Small Non-profit Budgeting - Coursework Example

Small Non-profit Budgeting Abstract An operational budget is a financial strategy of action that is prepared for a particular period of time. It is the projected cost of operations that are displayed in financial terms. An important component that is displayed in non-profit sustainability is the obligation of both the staff and board to a solid financial management and planning. It is also important to ensure that everyone on board is on the same page. Budgeting puts together a financial plan that is realistic for the non-profit organization. The board for the non-profit organization must come up with a plan mainly by setting the goals and defining the priorities. The goals and priorities are outlined in the strategic plan. The organization then determines the amount of money that will be needed fulfill the set goals and priorities, and this data is replicated in the annual operating budget. A budget that is well planned focuses mainly on the primary goals as it provides financial adaptability that is a key ingredient for maximizing sustainability. This paper explores the ways of creating a budget for a small non-profit organization and the expenditures that the money is needed for. Introduction Budgeting is a process. You have to use the facts that you know to be true, make sensible assumptions concerning the future and project ahead on what will be coming in the form of revenues and what will be rolling out of the organization in the form of expenses. These financial estimates are just projections. They are well defined using historical data and the events that may take place in the future. For instance, salary expenses of $100,000 for three workers in a given organization will be different from the one that will be set following year considering the fact that more additional staff will be hired. When the budgeting process is carried out, similar items are taken whereby their expenses are estimated over a given period of time. For example, an organization may need to know the exact expenditure on the office supplies in a given time. The budget will outline the summary of the total amount of costs that will be spent on office supplies. Small non-profit organization budgets must be timely and precise. They are set with a lot of thought, time and efforts, and the budget which is approved is reviewed all the year round. The whole organization must settle on the budget cycle, and the significances and goals of the organization as replicated in financial standings in the annual budget. The budget which has been approved is the one that forms the foundation for action. The draft budget must be given to board members in advance before the board meeting so that the members may have enough time to review it. Once it is approved it is passed to a senior staff member for implementation and management. Since the board is seen as a collective body, no one member of the board can make changes to the budget which has already been approved. Making a budget for a small non-profit organization can be wide or small. The complexity depends on the size and the nature of programs, the number of budget sponsors and the employees. We now look at the steps that are involved in budgeting. Steps involved in budgeting Defining the budget timeline. A list of objectives and goals should be developed. It is important that the people who are involved in the budget making process are familiar with the prior years’ activities as well as the changes that are set to be made in the years to come. These factors are necessary for the preparation of an all-inclusive budget. If there is a strategic plan, the organization should consider all the activities are likely to have an impact on the budget and then plan accordingly. Estimate the cost of the resources that are needed to accomplish each goal. The expenses of the previous year can be used as a springboard, however, the non-profit organization should come up with budgeting decisions that are based on many factors apart from the prior years’ budget. If the aim encompasses some new programs or activities, then the cost will be estimated by creating a list that shows all expenses that will be involved so as to achieve a given purpose. Expected dates and the amount of revenue to be generated should be estimated. The members who are doing budgeting will have a clear overview on the amount of revenue that the organization will have at any given time. This helps them to make good priorities on what expenditures should be catered for in the budget. Prepare the final budget. When preparing the final budget, the non-profit organization should use the facts and document all the assumptions. The facts and assumptions should help them to come up with the right projections that will help in budget making. When preparing the final budget plenty of time should be set aside so that a thorough assessment is made on the process. Additionally, all the revenues should be forecasted and then compared with the estimated expenses. The financial policies and the budget strategies of the non-profit organization should be adhered to if a successful budget is to be made. Finally the fixed and variable costs should be identified, and the members should be realistic on what they suggest. Present the budget for approval by the board. The final budget should be finalized and approved by the board. During the approval process, questions may be asked regarding some issues, and one should be prepared to answer them. During the presentation, adjustments may be made if some new information comes to light. Once approved the budget should be communicated throughout the organization in order to create awareness to all members. Evaluate and monitor the budget which has been approved. This is done by identifying reviewing all the variations. The specific reasons for the variations should be determined, and the organization should be on track with the new budget. Accountability and reviewing of the information that is in the budget occasionally will be very important. This helps in managing the budget, and the right corrective measure is taken if there is any need. In conclusion, the budget should be key in every organization’s strategies. It should allow the flexibility that is required to achieve the set goals with orderly and successful way. Good budgeting is the catalyst to successful financial management. References http://www.councilofnonprofits.org/resources/financial-management Read More