Budgets aren’t set in stone. Rather, they evolve over the fiscal year. They require periodic checkups and adjustments to make them work for, rather than against, an organization’s needs.
If it’s been a while since you’ve reviewed this fiscal year’s budget, take time now to go over the budget. Work with your accounting person or department to review projected expenses, income, and more, and give your budget a thorough checkup and tune-up with the following nonprofit budgeting best practices.
Nonprofit Accounting and Budgeting Best Practices
- Continuous monitoring: Budgets must be monitored continuously. This includes using both operational processes and the right software to provide up-to-date information. Continuous monitoring enables you to take action quickly should you need to adjust the budget based on actual and projected figures. It also lets you catch and correct mistakes quickly. Schedule time for budget reviews each month and add it to your calendar now.
- Assess and review: In addition to monitoring the budget to make sure there are no mistakes, assess and review the major line items periodically. You may need to shift funds from one budget to another or update lines based on cash flow. Special projects, especially those that take more than a year, may need to be treated separately in the budgeting system so that you can maintain, monitor, and review the project budget within a different timeframe than the organization’s general budget.
- Ask key questions: During the budget review, ask key questions. These questions may include:
- Did you gain or lose any important sources of funding?
- Do any granting institutions need updates on how their funds are being spent?
- Are there any new economic challenges on the horizon? If so, how can you adjust the budget to prepare for them?
- Is there any important or unexpected need that will require special funding?
- Are any lines running low? Expecting a surplus?
- Revise the budget according: Budgets are working documents, not final outputs. It’s fine to revise the budget and to make adjustments as needed to accommodate changing situations.
- Review bylaws and budgets: Bylaws may address budgetary issues. Review the organization’s charter and bylaws now to make sure that any changes you make to the budget follow the bylaws.
Communicate Budget Updates to Your Team
Lastly, budget checkups shouldn’t end with closing the computer or signing off on the updates. You must take the time to provide your staff with an update on the budget.
You may wonder why this is important considering that most people on your staff don’t have budgetary responsibilities. It’s simple: everyone needs to know where the organization’s finances stand. They may not need all of the details, but they need to know that there’s enough money to continue operations, address problems, and reinvest. If there’s a shortfall, they need to know that too, so they can take measures to conserve funds and cut expenses.
It may help to use data visualizations such as graphs and charts to explain the big picture to your staff. This is where cloud-based nonprofit accounting software comes in handy. Such programs offer the ability to run reports using up-to-the-minute data and provide easy-to-understand visuals to accompany your presentation.
Now’s the time to review, revise, and adjust the budget. Make an appointment with your accountant or CFO today to begin the process. And, be sure to schedule the next review now, too. Remember, budgeting is an ongoing process, not a final report.
Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.