As a part of our partnership with the Colorado Nonprofit Association, we recently provided a webinar to members on financial leadership, and the challenges most leaders face. Over the next several months we will highlight topics from that presentation. Now, we are looking at what should be done for the financial planning of the organization, specifically the annual budget.
How to build a strong nonprofit budget
A strong, inclusive development process is key to the successful development of an organizational budget. Establish a team that is appropriate to your nonprofit’s size and structure. Since nonprofits invest heavily in the programs of the organization, program managers are good team members that will provide the core of the program budget. Involving them in the budget process naturally leads to the accountability of managing to their program budget. Build the budget off of the organization’s strategic priorities and set a timeline, working backward, from the Board’s approval date. Once the budget is approved by the Board, establish a regular monitoring process that reviews actual expenses to budget. This is also a great way to create accountability with program managers by ensuring they review their budget to actuals for each program on a monthly basis and establish corrective actions if necessary.
Many of our larger accounting services clients, actually lead the development process, meeting with program managers, executive directors, and board treasurers to gain insight into the upcoming goals and funding expectations and developing a draft budget. In others, we simply review the budget prior to submitting to the Board for approval. In both cases, we play an important role in the on-going monitoring process highlighting areas of concern.
For more guidance on developing your nonprofit’s budget, click here.