Budget Time

Were nearing the end of 2018 and for those of us managing nonprofit organisations, our return to work after the festive season will be marked by budget preparations.

For some organisations this process will be relatively straightforward, however if your nonprofit has a gross operating revenue (GOR) of more than $500,000 then the process becomes increasingly complex.

Regardless of the size of your nonprofit there are some basic guidelines for budgeting.

  • Start early. This avoids the stress of trying to cram the exercise into a diminishing time frame. The financial year doesn’t end until June 30th, however you need to allow time for your finance subcommittee (if you have one) and your board to meet and discuss your projections for the 2019-20 financial year.
  • Resources will always be scarce, unless you have a secret recipe for generating revenue that others do not have. Funders fund program delivery but not administration costs or minor capital expenditure. These have to be funded from program funding and where necessary from reserves. In general funding has not kept pace with wages growth, yet remuneration remains a key element in recruitment and retention. Effective allocation of resources requires planning.
  • Engage as many of your workforce in the budgeting process as practical. It helps people to understand where the money comes from, the cost of their decisions and how savings might be made. Budget discussions can take place throughout your organisation without breaching confidentiality on individual remuneration. Leaving budgeting to the financial whiz you got tied to a desk down the back of the building is not always a good idea. Financial people often lack strategic of big picture perspective and not every decision is based upon the lowest cost.
  • Many boards and management teams will budget to the lowest common denominator. They look at the money they have recieved or expect to recieve and vow to spend $1 less than that amount. This is a self defeating exercise. Your organisation is like a slow boiling frog. No matter how long it takes the water to boil, the result will be the same.
  • The alternative is to budget (realistically) for a future where you generate more revenue than you need. This is not about being greedy; its about having money put aside for a rainy day, for the day the funders don’t come to the party, the building burns down and insurance doesn’t cover everything or to employ that one, essential employee. The days of volunteers sitting on upturned milk crates and tapping out letters of second hand computers are gone. Employees in our organisations deserve a workplace as good as others would work in.
  • At the same time the budgeting process does create an opportunity for your management to closely examine every cost item, and ask is this the most cost effective way to do things?
  • Finally, don’t focus just on costs. Look also at sources of revenue. Today there many ways to generate revenue. Each of them needs a plan – along with a reason why. You are not restricted to traditional funding or philanthropy. Crowdfunding for example offers different opportunities. Instead of passively waiting for your usual funders to cough up a couple of hundy, perhaps gather them together and share a conversation about a long overdue project.

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