If your organization operates on a calendar year basis, it is time to begin thinking about your non-profit budgeting strategies for the year ahead. Whether you start from scratch every year or simply make necessary adjustments to the budget from previous years, it is a good idea to get a head start on analyzing your budgeting strategies. Some issues may appear during this process, and they may not always be a quick fix. Issues to look out for include reduced grant funding and increased service needs. This is also a great time to investigate and address possible stumbling blocks that may have been prominent in years past.

Banish Silos

Your non-profit may not always approach its budget in an efficient and productive manner. For example, does your organization build its budget in silos, with little or no consultation among departments? Perhaps executives set goals, individual departments develop their own budgets, and accounting or finance is charged with crunching the numbers.

You might be better off approaching non-profit budgeting strategies holistically. This requires collaboration and communication between units. Rather than forecasting revenues and expenses on their own, your accounting or finance team should gather information from all departments first, then perform their financial calculations.

Improve Accuracy

Also be wary of underbudgeting. You can improve accuracy with techniques such as forecasting, which means projecting financial performance based on such variables as historical data (for example, giving patterns), economic trends, and assumptions about circumstances expected to affect your organization during the budget period (such as a major capital campaign). Forecasting generally takes a longer-term view than budgeting — say, three years versus the typical one-year budget. It also provides valuable information to guide budget allocations and strategic planning.

You might also want to perform some budget modeling, where you game out different scenarios. Consider your options if, for example, you lost the support of a major donor or couldn’t hold a big, in-person fundraising event.

Or switch from your annual budget to a more flexible rolling budget. You’d still budget for four quarters but set certain intervals during which you’d adjust the numbers as circumstances dictate.

Provide Backup

Don’t forget to back up your budget with a reserve fund. If you already have operational reserves, avoid the temptation to skip contributions to this fund during any budget period. For more help with your non-profit budgeting strategies, contact us.