Economic, social, and political events that have already occurred in 2024 carry the potential to adversely impact your non-profit organization’s budget. If you typically create fixed budgets well before each fiscal year, it might be beneficial to consider an alternative approach. Adopting rolling budgets can offer increased flexibility for your organization. In addition, amidst significant changes, you might want to explore the option of reforecasting your existing budget.

Rolling Budgets

Rather than leaving a budget in place for the year, organizations with rolling budgets set periodic dates to adjust the numbers. For example, you might budget four quarters ahead. At the end of each quarter, you would update the budgets for the next three quarters and add a new fourth quarter.

The rolling approach anticipates changes and encourages your organization’s leaders to take a forward-looking perspective. It works well for non-profits dealing with shifting ground and evolving strategies. Plus, it provides more useful information for decision making than a backward-looking static budget.

Reforecasting

Some non-profits may require an even more dramatic budget fix. Reforecasting your entire budget could boost your non-profit’s odds of survival in tough times. This option generally makes sense if you’ve undergone a major change that has implications for overall operations, such as securing or losing a large grant. Reforecasting also typically makes sense if it becomes clear your existing budget is materially inaccurate.

This process begins by identifying costs and revenues that are variable (for example, supplies and program revenue) and the effect that a trigger event might have on them. For example, during the COVID-19 pandemic, the fixed expenses (such as payroll or rent) of many organizations changed dramatically. You should reforecast any items that are likely to differ substantially from your original estimates.

You also may find it worthwhile to apply budget modeling with different scenarios. For instance, what would happen if a major revenue source were cut by half? Or if it disappeared altogether? Would you seek a loan, cancel a capital project, or trim staff? The final reforecasted budget is a fully revised document, not simply a handful of line-item adjustments.

Going Forward

Even if this isn’t your non-profit’s budget season and you already have a budget in place for the year, think about how you might change the process in the future. Contact us for budgeting help.