Abila recently released their “Building a Better Budget: The Nonprofit Budget Roadmap ›” eBook, and Soft Trac is planning a Budget Session at our upcoming customer conference. Budgets are a hot topic right now. There's a good reasons for that fact. Budgeting is a critical component of laying out your nonprofit roadmap for the year. It can be a time consuming process, but one that is vital to maintaining the financial health of your organization.  

Below we have highlighted five important pitfalls to avoid as you move through your budgeting process:

1. Starting Too Late. Budgeting done right takes time. You cannot pull something hastily together and expect to get good results. You need to spend time reviewing, editing and revising until your budget truly reflects your organization's goals for the upcoming year. While actual time needed will vary by organization, a four month lead time is a good ballpark. The first phase will just be pulling your budgeting teams together, but then you'll want to expand across the organization so that your budget numbers can be based on solid information.
 
2. Not Involving the Right People. In addition to needing adequate time to prepare your budgets, you need to  include key people from across your organization. While the budgeting process will likely begin with your Chief Financial Officer, be sure to expand the process to other departments such as development and programs.  Your Development Department will be especially crucial in helping to determine the anticipated revenues in the upcoming year. As our earlier blog series "Finance and Fundraising Working Together" showed, it is important to the success of your organization for these two groups to work together. By involving departments throughout the organization, you will not only have a better insight into upcoming revenue and expenses, but you will also encourage buy in of the budget from these key personnel.
 
3. Assuming Your budget will Remain Static. While using your previous budget and adding a percentage increase across the board is a good starting point, this is only where the budgeting process begins not where it ends. You must evaluate all variables that may impact the budget. Are you expanding your fundraising efforts? Are you expecting a new grant? Are there other factors that might change revenue in the upcoming year? What about expenses? Are you expanding your programs? Adding new positions? How do these changes impact your expenses? All of these factors need to be reviewed and incorporated into your budget.
 
4. Not Reviewing the Budget throughout the Year. Once you finish your budget, don't stick it in a drawer and forget about it. You will need to revisit your budget nu

mbers on a regular basis, and make adjustments throughout the year as more information becomes available.
 
5. Not Linking your Budget to Your Chart of Accounts.  Everything included in your budget should relate  to your chart of accounts so that you can monitor your financial health. Having your budget line items tied to your chart of accounts, allows for you to more easily manage your budget throughout the year.

The budgeting process is a great time to review the health of your organization, and look to the future to find the best path forward so that you can continue to deliver on your mission.

Would you like more great tips on budgeting? Join us at our Soft Trac Annual MIP Customer Conference › scheduled for Monday, September 19th in Freeport, Maine for a full day of MIP sessions including:

Taking the Next Step in Budgeting

You’ve completed your first year of budgeting in MIP, now what?  Learn how to take advantage of historical actual and budget data, create templates for program staff and take advantage the power of the reporting in MIP.

Soft Trac is a woman-owned business and accomplished team of nonprofit software consultants.  We believe in making nonprofits "do good" better.   For more information on any of the topics discussed in this blog or to learn more about the software products and services we offer, please visit our CONTACT page.