It’s the time of year that (most) nonprofits are planning for their fiscal 2020 budgets. If you’ve already completed yours, hurray! If not, let’s get cracking – your 2020 budget should be approved prior to the end of 2019. Having your budget approved in the next month or so allows your board fund development committee to align next year’s fundraising plan with the financial plan, allowing you to start the New Year off strong.
For those of you in the budget trenches right now, I’m proud of you. Budgeting is not for the faint of heart. And it’s a critical business practice that’s accomplished as a team, not in a vacuum.
Let’s walk through some steps and practices to ensure that budgeting is a team sport this fall.
Involve the board finance committee. The finance committee, chaired by the board treasurer, should be involved with assisting nonprofit staff (if you have staff) in pulling together a draft budget to be presented to the board.
When presenting the draft budget to the board, build in extra time to provide financial training to the entire board. Remember, the board has a legal and a fiduciary responsibility to fulfill. How can the board be responsible stewards of funds donated to your organization if they don’t completely understand how the budget is put together?
- Do you have an executive compensation policy that is informing your salary line item in the budget? (If not, here’s a link for additional information on why this is so important.) https://www.councilofnonprofits.org/tools-resources/executive-compensation
- Have you built in professional development funds for board and staff? This would include annual board retreat and strategic planning facilitation fees, as well as additional training opportunities that are relevant for staff and leadership volunteers.
- Are there funds allocated for internal systems that create efficiencies and intuitionally sustainability? Namely, accounting software like QuickBooks, and donor database management software like Bloomerang? https://bloomerang.co/partners/incite/
- Have you built in a plan to ensure that you have a reserve for your organization? A goal to consider – at least six months of operating expenses in the bank.
Finally when the budget is approved for fiscal 2020, this document doesn’t go dark. It’s a tool, and should be discussed at each board meeting. Whether it’s a part of the consent agenda, or referenced during the meat of the meeting, it’s a living document.
All board members are responsible for the financial health of the nonprofit, and it’s our collective role to make sure that everyone has been trained to make informed financial decisions and participates in the process.
Need budgeting guidance for next year? Give me a shout or book a call with me. Good luck winning the budgeting game!