By Jewell Cochran
A budget is a management tool to plan for present and future operational performance. Think of it as a translation of operational goals into financial terms. A “break-even” bottom line is reasonable and typical for nonprofits. Although it can be a rather involved process to create and monitor, here are a few helpful tips:
- Generally, non-profit budgets are categorized into 3 main areas: Administration, Program, and Fundraising.
- Start by compiling prior-year actual amounts, and continue building with specific revenue and costs identified for the new budget year.
- Involve and educate department leaders on the process and solicit input.
- Compare Actuals to Budget in the monthly Statement of Revenue and Expenditures.
- Review grant performance closely to keep compliant with donor requirements.
- Periodically modify budget assumptions based on actual performance in order to project realistic year-end number.
Click here to read the fourth article in this series – Financial Management Best Practice #4 – Financial Statements