4 Powerful Budgeting Tips for Nonprofit Organizations
by Aaron Kauffmann, CPA
We can all agree that budgeting is a good idea. But when there’s so much to do and so little time, it can be easy to let this critical task fall by the wayside. Don’t let this happen to your nonprofit organization!
A well-designed budget gives you the ability to monitor your organization, particularly its financial position, throughout the year. With this insight, you can be intentional about purchases, avoid reactive spending, effectively manage cash flow, and steer clear of potentially precarious situations. Most important, a budget can help your organization consistently serve those who matter most—its members or participants.
Here are a few tips for optimizing your nonprofit organization’s budget this year.
1. Factor in your organization’s grants, contracts, and agreements.
A budget can help you plan for the grants, contracts, and agreements your organization currently holds. So, don’t forget to factor the spending timelines associated with these into your budget. This is especially important when a grant is up for renewal. The grantor will want to see a need to renew the funds as well as evidence that they’re being used appropriately.
2. Use the proper level of detail.
You don’t want a budget so detailed it records every single invoice your organization plans to incur or contribution it plans to receive. But you don’t want it to be too vague, either. To achieve the ideal level of detail, simply organize your budget into the significant categories your organization anticipates for the year. This approach can help you easily see where deviations are occurring and decipher the reasons behind them.
3. Be realistic when setting goals.
It’s important to avoid under or over budgeting for revenue and expenses. Including stretch goals, which are “extra credit” goals designed to stretch your team’s performance, within your budget to grow revenue or decrease spending can help, but only if they’re realistic and aligned with your organization’s strategic plan. Being realistic can also help to keep your staff members motivated to stick with the budget—and prevent them from feeling discouraged if they fail to meet them.
4. Set your budget before year-end.
Finalizing your budget before the end of the year lets you start the new year being intentional—and not reactive—about spending and fundraising. To achieve this, consider getting started on your budget as soon as the fall season rolls around.
Budgeting helps your nonprofit be at its very best.
Budgeting, when done right, can help you determine the best way to leverage your organization’s resources—even when you’re asked to do more with less. When you’re ready to focus on your budget, we’re here to help. Our CPAs can guide you through the process, and help you determine the right level of detail for your organization’s budget. Contact us today to learn more.
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