Top Tips for Nonprofit Budgeting
Creating an annual budget is a necessary step for any organization but is especially important for nonprofits that often require even tighter fiscal controls than their for-profit counterparts. Having a thoroughly developed budgeting process not only leads to the creation of a comprehensive budget, but also makes the budget creation process itself less onerous. While our consultants suggest you kick off your budgeting process at least four months before the start of a new fiscal year, we know many organizations are either still struggling or may have just started the process. With them in mind, we have pulled together a few practical tips applicable to any nonprofit organization.
Know your Goals and Objectives
Planning and goal setting must be completed before the budgeting process can begin in earnest. A lack of proper planning and goal setting leads to a poorly scoped and defined budget. If people do not know their goals for the upcoming fiscal year, they may not know how to start budgeting or may repeat current modes of operation. In addition, they may miss substantial changes, either budgeting too little or too much, which causes frustration, missed budgets and could require a lot of rework.
Get Upper Management Support
Getting upper management support is a crucial step in the budgeting process, because if upper management does not give their support, no one else will. Namely, upper management is responsible for several tasks. They need to lead approval of organizational goals and operations plan. They also need to be involved as leaders in the budgeting process. They need to support the process by managing their staff to set timelines to ensure product completeness and accuracy. Lastly, they need to approve all budgets prepared by those that they supervise.
De-centralize the Budgeting Process
While getting upper management support is important, every manager who is responsible for a budget should be involved in the budgeting process. Understanding the rationale for their budget enables them to “own” it and act as stewards of their department’s expenses. The finance department can help coordinate the budgeting process but should not be putting together program budgets. Ultimately, they are not the individuals responsible for the budget.
Involve Staff at Other Levels
Dispersing responsibility throughout the organization helps the process overall. Individuals that aren’t upper management and don’t have direct control over a department’s budget should still be involved in the budgeting process. Getting their buy-in and delegating projects for them to plan and budget is important, as the more they are involved, the more they can work to help the organization succeed.