A collection of our past articles about budgets and your credit union.
Over the years, we have written many articles about budgets and your credit union to give advice to executives. We have been trying to streamline this blog lately and consolidate such posts that we feel are informative and important for those running credit unions. There are other articles about budgets, and surely we will revisit this hot-button issue, but let’s enjoy some time looking back at this collection.
Strategic Budget Planning
Are You Ready for Budget Planning Season?
It’s almost budget planning season again. That means you are probably making plans for planning season. That’s a really horrible pun, but the message is clear. Nothing happens very well at a credit union without planning. With that said, let’s look at a few elements to include in your strategic budget planning.
1. Communication.
Once a strategic plan is approved by your board of directors, it is up to leadership and upper management to make sure the plan is carried out. The best way to ensure this is with consistency. If your staff sees you carrying out elements of your strategic plan consistently, they will be more likely to follow through on them as well. Your consistency communicates the importance of each element. And while staff meetings, emails, and memos are important means of communication, consistency via management action is the most effective means of communication.
2. Delegate.
This item goes hand in hand with communication. Delegate certain elements of your strategic plan to staff members accordingly. This makes execution extremely efficient. Of course, you need to make sure your staff is empowered to make decisions if you delegate the reins of power. Otherwise, your plan will be suffocated through micromanagement. Staff meetings are excellent vehicles for distilling information and clarifying any items that might be vague. Just be sure your staff feels like they can ask questions without fear of consequence. Create an open, honest culture, consider vendors that have been in business for a while, and delegate. Then watch your plan take shape.
3. Never Stop.
The whole purpose of a strategic plan is forward motion. To that end, your organization should never stop moving in that direction. It might be helpful to create some sort of online portal, so board members can give input and begin the decision-making process for “housekeeping” or other process-related items. This way, they can give input beforehand, saving face-to-face meeting time for high-value issues and priority concerns.
Addressing these elements before you begin strategic budget planning will do more than just empower your staff and management; it will enlarge your entire credit union. As your credit union grows, things will change. Processes will be modified, new positions will be created, and increased productivity will be expected. That is how you know your strategic plan is working. And don’t worry, either. We will be with you every step of the way with safe, compliant forms and disclosures so your credit union can keep planning and growing. Connect with us for a strategic marketing plan customized for your credit union goals and demographics.
Staying Within Your Credit Union Budget
Use It or Lose It
When credit union CEOs and executives think of budgets, they think of a certain amount of money that should be allocated to various expenses. Determining how much to spend on various expenses is only half the battle. For a credit union, the other half is to be able to effectively judge your spending performance. In order for a credit union to operate efficiently, a budget must be established, maintained, and adjusted throughout the year. Estimating and matching expenses to revenue (real or anticipated) is key to determining whether the credit union has the correct budget to fund operations, expand, and generate income. Without a budget or a plan, a credit union runs the risk of spending more money than it is taking in, or conversely, not spending enough money to grow the credit union and compete with other credit unions.
A strategy must be used to track and measure things like:
- Fees and other non-loan generating sources. Checking, savings, and money market accounts fall into this category.
- Controlling expenses. Preparing for projections of sales, operating costs, overhead costs, administrative staff, capital requirements, supplies, and other types of overhead required to operate daily is vital.
- Investments. These could be products sold to members or items the credit union has invested in, such as forms. Calculating operating profits and returns on the investment is a necessary strategy.
- Cost-benefit analysis. This is essential. A good CB analysis will provide useful information, allowing credit unions to make adjustments as needed.
- Tax Exemption. Current non-profits show exemptions, and according to CU Times and former Capitol Hill policymakers, also consider preparing to again defend their federal tax exemption as presidential candidates and members of Congress are calling for tax reform in 2017. This may affect businesses’ tax expenditures granted in federal law.
These measurements work the same way as individuals budgeting for their own household expenses. Lists, budget software, and financial statements are all tools used by people to stay on budget. Credit unions operate much the same way. There are tools and metrics used to track each of the areas mentioned previously.
Lending Forms Budget:
This is why a good forms system is essential. With forms from Oak Tree, you can position yourself to lend more to your members. Our forms integrate with any data processor and are kept current with regard to all state and federal guidelines. Budgeting for forms makes it more efficient to present options to your members and track your progress. Doing these two things will ultimately contribute to a smoother, more efficient operation that works with your budget. That translates into more time available for staff to speak with members about all that your credit union has to offer.
At the same time, the compliance aspect gives you peace of mind. We take time to make sure our forms are the best in the industry, so you can use your time to better manage your credit union, keep on task, and on budget. Get a quote for a consumer, membership, home equity, or business forms package at ClientServices@OakTreeBiz.com
Marketing Budget for your Credit Union:
Commonly, credit unions base next year’s marketing budget on what it was this year and give their budget an increase from the prior year. Others set their marketing budgets according to their strategic plan. According to The Financial Brand, credit unions spend an average of between $8.00 and $16.00 per member on marketing. If you wonder what your budget should be to reach your credit union’s growth goals, or how to establish marketing ROI, or what areas need to be increased in your marketing budget, a strategic budget might be the best fit for your credit union. To learn more about how to invest in your credit union’s future and budget a detailed plan based on corporate goals, branch/service expansion, market penetration, new products/services, community involvement, research, rate forecasts, and media channels, email us at MarketingServices@OaktreeBiz.com.
Your Credit Union and the Bottom Line
Credit Union’s Bottom Line Tips
In any business endeavor, the bottom line is always important. This is particularly true of credit unions. Without a healthy bottom line, you cannot serve your members responsibly. Yet, ensuring you have one is not difficult. All you need to do is pay attention to a few basic items. Read on for tips about your credit union and the bottom line.
Members
Current credit union members make a difference, so it’s important to make sure that you know your members well. Continually seeking opportunities to connect with them on a personal level is crucial. Steps like calling them by their first names whenever possible, making small talk about their family, work, or other areas of life that you have discovered by serving them, should never be missed. This is important. Consequently, this positions you better to market other products and services you provide that your members may be unfamiliar with. Perhaps they have never thought of purchasing a CD, or maybe they would be perfect candidates for share-secured lending. Knowing your members is key to marketing more of your products and services. The result is a healthier bottom line for you.
Growth
This topic dovetails perfectly with the one we previously mentioned. Credit union growth can happen in a variety of ways, but most often it is through word of mouth. Credit unions, after all, are a very specific market. As such, it should be one of your goals to saturate that market as quickly and effectively as possible. Offering things like referral bonuses or member giveaways for referrals are great way to increase member growth. Of course, you can always reach out with a marketing campaign.
Home Lending
This is a third, and very effective, way to help you increase and maintain a healthy bottom line. With recent regulations relaxed concerning home equity lending, now is the perfect time to approach your members about refinancing their current home, if you haven’t done so already. This is a way to maximize credit union lending potential using your existing customer base. It’s also a great marketing tool that can be used to attract new members.
Paying attention to these three items will help you maintain a healthy bottom line. That’s important to help ensure smooth workflow and future growth. It promotes efficiency and confidence in your staff. Some would say there is no better management tool than a healthy bottom line. We would tend to agree with that statement.
Credit Unions Need Marketing Budgets
CU Marketing Corner
For many credit unions and other businesses, this time of the year means it is time to think about the budget for the next year. Many who work on this want to find the things that return large and immediate ROI benefits to the company, which means many functions might get overlooked. Marketing is one of the things that might not always produce immediate results, but in the long-term, the effect of no marketing can be seen. Let’s look at why your credit union needs a marketing budget.
Does your credit union have a budget designed specifically for your marketing department? Here, we will go over why it is important that your CU has allocated funds just for the marketing and advertising team. Some CUs take funds from other departments and give a small percentage to their marketing company, or even have a “slush fund” that is divided up among miscellaneous purposes throughout the CU. Setting aside a marketing budget may be a challenge for some smaller credit unions, but in the end, the return on investment will prove worth it.
Marketing is Crucial
While it is crucial to have an initial budget set for marketing, it is just as important to revisit the set budget monthly or yearly to help with setting up your CUs marketing strategy. Many companies tend to underspend when it comes to marketing and marketing materials, which in turn leaves your CU missing out on many growth opportunities.
The budget set forth must include all relevant items such as printed materials, branding, event marketing, SEO, social media, website maintenance, email marketing, mailings, and ongoing projects. You will need to sit down with your team and establish a clear guide that includes what your CU wants to focus on when it comes to marketing, and ensure the budget covers all costs outlined.
You might be asking yourself, “How much is appropriate to spend on marketing and advertising?” The cost can, of course, vary from business size to industry. The U.S. Small Business Administration defines the proper marketing budget amount to fall between 2% and 10% of overall sales. The normal average spent is between 4% and 6%. With a well-defined and concise marketing plan in action, the ROI should be well worth it. Also, before establishing your marketing budget, your CU should do some research on the following: industry and marketing research, competitor analysis, marketing audit, and internal marketing performance records. Having some knowledge of these topics will surely help guide you in the planning of your marketing budget and help outline the future course.
Still wondering why a marketing budget is important, or if your CU needs one? Here is a short outline of why your CU can benefit from having one:
Forces your CU to prioritize marketing efforts
When a marketing budget gets looked over, you risk losing money and not reaching your targeted audience. Even if you start out with a smaller budget for the marketing department, at least you are prioritizing marketing needs. Setting the budget will ensure that these funds do not get used up by other expenditures. Providing marketing with a budget, instead of placing those responsibilities on someone in let’s say, the sales department, will prove to be a win-win within the company.
Motivates your CU to track your ROI
Setting a marketing budget and following that with tracking, your CU’s return on investment will be a great starting point, and going forward, determine if there is a need for a larger marketing budget or if you should be cutting back expenses. In starting out, though, a gamble may be required in order to set the pace. When done well and handled correctly, your CU should have a positive ROI and see the value of a set marketing budget as opposed to just trickling down funds from another budget when necessary.
It can be great for sales
Your CU wants to get its brand and products out to its members and potential members, right? Well, having a marketing budget ensures just that, meaning that you will be seen and your CU is reaching exactly who their target audience is. As a credit union, you want to do everything you can to help your team promote your services. One way to do that is a good marketing strategy. If your current or potential member already has an idea of your brand and voice, it makes conversations for your team an easy and smooth affair. Chances are if you’re executing your marketing correctly, half the work is already done…selling them on your brand!
To wrap this up, while every department and aspect of a credit union contributes to its success, when you take away funds from one department to give to another, you can miss out on enormous opportunities and growth within. With over 40 years of experience in the credit union industry, we understand how valuable a marketing budget can prove to be, as well as placing importance on growth and stability. We can help with marketing campaigns for your credit union that fit your specific needs and goals. If you would like more information about how to improve your marketing, follow us on social media or follow our credit union marketing blog.
Budgeting’s Not a Chips and Salsa Party
In a commentary article posted on Credit Union Management, our CEO, Richard Gallagher, discusses how budgeting’s not a chips and salsa party. At times can be mundane, but it is necessary for your credit union.
The Lifeblood
Budget allocation for credit unions should ultimately be about growth and stability, but always with respect to net revenue. Viewing that as the heartbeat keeps allocation honest. Without strong net revenue, there will be no asset growth. This will affect things like operating expenses and credit losses. Your credit union will have to either lighten the load or encourage asset growth to keep net revenue healthy. Of course, the latter is preferred.
One of the greatest assets of mobile banking is 24/7 access. Members can check loan balances at any time, just as There are a few things you can do right now to see whether your budget is in line with current net revenue. First, go over each line item and compare it to past years’ budgets. Are there any blatant discrepancies? If so, look into them and find the cause. Chances are you will find one of two things: Either the expenditure in question cost more than anticipated or it did not produce as expected. Any item that is a cost drain or does not address productivity will have a negative impact on net revenue.
Once you find those items, take time to go through them and determine the underlying issues. Correcting them mid-year during allocation planning will keep net revenue strong and healthy.
Richard Gallagher
To read more about how your credit union can successfully allocate your budget, go check out the CU Management article, and then check out our lending documents for your credit union.
(Note: this is an older blog entry and has been edited since originally posted.)
