Common Problems Not-For-Profit Organizations Have When Budgeting and How to Deal
Running a not-for-profit organization can be very different from leading a business. While the two can share similarities, non-profits often have unique opportunities and challenges that corporate entities just don’t have to face.
One of the areas that can be unique for not-for-profits is the budgeting process. Most, if not all, organizations want to cut down on operating expenses, but in a non-profit, the less spent on operations means more funds going to the cause being championed.
Resources can be scarce in a not-for-profit, which means a strong budgeting process is that much more important. That said, we’ve pinpointed some common pitfalls non-profits run into and identified ways you can deal with them when they do arise.
- Budget timing.
Often, not-for-profits can struggle with the timing of their budgeting process. With fewer staff members doing more, it can be easy to start the budgeting process too late and then scramble to get it done. Working on the budget last minute is rarely a recipe for success.
The solution: Plan a budgeting timeline and stick to it. Put it in the calendar to begin the process much earlier than you think you have to and divide it into stages. Phase one — pulling the budgeting teams together. Phase two — reviewing past information. Breaking it down into smaller steps over a longer period of time will make the process more manageable.
- Not involving the right people.
Budgeting doesn’t happen in a silo. Many departments and staff members need to contribute and leaving some out can create more problems down the line.
The solution: Involve departments throughout your organization and include anyone who is responsible for monitoring the budget. This will create staff buy-in and help promote understanding of what items are priority and why.
- Making assumptions.
Looking at the previous budget and predicting a percentage increase is a good starting point, but it doesn’t tell the whole story. A non-profit’s income and revenue can change so much from year to year that it’s nearly impossible for a budget to remain stable.
The solution: develop what-if scenarios and evaluate any variables that might impact the budget. Expanding fundraising efforts? Expecting a new grant? Are there any planned expenses? Those should all be thought about and accounted for, not just a last-minute thought.
- Not linking your budget to your chart of accounts.
Some budgets have line items that are given different labels than is written on the financial statements. This can create confusion when it comes time to review.
The solution: take the time to make sure your budget line items and chart of accounts match.
- Not reviewing the budget.
Once the budget is done, it can be easy to stick it in a drawer and forget about it until next year. But doing so can be a major pitfall. Rolling forecasts are becoming the norm and for a good reason — markets can shift so quickly that many organizations need to be adaptable.
The solution: set time each month to review the budget and make adjustments as needed.
- Making the budget the old-fashioned way.
It can seem sometimes that budgeting software can be too expensive, especially if your organization is cash-strapped as is. But financial technology can simplify the budgeting process, letting you get more done in less time. Take True Sky’s software, for example. True Sky makes it easier than ever for multiple people to collaborate on a budget. It takes the frustration out of the workflow and even lets you develop customized reports for data mining, meaning you can do much more for less effort.
The solution: consider software the takes the tedium out of the process so you can focus less on data entry and more on analysis and planning.
Want to learn more about how True Sky can help your not-for-profit? Visit www.truesky.com or call 1-855-878-3759.
