Nonprofits are constantly looking for new ways to develop and achieve their mission-driven objectives. Unfortunately for smaller organizations, big aspirations aren’t generally matched by a big budget. So how can nonprofits manage financial restraints while also maximizing organizational sustainability?
Taking the time to plan out one’s budget, on a more consistent basis, can help an organization better identify, prioritize, and build towards their goals. To create an effective budget, follow these 6 simple steps:
- Build a Budget Committee—Committee members should be familiar with budget and goal history, as well as future objectives. The committee often includes the Board Treasurer, CFO, Executive Director, and other finance-oriented positions.
- Create Deadlines—Pinpoint the deadline for final approval, as well as mini deadlines leading up to it. Delegate tasks to each committee member to ensure that everything is accomplished in an efficient manner.
- Analyze Last Year’s Budget Do’s and Don’ts—Look for patterns in past budget fluctuations and identify potentially unrealistic goals. Which budget items were allocated too much/too little money? How have goal priorities shifted this year?
- Draft a Budget Structure and Timeline— Map out target goal dates for each objective, as well as their individually estimated costs. Don’t forget to include a reserve for miscellaneous expenses and potential emergencies.
- Present Budget to the Board—Because the Board often must approve the final budget, allow additional time for feedback and questions.
- Review Throughout the Year—After everything is finalized, continue to track your budget’s progress throughout the year. Comparing the estimated costs with your actual expenses will help determine the overall soundness of your budget.
In order to grow within the nonprofit sector, organizations must learn how to construct and abide by their determined budgets. Serving as a roadmap to achieving annual objectives, a well thought out budget can help nonprofits succeed without sacrificing excess funds.
Learn more about the importance of nonprofit budget planning here.