Nonprofits set and determine budgets based on what it will cost to run their programs and organization for the coming year. A thorough budget gives those in higher positions a full spectrum view of the organization, allowing them to take a proactive approach to situations that arise during the course of the year. Whether you are already in the middle of your fiscal year or if you are just now determining your budget, the following tips were designed to help you develop and maintain a healthy budget for your organization.
1. Match the budget line items to your organization’s chart of accounts.
A chart of accounts classifies the types of revenue and expenses your organization incurs within your accounting system. Salaries, wages, rent, utilities, printing, promotional costs and more are accounted for in the chart of accounts. By using these same categories in your budget, you easily monitor these items against your budget and pull the necessary financial reports as needed.
2. Include indirect costs in your program budgets.
If your organization has more than one activity or program throughout the year, it’s likely there will be some administrative or indirect costs that have no place. These costs can include the cost of your accountant and auditor, property and liability insurance, and some portion of your staff time. By planning ahead and budgeting for these indirect costs in your program budget, you can recover a portion of these shared expenses.
3. Be conservative/realistic about your projected revenue.
When determining your budget, make sure that you are realistic about your organization’s expected revenue. Go back through the funds you’ve budgeted for and identify them according to these three categories: committed, likely or possible. It’s smarter to add a new program into your budget in the middle of the year when its funding is confirmed rather than having to cut it back midyear due to insufficient funds.
4. Involve staff from every level in the budgeting process.
Including your staff in the budgeting process will not only keep them more committed to your budget, but it will also open up avenues for them to share with upper management what programs need to be included in the budget. Someone else may be able to think of things upper management hadn’t included or discuss additional options that may have been overlooked. By including staff from every level within the organization, the nonprofit increases its accountability among staff and expands its awareness of what is happening within the company.
5. Keep notes.
Make sure you keep record of the assumptions, or the source of an estimate, made when developing the budget. Take full advantage of the comment features in spreadsheets, or type your notes in a text file and keep them on hand. Since your budget will most certainly change from now to the end of the year, having these notes to refer back to will save you the headache of tracking down the information used to determine that specific number.
If you would like to learn more budgeting tips geared toward nonprofit organizations, click here.