The Safe Library - Service, Safety, & Security with Dr. Steve Albrecht

By Dr. Steve Albrecht

The American Management Association is the oldest training company in the US. It was founded in 1926 and has trained over 10 million people. Of the 160 business seminars it offers, for business owners, leaders, managers, and first-line supervisors, the most popular learning program is a two-day workshop called "Fundamentals of Finance and Accounting for Non-Financial Managers." 

This program is not popular because it's the easiest to attend or the shortest (others don't require nightly homework like it does and are usually three or four days in length). It's popular because it's the most necessary training for business success for current and future leaders. To help you promote in your career as a library leader, you must be able to "speak the language of business," which is about understanding budgets, monitoring spending, understanding payroll costs for existing or future staffing levels, controlling costs, allocating assets, counting inventory, and knowing how to read and interpret the often interrelated financial reports.

As a library employee wanting to move into a supervisory, management, or leadership role, it's critical for your success to acquire a knowledge of basic financial statements; understand the "Accrual Process," the "Accounting Equation," and what "Generally Accepted Accounting Principles" means; understand liquidity, leverage, and profitability through understanding cash flow; calculate fixed, variable, overhead costs, and a break-even analysis; be able to read, interpret, and explain a Balance Sheet and Income Statement; understand operating and capital expenditure budgets; understand employee and payroll tax reporting requirements; and know how and why to measure the Return on Investment for departments, projects, and strategic plans. 

And speaking of budgets and their importance, I contacted my (far wiser) colleagues for their advice on getting a better handle on public agency budgets:

"Get in good with your Finance Director and get some simple explanations of how your particular library's budget process works. Get their help to move money around if you've over/under spent in certain areas."

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"Budgets offer an opportunity to set goals for the organization with a spending plan. The budget is a guide. It doesn't mean there won't be exceptions. It has to be realistic from the beginning, i.e., because you want to spend $xxx, you can't just say revenue is going to be $xxx. It's a tool to help management understand both the revenues stream(s) and expenses of the organization, and which expenses are fixed and which are variable."

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"When we think of budgets or budgeting for work, we often think we must have some sort of financial background or that the `finance person' will or should be the one to set and monitor the budget. This couldn't be farther from the truth. Managers and supervisors need to know how to establish, use, and defend their budgets. Begin with the end in mind. I still love this phrase from Steven Covey and it applies to budgets: '1) Know where you want to go, 2) What you need to accomplish and 3) How much it will take to get you there.' In other words, a budget is that road map that you set in the beginning with the end in mind. Knowing this information, keeps your program running and your staff employed."

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"Understanding funding sources. It's likely the majority of funding comes from General Fund sources (versus Revenues) and therefore is subject to the approval of Public Officials (usually the City Manager or County Administrator, then the Mayor and Council). Does your city or county have a one-year or two-year budgeting process? There is not any latitude to change funding allocations throughout the budgeting cycle unless you're able to reallocate within your approved budget, so you have to anticipate needs. Think strategically and long-term. Big items like Capital Improvement projects must be planned for many years out. Foundation support (like the Friends of Library) is where special projects and discretion may provide additional funding to get non-budgeted items. Maintaining public support and having advocates who will fundraise from a non-profit perspective and people to write letters or speak at public comment during budget hearings can 'save' or raise the importance of library initiatives as a City Manager or County Administrator tries to balance the needs of all City or County departments. It's important for them to share the reality of the public budgeting process to encourage staff to be fiscally prudent. The majority of a budget will go to personnel-related expenses so there is little discretion 'to find extra money to spend.' Salary savings from open positions are usually available for departments to spend, depending on the spending philosophy of the City Manager or County Administrator."

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"Know your library's part of the overall budget expectation. How did the budget pan out for last year? On the nose, under, or over? How are budgets determined? Do you have a say in your budget needs? How is the budget matched to the department's needs? Once you determine your department needs have you involved your team in finding ways to improve the department? Once you've empowered the team to help drive the department goals, you can look for innovative ways to close the gaps. You can determine the costs of improvements and team investments and forecast by monthly milestones. Measure the team's success in milestones and forecasts and reassess and adjust by mentoring your team. The real key is to know the mission, assess the team's ability to get ahead of the mission, and determine the investment needed for team growth within the department's role in the overall mission. Success comes from the innovation of empowered employees that feel valued in the organization's mission."

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"Budgeting helps to track (and control) actual expenses and future expenses as well. Set a budget based upon fixed costs and revenue (income). Do it for each month, anticipating additional expenditures over and above fixed costs. Control your discretionary spending and live within your budget limits. Make staff additions with the budget in mind."

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"Budgets are a forecast and recognize that many expenses are variable and as such a function of revenue. Use the budget as a benchmark to measure variations from the forecast and expose potential problems. If revenues exceed the budget, then your variable expenses should follow suit. If revenues drop, variable expenses should drop also. Non-profits like libraries require budgets to provide blanket board approval for expenditures by the management. While we may also use the budget to benchmark performance, we're primarily using it as a preauthorization to spend funds within the limits of the budget. Budgets should be built around staffing requirements (how many people, of what job description/pay rate are required for each shift). Include adding hours to accommodate an unanticipated peak period or subtract hours during less peak hours. Another rookie mistake: accidental overtime. Overtime results in premium pay (1.5 to 2x the original rate of pay). Similarly, if breaks or lunches aren't taken on time, then premiums or penalties must be paid. All of these things create the potential to overspend the budget. Tight control of the  breaks and lunches, and careful scheduling can help avoid these penalties and premiums."

There are lots of approaches to improving your financial literacy, using either online courses from training companies that specialize in one-day or multi-day seminars; local or online college and university classes, extension courses, or certificate programs; or through self-study programs offered by financial education non-profits or associations. Ask for mentoring from the financial professionals in your library, city, or county. Get directions, a lesson plan, and supportive career guidance from your Chief Financial Officer, Finance Director, Finance Manager, Budget Director, or similar experts. They recognize the value of the data they create and interpret; they will want you to appreciate it just as much.