Why cash flow can be tricky

The problem is that to have a chocolate fountain on the night, you will probably need to book a few months in advance. When you book, you will need to put down a deposit; a small percentage of the total hire cost that is non-refundable. Tickets won’t go on sale until a couple of months beforehand – so you won’t get any cash from them until well after the deposit money is needed. That is cash flow: making sure you have cash when you need it – sometimes before ticket money has come into the pot.

The solution is obviously to start fundraising as soon as possible. Then you can have ready cash available for deposits on products and services needed months before prom night.

Keep the prom budget flexible

Another thing to bear in mind is that your early budget is only a guide, and needs to stay flexible. You could always have a “would be nice to have” list of things you can afford if the fundraising goes really well. The “must-have” list allows you to prioritise, but it doesn’t have to be all you’re aiming for.

Don’t forget that the full invoice has to be paid at the end – so if you are considering something from the “would be nice to have” list, make sure there’s enough money in the pot to pay for the total cost of the items on the “must-have” list, not just the deposits.

A tiny reminder about prom finance housekeeping

Don't forget to keep every single bit of paper relating to deposits, invoices, receipts etc in one big box file looked after by one person (the prom committee treasurer if you have one) otherwise you'll have a huge headache at the end of it all.

So what’s the point of a prom budget?

Fundamentally, everything that has to be bought or hired for the prom will have to be paid for – and to pay for it you need to find money, some of it ahead of prom night, some of it afterwards. If you don’t set a budget, you have no idea how much money you have to raise, and also how much money you can realistically spend.

Setting the prom budget involves a combination of maths and guesswork. But don’t panic, here’s the low-down.

Firstly you need the following numbers:

• How many people you think will buy prom tickets.
• How much money each ticket will be sold for.

Then you need to multiply them with each other, e.g.

150 tickets sold at £15 each = £2250

That’s how much money you are likely to make on ticket sales BUT it is only an estimate, probably based on the number of people in your year. However, it’s a good starting point for your prom budget.

So that’s the maths bit (and a bit of guesswork too.) Now for the fun part.

The wish list!

Make a list of all the things you as a committee think the prom should have. Go crazy: chocolate fountains, red carpets, dance floor, the best DJ in the county, whatever. Then do a bit of research online and find out how much each one might cost. Add it all up.

This is the point when you realise that a) you can’t have everything on your wish list and b) ticket sales alone won’t cover the prom.

So the next stage is to prune the list: what are the most important things to have? What can the committee stand to lose from the list? When you’ve got the pruned list, you need to start getting real quotes from local companies.

The next important bit of maths comes from the following calculations:

• The total cost of the items on the “must have” list (let’s say for an example this is £5,600)
• The revenue from ticket sales (in our example this was £2250)

All you do is subtract the cost of the must-haves from the ticket revenue:

2250 – 5,600 = – £3350

Uh-oh. There’s a minus – that’s the amount of money you need to raise to be able to have everything on your must-have list.

Simple huh?

Well… actually, that’s only part of it. This is where the ugly brother of budgeting comes in: cash flow.