Having a budget is essential for any company or individual who desires to have better control over their finances. The process by which that budget is developed is also important. Last week we looked a few overarching components that are essential to have in place before you begin the budgeting process. This week we will take a deeper look into key documentation and steps needed to complete the budget process.
Keep in mind that your organization’s mission and vision should drive the budgeting decisions along with fiscal accountability. A great budgeting process will include the input of those ultimately responsible for executing the company’s mission in conjunction with the finance team and senior staff. Identifying fixed costs and known revenue along with incorporating a plan for the year’s initiatives will be the primary data used to get started.
Follow these steps to develop a good budgeting process:
Document the process.
Put your budget process in writing. Doing this creates a measurable tool to reference as you go along. Having steps and checklists will keep the team accountable and productive throughout the planning. Additionally as the process evolves and changes from year to year, be sure to maintain current notes for reference in future planning seasons.
Identify stakeholders and assign the planning committee.
The finance team and senior staff will naturally play a significant role in developing the budget, but additional staff members whose responsibility is to be accountable to the budget should also play a role. Inviting the team to weigh-in builds buy-in and allows relevant feedback which could prove invaluable to creating an accurate budget. At minimum be sure to include a time period where other staff members are asked to review and speak into the budget in the draft stages.
Get out the calendar.
The early bird gets the worm – this is true in establishing the budget as well. Having a budget approved less than 30 days before the beginning of the fiscal year could severely compromise the success of the year’s goals. At the very least aim for budget approval 60 days before the new fiscal year begins and if possible complete it even earlier. Consider your natural rhythms and take advantage of non-peak seasons to work on it when staff and volunteers have ample time to focus on the numbers.
Assign tasks and a timeline.
As you are building the budget process define tasks and assign deadlines. Oftentimes multiple people will have responsibility over a line item – regardless you want to choose one person to be accountable for the task. Having a single person responsible for the task will increase the likeliness of it getting done and on time.
Match the financial statement to the chart of accounts.
Ensure that line items from the financial statements and charts of accounts are the same. This will eliminate guesswork from your administrative staff when matching the budget and actuals. Particularly where expenses are concerned when the financial statement does not have a corresponding line item within the budget it can result in mistakes or overages in line item balances.
Work the plan.
After carefully creating the detailed budget, the next step is to implement the plan. This may sound obvious, but setting clear expectations for how the budget should be executed is as if not more important.
At Beck and Company Certified Public Accountants and Business Advisers our Nonprofit Services team is committed to assist you with your back-office accounting and financial needs so you can focus on your mission. Contact us to learn more about our nonprofit specialists provide professional advice and assistance in a number of areas including business planning and budgeting.