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Budget Challenge: Meet Credit Union Strategic Goals, Innovate AND Keep The Lights On
Members are the driving force behind all your credit union’s activities, and that’s understandable. Not only does your business strategy focus foremost on fulfilling their needs, but with directors who are members it’s a given that member interests will be top of the priority list. That makes your credit union budget strategy different from that of a for-profit bank, in the following ways:
- Operational costs take precedence in your funding. Balancing the budget is an important issue for member boards, even if they aren’t personally liable for any shortfalls incurred.
- Member enhancement initiatives are vital, to show your board is doing its job and looking after the interests of the membership.
Generating a profit often gets left on the back burner. Isn’t it time your CU stopped being on the back foot, and started being more sustainable? Don’t you owe it to your members to strategize ways to allow for growth, instead of survival? Here are some options you can consider that help you do so.
Generating An Operating Reserve
Profit isn’t necessarily a bad word, but in the event your directors don’t agree you can call it a surplus or an operating reserve. The latter is particularly useful if your credit union budget strategy includes payment of cash bonuses to members at the end of the fiscal year. Board-designated operating reserves offer a number of advantages for members, including:
- The ability to meet the CU’s strategic goals
Innovation - opportunities to keep pace with technology, such as updating the core banking platform
- Long-term financial stability
- Sufficient funds to ensure comfortable cash flow on a day-to-day basis
- Ability to make planned capital purchases, such as equipment and infrastructure
- Investment opportunities, such as commercial real estate purchases
All these benefits can be a major factor in the growth of your CU, and can improve the agility of your management processes. In turn, that agility empowers you to tackle new opportunities with the vigor needed to keep pace with developments in your market.
Download our Budget Season Strategy Guide for more information on how to adapt your credit union budget strategy to offer your CU the chance to be the best you can be.