As we have mentioned before, budgeting is important for an organization of any size. It can help you track funding cycles throughout your year, predict shortfalls and overages and simply help you plan for the future. That said; there are a few things that are an absolute must “do” and a few common errors that are clear “don’ts.”
A strong foundation of an organization is an annual budget that is approved by the Board of Directors and the end of the fiscal year. Think of this as a financial road map to the next year. At the least, this process takes about 3 months so make sure and plan ahead.
DON’T: Make a budget by yourself.
Gather the Board to agree on common goals. Some organizations like to do this at an annual retreat at a resort or simply a long evening in a library room. Let everyone share their ideas. When shared goals become more clear, figure out how much you want to spend on them. Look at administrative expenses over the last year or two and make estimate what your next year’s costs will be.
DON’T: Recycle numbers: Many groups fall into a bad habit of simply using last year’s budget numbers to reconstruct next year’s budget.
DO: Take a close look at actual numbers spent and go from there.
Look at the past year’s fundraisers. What fundraiser was worth repeating? Does membership need to increase? Does membership price or dues need to increase? What wasn’t successful?
Don’t: Do not simply look at income numbers.
Do: Consider costs, volunteer time and staff resources.
Take a good hard look at the two lists of income and expenses. If your expenses outweigh your income, you can either cut back on expenses, or increase income. Consider which would better serve your membership? Do you have the resources for another fundraiser? Can one of your programs be adjusted to reduce expenses?
Budgeting is a great tool for risk management and managing expenses. Just make sure to “DO” it right!
Council of Nonprofits