You’ve recognized a need in the Redlands or the surrounding area in some capacity. You’ve felt strongly that something should be done. And you’ve taken the initiative to address this need, wholeheartedly and in many ways, sacrificially. This is the heart of a nonprofit manager. Your work is driven by the intent to serve and better the Inland Empire community. And while this nonprofit is not focused on financial pursuits, its operation is dependant upon sufficient funding and efficient spending. Doing this well requires a bit of strategy and thoughtful planning. That’s why we’ve broken down the budgeting for nonprofits process here in five easy steps.
The five steps of budgeting for nonprofits:
- Assign a budgeting team. Whether your organization is big or small, well-established or not, you’ll require a leader and a team of people to take charge of your finances. Your leader might be a chief financial officer (CFO) or simply anyone who can take on this role. Upon selecting this person, decide which staff members- board members, committee members, etc. who need to be involved somehow. These will be the people with whom you must communicate responsibilities, expectations, and deadlines for the success of your financial ambitions.
- Create a budget calendar. Do this with plenty of time before requiring approval and in consideration of the current year’s finances. In other words, this calendar should act as a snapshot within the bigger picture of your fiscal year. Upon its creation, this calendar will serve several functions. With it, be sure to set timelines and critical deadlines, schedule training’s and meetings, and determine your nonprofit’s goals and objectives. This tool will keep you on track, motivated, and organized as you effectively budget.
- Prepare to create your budget. This may seem tedious, but it is an important step. We advise that before creating your budget, you set financial goals. Consider what seems achievable based on past data and your organization’s expenses. What do you want to accomplish? Does this seem financially possible? In what areas do you typically go over-budget? With these questions in mind, build a template of your budget and propose it those involved in your finances. Inform them of what’s going on within the context of this timeline.
- Create your budget. Now it is finally time to begin building your budget! Thankfully, the front work of these first three steps will make doing so far simpler than it sounds. First, budget your expenses based on what you want to do. Then, you can budget your revenue. And since this is often unpredictable for a nonprofit organization, make sure you include alternate options. Your anticipated revenue may never be available, so be prepared. In this process, forecast your cash flow and any seasons of a deficit. Upon approval of your budget from your board members, plan to orient your financial team and instruct them on what to do next.
- Monitor your budget. Though your budget may be complete, your work here is not done. Be sure that throughout the year, you create regular reports for program managers, executive directors, the board of directors, etc. These will maintain organization, clear direction, and participation from each member. Remember that creating your budget is significant, but maintaining, refining, and abiding by it are the critical elements of your success.
Finance concerns may pose a nuisance to your nonprofit operations. However, it is the ability to manage your money that will front your accomplishments properly. Without donations, fundraisers, and a well-managed budget, your organization would not be able to serve the community as it does today. And if you require payroll, bookkeeping or tax assistance, please do not hesitate to reach out to us at Prospect Financial. Call on us today!