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Budgeting For nonprofits: your organization's budget is one of your best tools

Budgeting for nonprofits and fundraising are about so much more than where an organization’s money is spent and acquired. They are complementary aspects of how an organization operates, and can be tools for development, and collaboration when understood properly.

Too often, budgets become a source of anxiety for those tasked with creating them. Money in general can have this effect on people, and when one thinks of budgets in terms of limitations and scarcity, the budgeting process can be especially daunting.

It doesn’t have to be this way. Let’s take a step back and think more broadly about budgeting for nonprofits with the right mindset: collaborative budgeting.

The Values in a Budget Are More Than Monetary

The ultimate goal of a budget is to take the values that you hold as organization and try to assign that into the finances.

It is yet another way to explain and support your mission.

It goes beyond how money is handled and illuminates how your org performs in and interacts with the community.

This is just one of many reasons why budgeting for nonprofits should not be a solitary process. It should be collaborative, and it should include insights from contributors and community members.

A Budget is More Than a Spreadsheet

Yes, there are spreadsheets and graphs and charts involved in most budgets and associated financial projections, but you should also include a written overview, a consensus. The text of a budget should document the aspirations of the organization and intermediate goals, even if they are not immediately achievable based on current cash flow and reserves.

Compiling these documents over years is extremely useful down the line. Such a record helps to maintain continuity despite inevitable staffing and board changes. It keeps you from forgetting your goals, so that when you have the reserves, you can revisit, evaluate and explore these goals effectively.

Writing a Budget is a Chance to Create Buy-In

A comprehensive budget communicates how people want to see an organization grow and develop in the future. Getting that full picture requires speaking to people at every level of decision-making in the organization, and this is where collaborative budgeting comes in.

These conversations can show everyone involved that their input is valued, and can spark new ideas. Even in organizations with a lot of group discussion around budgets, there is still usually one person to whom it falls to make the final calls and compile the official doc. It could be the finance director, or the executive director, or someone whose primary job is to run the budgetary process annually.

By including many voices throughout the budgetary process, the final author will have more confidence in the final product, and others in the org will, too.

Budgets Are a Living Document

Too often, the budget gets the official stamp, gets distributed, and then gets put away for nine months. This is unsatisfying for those who had to put in all the effort to make the document, and it also squanders the potential to use the budget as a tool for further conversation and evaluation.

When we think of budgeting for nonprofits as an aspect of our work and mission, “staying on budget” isn’t about tracking every cent, but rather looking for indicators of what is effective and where we might adjust strategies.

Budgets can also be revisited and amended...

…and we shouldn’t think of these situations as “We got it wrong,” and instead think of it as “We are paying attention, and we are agile.”

A Collaborative Approach to Budgeting Reminds You What You Do Best

Speaking of mental frameworks: Try thinking of budgets in terms of “What do we love to do and what do we do well” versus the usual “We only brought in so much…we need so much…”

The latter case may seem to be more grounded in reality because it has specific numbers attached, but it is detached from the actual work and results that you are achieving.

When you are focused on what you do well, the best ways to fund that work and the places to push your resources become more evident.

For example, you might ask: “What programs do we have that we could shine a light on to raise interest? What are some stories we can share with donors? Who is engaging the most? Should we be more focused on small-scale grassroots organizing or courting individual donors or something else?”

Again, a collaborative budgeting process is required for this to work well, as the answers can be diverse and offer a more complete picture of your org’s operations. Getting informed answers to these questions makes it easier to go back to the numbers and assign values, and can bolster your confidence in that complement to your budget: your fundraising strategy.

The Budgeting Process Helps Evaluate Organizational Health

Budgets too often come from the top down, with the why of it remaining obscure to the people who are actually expensing things. Meanwhile, those at the top of the decision-making ladder often don’t have a clear understanding of what is being expensed and why (until people run over budget and there is an audit).

In another post, I will explain more about how to have conversations about these expectations and the proper tone to take when discussing expenses. For now, let us just simply say that these, too, should feel collaborative, like the rest of the budgeting process. It’s about seeking solutions rather than blame.

That brings us back to the overarching point: Budgeting for nonprofits should not be daunting, scary, and informed by a sense of scarcity. A budget should be understood as a reflection of your collective goals, successes, and hopes.

If you are the one in charge of the budgetary process, don’t go it alone. The more collaborative you make the process, the more mutual understanding and excitement you will foster with everyone involved.

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