Building Your Budget—the bridge between ideas and action
Joan M. Renner, CPA, CGMA, Director 501(c)(fit!)
Right about now, you may be focusing more on next year than this one. Your Board has exciting new ideas, but making them happen is another matter. You’ll need people, space, supplies, and most of all, funding. Some take a leap of faith and hope for the best. That may work, but why leap when you can take the bridge. The process of building your budget is the bridge between ideas and action.
What do you want to fit in? What are your Board’s goals and priorities? Whether you have a formal strategic plan, or an informal idea of where you’re headed, gather your budget team for a kickoff meeting. First do a sketch of what you want to do. Right now, put everything in the sketch. You’ll clean it up later.
Next, flesh out your sketch with some more detail to bring your plan to life. Cost it out. Who’s going to do that? Your controller or CFO (in-house or outside) can help maintain a spreadsheet to keep the budget development organized.
Your best strategy for developing your budget is to divide and conquer. Divide your costs into functional areas and assign them to the individuals on your budget team responsible for each area, to fill in next year’s expected amounts. Team up a program person with a financial person for a powerful combination of skills.
At this point, don’t edit your costs too much based on what you can afford or what your existing staff can handle. The Finance Committee and Board can make those choices later. For now, focus on what it will cost to carry out the proposed activities the way they should be done.
So what will it cost? Well, what will it take? Will we need to bring on an outside coordinator? Get some estimates. Will we need new equipment or supplies? Shop around to determine the cost of new items. Will we need new space? Put that in too.
For existing costs such as your office lease and your health insurance, check for scheduled increases and expirations. Will you have to lease a new copier? Be sure to give yourself a cushion. Always estimate big where expenses are concerned so you won’t be caught short. This will give you a good idea of how much your proposed activities will cost.
Now, it’s time to identify whether you will be able to pay for it all. Estimate what you expect to bring in from each source of income. Consider your past experience, current trends and preliminary plans. Be sure to remove any one-time donations from next year’s expectation. By all means, DON’T plug the budget with aspirational income. Always estimate small when it comes to income, so you wont’ be caught short.
At this point, it’s time to decide what you can afford and what you’ll have to leave out. Pull it all together and review your draft budget with your Finance Committee. Priorities are a Board decision, so don’t take all the stress of balancing the budget on your shoulders. Identify sticking points, propose solutions and let them choose.
With guidance from the Finance Committee, make revisions and get their approval. Now you’re ready to take your budget masterpiece to the Board. You’ve used your budget development process as the bridge between ideas and action. You’ve ended up with a budget that’s the financial expression of your goals and strategies for the year; and it’s not just a leap of faith.
We have a helpful session on Building Your Budget—and putting it to work at our upcoming financial leadership seminar, 501(c)(fit!)—Financial Leadership Training for Emerging Nonprofit Professionals.
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