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!