6 Functions for Creating Effective Budgets

Budgeting is an intrinsic and vital part of a nonprofit organization.

Often, it requires months of drafting and revising before reaching final board approval.  Even further complicating the budgeting process is the fact that it often involves mostly non-financial staff to develop. And for heavily grant funded organizations, budgeting may often span multiple years and not align with the organization’s fiscal year.

When reviewing budgeting applications organizations should ensure they are able to do the following:

1. Track and merge multiple budgeting scenarios

  •  This allows organizations to maintain multiple budgets either by department, project, grant or even multiple looks for the organization as a whole.

2. Create tool kits that show current budget and actual financial data and apply inflators/deflators

This allows the accounting organization to provide Excel workbooks to budgeting users that include:

  •   Current Actuals
  •   Current Budget
  •   Current Actuals/Budgets plus/minus ‘X’ percent

3. Facilitate multiyear budgets

  • Ability to derive budgets spanning fiscal years
  • Often organizations will develop a current year budget and begin forecasting into the following year.

4. Develop budgets not in alignment with the organizations fiscal year

  • Grant funded organizations are often required to develop budgeting and reporting specific to the requirements of the grant.
  • The budgeting solution must be flexible enough to define the budgets length regardless of alignment with the organization’s fiscal year.

5. Track modifications and audit trails

  • Ability to adjust a ‘finalized’ board approved budget if required.
  • Ability to track/require notes defining the need for the modification.

6. Use forecasting to take a defined data set into account and develop the budget.