Another budget season is upon us and although this is the time of
year where many in non-profit leadership go crazy, I must admit that I
am a budget geek. I love creating budgets. After inheriting a couple of
budgets that seemed unrealistic at best and after several years of
experience in creating budgets that support programs without putting
board members in a position of saying “where in the heck is that money
going to come from”, I’d like share a few thoughts that might make your
budget process a little more fun, or at the least help create a process
that doesn’t leave you dreading the next one.
These might be oversimplified for some, but even then they might be a good reminder.
For
me, budgeting is an ongoing process. Every team member in development
has a budget sheet that they add to throughout the year. Whether it’s a
training they might want to attend next year, new staff, a new
fundraising event or a new fundraising campaign, everyone keeps a list
and we go over the lists throughout the year. We also make notes about
whether the current budget we are working in made sense.
An
easy way to start the budget process is to simply ask program folks how
much money they need to do the mission and development folks how much
money they think they can raise. If those numbers match (ha!) then you
are good to go. My experience is that there will be a good amount of
money in between the two. But at least you have a start.
In
the non-profit world we do not create target budgets. We do not set a
goal for fundraising and hope we get there. This is one of the key
difference between us and the for-profit world. This means no
pie-in-the-sky revenue budget. If a non-profit isn’t making budget, cuts
have to made. You never want to be in this position.
Have
a plan for any increase in revenue. I have seen budgets where
individual giving increased 200% with no plan in place as to how that
was going to happen. It sure is easy to just add revenue here and there,
but someone is going to have to raise that money, and if they don’t
then we’re in a situation like I mentioned in the prior paragraph. There
are many times when it’s easier in the moment to just add revenue here
and there to make up the difference between revenue and expense. Don’t
do it unless there is a clear, realistic action plan to raise that
revenue.
Have a finance committee go over your budget.
This typically happens as part of the budget process. I want finance
committee members to particularly pay attention to increases in revenue
based on forecasted revenue for the year, not budgeted. This is very
important because if you have a budget line that is below in revenue yet
create a line item for next year based on what was budgeted, you are
comparing apples to oranges. This can easily happen with events and
individual giving, and create tough times for you next year.
Here’s
an example: You have $500,000 budgeted for individual giving and are
forecasting ending the year with $350,000 in individual giving revenue.
When working on next year’s budget you increase your line item to
$600,000 which means next year you need to raise $250,000 more than the
year prior! Don’t do it!
Finally, someone needs to
support decisions made by the development team in regards to revenue. If
something really doesn’t feel good in reference to revenue and your
ability as a team to raise, don’t budget it. That’s not always easy, yet
in the end you, your team, your staff and those you serve will be so
much better off.
Thanks for reading!
