The Dos and Don’ts of Setting Up a Nonprofit Budget is a crucial tool for any nonprofit organization. Without it, organizations cannot plan for the future and assess their financial well-being. There is a wide range of methods that charities can use to allocate budgets. The most commonly used methods are:
- The affordability method which is used when nonprofit leaders allocate budgets based on what the organization can afford.
- The arbitrary allocation is used when a budget is arbitrarily allocated without considering the organizational objectives.
- The historical method applies when last year’s budget is used as a base to allocate this year’s budget.
Paper-based systems compel nonprofit leaders to allocate budgets based on last year’s budget. This method of allocating funds results in a shortage of charity resources.
When you automate budgets the duty of setting aside funds becomes easy. Another advantage of using an automated budget is that charity CFOs get to monitor funds wherever they are.
We touch on five do’s and five don’ts of setting up budgets. Read more about budgeting on this blog.
Do # 1
Always consider the calendar when setting up a budget. Is the budget for the first quarter or the second quarter of the year? Revisit your goals to see if the budget still helps you to achieve the set goals.
Do # 2 Why NGO budgeting should be fun (3)
Remember to remain accountable and conservative during the process of setting up a budget. The purpose for budgeting is to curb wastage of donated funds.
Do # 3
Automate your purchasing processes. There is a slim chance of spending within budget when all purchases are still done on paper.
Tweet this: Remember to remain accountable and conservative during the process of setting up a budget
Do # 4
Monitor all your purchase transactions because when purchases are not monitored funds can be wasted.
Do # 5
Assess key organizational KPIs from time to time. For example, when a donor retention rate has decreased by 20% it’s important to find the reason for this so that action can be taken.
Don’t # 1
Don’t use last year’s budget without considering the current program’s needs. Last year’s figures can only be used as a guideline but not a true reflection of your current organizational needs. Economic conditions will have a huge influence on how you should project your costs for 2017.
Don’t # 2
Don’t exclude your staff in the planning stage. When setting up a budget, make sure that it easily accessible not only to the finance team, but to employees from other departments. The best way to do this is by employing a purchase order system like Procurementexpress.com which allows all employees from various departments to access budgets and request purchases.
Don’t # 3
Don’t create just one budget for all fundraising programs. It’s imperative that each program has its own budget.
Don’t # 4
Don’t process a payment for a PO that was not signed by a project manager. This problem is commonplace with charity organizations still using paper-based systems. Every PO of a particular charity program needs to be signed by a manager of that particular program. Procurementexpress.com helps charities to specify who the approvers are.
Don’t forget to include indirect costs in your program budgets. Usually, indirect costs include costs such as auditing costs and property and liability insurance.
Want to set up your budget like a pro? Sign up for a free trial of Procurementexpress.com today. The team is available 24/7 just to make sure that, you spend transparently.What challenges do you currently have with budgeting? Post your comment here