5 Ways Fund Accounting Software Makes Nonprofit Budgeting Simple
Building your nonprofit budget is often like putting together a 1,000-piece jigsaw puzzle. You know what you want it to look like in the end, but when you start, it’s just a pile of disconnected pieces. As you work through it, you start to connect the programs to funding sources and—after turning a few pieces upside-down—see how it can all come together.
Also like a big jigsaw puzzle, your annual nonprofit budget often takes a lot of time and concentration. But with the right fund accounting software, you can take much of the pain and guesswork out of the process, with features to streamline financial activities across all stages of the process.
In a recent webinar, Senior Instructor for Blackbaud University Nate Hug shared five ways your fund accounting software can simplify the budgeting process for your nonprofit organization.
1. Duplicate Budgets and Never Start from Scratch
Templates are a major efficiency tool in practically every office task and a great time-saver in budgeting as well. There’s no need to reinvent the wheel every period, and as long as your nonprofit has at least one budget in your system, that can function as a template in fund accounting software.
Rather than starting each new budget from a blank slate, make a copy of a previous budget and save that as a template from which to develop all future ones. Certain line items fluctuate or appear and disappear depending on the period, but many others stay the same. Duplicating budgets ensures consistency and thoroughness across your programs and fiscal years.
Fund accounting software also gives you the flexibility to copy just the budget, the actuals, the actuals and encumbrance, or none of the dollar amounts—just the accounts, projects, and grants. This simple strategy gets you over halfway there, with the push of a button.
2. Work with Tools Your Team Understands
One thing that never seems to change across every organization, period, and economic cycle is that people prefer Microsoft Excel for working with budgets. Excel is universal, people are used to it, and it remains the go-to tool.
A great feature of fund accounting software is an Excel add-in that lets people create and edit a budget in Excel—where they feel comfortable—and then upload the completed version to the database for analysis and reporting. You can move your budget through the approval process quickly and easily, without extra training for those in your organization who aren’t in your fund accounting system on a regular basis.
3. Use Scenarios for Better Forecasting
Scenarios are a core concept of fund accounting software, identifying a single instance of an organization’s budget for a given fiscal year or period. Use these instances to create multiple scenarios of your original budget to test different outcomes and track revisions and changes.
Some examples of scenarios include:
- 10% over or under: See what the budget would look like if you were running a 10% surplus or funding was cut by 10%.
- Capital campaign: Measure the budget impact of launching a capital campaign.
- Granular lens: Create scenarios by department or program.
- Grant applications: Forecast the implications of receiving—or not receiving—a sizable grant.
Additionally, all these different scenarios exist simultaneously in Blackbaud Financial Edge NXT® and can be reused from year to year. The software allows you to look at different scenario IDs side by side, compare different budget scenarios next to an actuals column, or create variance and favorable/unfavorable columns.
Not only do budget scenarios help you stay nimble as you plan for a variety of possibilities, but they also help you set realistic goals for your organization.
4. Let the System Do the Distribution Math for You
Another way to save time with the budgeting process is by making use of the distribution methods available in your fund accounting software. Proper budget allocation is crucial to implementing an organizational roadmap and ensuring resource availability, and there are several strategies for doing so.
One is to distribute evenly, which means splitting the total budget amount equally across all periods. Or you can distribute by percentage, which keeps the percentage for each period the same while allowing the amount to vary.
Organizations can also create custom budget templates to determine exactly how they want to distribute funds across each period. For example, you may use 70% of a line item in Q1 with 10% of the budget allocated in the remaining quarters.
Financial teams can then filter by particular segments or categories to narrow down what their budget is looking at, then allocate to those segments using the various distribution methods.
5. Finalize Your Nonprofit Budget to Track Changes
Finalizing a budget is one of the simplest—and most powerful—things you can do in fund accounting software. It essentially locks a budget after it’s been approved, providing a single point of reference across the organization. Any changes thereafter will have to be annotated.
A finalized budget represents consensus and collaboration—be it board approval, or simply departmental sign-off—and makes it possible to track all future changes. That doesn’t mean changes can’t be made. It just means that they need to be justified, and the software will require a note explaining each one.
Once a budget has been finalized, the fund accounting software makes it easy to look back at all adjustments and see who made them and for what reason, displaying the original amount, the adjustment, and the current amount.
Simplify Your Nonprofit Budgeting with Blackbaud
Financial Edge NXT gives nonprofits all the tools they need to simplify and streamline their budget process for fewer headaches and better results.
With Financial Edge NXT, budgeting becomes an opportunity to test scenarios, gain consensus, and plan for the long-term financial health of your organization. It lets you work where you feel comfortable while giving you all the advantages of powerful analytical and reporting functions.
You don’t always know what the future will bring, but you can use the best fund accounting software to put your organization on a steady course for future success.
For more tips and examples of how Financial Edge NXT can transform your budgeting process, watch the full webinar.
Fund Accounting Software that Drives Impact
Find out how Blackbaud’s Financial Edge NXT® fits your organization.