Article 3 – The Birth and Growth of a Non-profit, Budget Planning and Execution
As we think about the growth of a non-profit and closely examine how a non-profit can go from “Mom and Pop” to a large fully-functioning organization with financial rules and guidelines, we have to take a deeper look into the Budget Planning and Execution Process.
In the first article on the series “Accounting Systems and Best Practices for Nonprofits”, we talk about some pain-points that can become challenging during this growth process. The first group of items that may be the most changing during your growth from a small non-profit to a medium-size one may be in the realm of the first 5 bullet points listed in our first article:
• Delivery of reporting needs from sub-entities (local chapters and affiliates) to a national organization and vice versa.
• Budget Planning.
• Transparency of expenses.
• Adhering to our “cost to raise a dollar” guidelines.
• Petitioning sponsor and donors with the most appropriate documentation.
We touched upon reporting needs. Today, let’s talk about Budget Planning. This process can be a huge pain-point in a fast growing non-profit. What factors play a role in enhancing this pain?
Historical P&L Reports: Say you are the one being challenged to “pop in” numbers for the coming year’s budget. Obviously, we have to plan accordingly based on if it is a fund raising or revenue generating event, an educational event, or maybe it’s a service, a scholarship fund? But getting down to the basics, we really need to review our historical P&Ls and take a close look at our numbers. How easy is it for you to get those reports in a timely manner? Are you waiting on one person such as a board Treasurer? Maybe you are waiting on transaction entries that haven’t been done? In the non-profit I am a part of, it seems that our budgets are due the exact same time as our biggest and most challenging fundraiser. We are scrambling to get sponsor donations and event expenses in so we can see if we can plan for “bigger and better” next year. Our P&L reports mean nothing unless the data is up-to-date and accurate.
The best option for this pain-point would be to have a system where multiple players can login and perform data entry and run P&L reports as needed. When you have a system that you can enter the information real-time, it makes life all the easier.
Project Budgeting: How do you organize your budget for a specific event or service? As a budgeting item get bigger and more complicated, can you accurately budget when there are many items that play a factor? Maybe you have an event that now requires a full time event manager to be hired? Maybe you need to track time and expense for this event? Maybe your budget varies upon location? For example, my fundraising walks require a larger expense budget for Cleveland than in Toledo. More people equals more food right? So planning for my walks might be better managed if I could break down my costs by location.
There are a few great Accounting ERP systems that have this project budgeting feature. It is a great way to really organize your game plan.
User Acceptance: Does this make you laugh? But really, when someone is irate about a budget change that is not in their favor, do you have the right tools to fight your battle?
They can’t fight the facts. If you have a system where there are easy-to-reach reports to provide ammunition, it makes the battle easier to fight.
Newbies in the Pipeline: A “newbie” is what I like to refer to as a new item (service, event, scholarship) that might be added to the budget. For a non-profit company, it takes a lot of guts to get newbies in the budget pipeline. In order for approval from the big wigs, there has to be a need that typically falls in-line with fulfilling the needs of the national plan. So getting approval is painful!
Having an accounting system that can help you provide detailed reports to support your request is a great way to get your budget approved and quickly fulfil the needs of your community.
Execution and Delivery: How long does it take to prepare your budgets? Days? Weeks? Do you put it off to the last minute?
An accounting system that can help you with this process and improve your decision making is the right way to go! The more organized this process is, the more likely you will be to finish ahead of schedule and have more confidence in your submissions.
Stay tuned for our next article that will dive deeper into some of other areas of non-profit financial best practices. Please email me at mackenzie@caidynamics.com for comments or questions on this subject.