Is creating a budget really necessary? Many associations and nonprofits struggle to maintain sustainability, let alone growth. A well-developed budget can be a key tool in keeping an organization focused on primary objectives as well as provide guidance and discipline when making key decisions for the organization. In addition, the budget process can help an organization assess its current financial health. It is important to remember that the budgeting process does not have to be complicated or cumbersome. The simpler it is, the easier it will be to stick to!

When we talk with our clients about developing an annual fiscal budget, we always recommend they follow these eight key steps:

  • Determine the timeline for the budget. An approved budget should be completed at least three months, or one quarter, prior to the start of the next fiscal year. Plan to have your budget finalized prior to the start of the next fiscal year.
  • Agree on which team members will be working on the budget. Determine who will have approval authority. Some organizations may require a presentation and approval from the Board.
  • Develop a thorough understanding of current income and expenses, forecasting through year-end. Examine each potential source of revenue. Some organizations or nonprofits may receive grants or other funds that are restricted for a particular purpose.
  • Determine and prioritize which strategic goals will impact the financial results of the organization. Analyze the financial impact these goals will have on the income and/or expenses in the upcoming fiscal year.
  • Develop a draft for both income and expenses. Amounts can be based on the following: previous history; new contracts; expanded operations; capital expenditures; and changing economic conditions.
  • Make sure to review the budget. Document all business assumptions and allow team member input. This review should ensure that goals and ability to meet said goals are addressed.
  • Once the budget is approved, clearly define who will be responsible for key areas/decisions. Incorporate the financial budget into the business plan for the upcoming fiscal year.
  • Consider using accounting software. Most packages allow for the integration of an annual budget. This makes it easy to compare financial performance on a regular basis.

For organizations with multiple chapters, creating a standard budget template for each chapter to follow is beneficial. Each chapter’s budget can then be rolled into the organization’s master budget. Check out some budget templates to help you get started.

The budget should not be “written in stone.” Chances are the financial position of the organization will change during the year. Regular review of actual financial performance compared to the budget is necessary. The budget should allow for changes based on business needs. By documenting changes and assumptions as they occur, you will ensure a more thorough budgeting process for the next fiscal period.

Interested in learning more about how you can reshape your organization’s budget? Contact us today!

Article written by:

Rebecca Mead