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Budgeting for Nonprofit Organizations and Why It’s Important to Start with Revenue and Support
Assembling a budget for a nonprofit organization often feels like an endeavor that requires more artistic methods than scientific computations. This is especially true when it comes to budgeting for revenue and support, which is usually hard to predict with accuracy. To help balance the art (intuition) with the science (analysis) of budget building, consider using a “funding-first” approach.
The Importance of Budgets to Nonprofit Organizations
The word “budget” has almost universal recognition. Budgets have a very broad spectrum of usage and applicability beyond just nonprofit organizations, ranging from large entities (governments, Fortune 500 companies, professional sport teams) to small businesses, individual entrepreneurs, and even smaller applications such as families juggling home budgets and providing their children with early exposure to budgets through managing allowances.
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How Intermediate Cash Fund Pools Support Long-Term Investment Portfolios [SUBSCRIBERS-ONLY]
Nonprofit organizations should expand their cash management policies and procedures to include provisions for establishing and maintaining intermediate cash fund pools. This will not only enhance protection and management of operating (short-term) cash funds, but also act as a conservative buffer for long-term investment strategies, allocation targets, and portfolio risk management.
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How to Make Your Nonprofit Audit Committee More Impactful [SUBSCRIBERS-ONLY]
Audit committees for nonprofit organizations are charged with filling a very important and broad fiscal and financial accountability and governance oversight role. Most nonprofit audit committees center their attention on the back-end of the annual financial statement audit process when they receive draft auditor reports. While this is an important function, audit committees can be more impactful if they shift more of their focus to the front-end of the annual audit process and expand their internal control and business practices oversight roles.
Any Board Member Can Be a Board Champion
The concept of a “Board champion” for a nonprofit organization is frequently misunderstood. Board champions do not necessarily have to be officers. They can be any responsible Board member who is willing and able to actively engage in helping the organization. Board members have the potential to help in many ways, both small and large, by sharing their experiences, skills, and aspirations for the organization. Even seemingly small ideas and offers to assist can sometimes have just as big of an impact as officer service.
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Regular Communication Between Development and Finance Departments is Essential for Donor Management [SUBSCRIBERS-ONLY]
Donors are one of the most precious sources of funding for publicly supported nonprofit organizations. Managing this resource is critical to sustainability, continuity, and financial health. There are many important elements to donor management, but these elements will be rendered almost useless without consistent pathways of communication and sharing of information between development and finance departments.
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The Case for Capitalizing Portable Electronic Devices (PEDs) [SUBSCRIBERS-ONLY]
Nonprofit organizations are now accustomed to living with changing conditions. Change can come in many different forms, from dramatic and fast (remote working, inflation) to subtle and out of sight (technology, rules, and regulations). A noteworthy example involves portable electronic devices (PEDs), which have seen subtle steady changes leading to lower cost with expanded performance and capacity. These changes have led to new risks that deserve special attention.
Drafting Dissolution Language for the Articles of Incorporation
The “dissolution” clause in a nonprofit organization’s Articles of Incorporation is one of the key provisions required to qualify for 501(c)(3) status. This language must require that the organization’s assets remain dedicated to 501(c)(3) exempt purposes in the event it dissolves. While this basic principle is easy to understand, many overlook the significance of subtle differences in how to approach drafting this language.
Purpose-Built Financial Messaging and Reporting
Financial reports show up each month with great regularity but little fanfare and excitement. Consequently, we tend to take financial reports for granted and do not give them the attention they deserve. To correct this deficiency, nonprofit organizations need to add purpose to their financial reporting, aiming to fulfill the “needs” of users while also satisfying their “wants.”
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How Nonprofits Can Better Manage Overhead Expenses [SUBSCRIBERS-ONLY]
Managing a nonprofit organization’s overhead (management and general) expenses is just as important as managing program and fundraising expenses. Most nonprofits would not dispute this statement. However, most organizations tend to put an inordinate focus on managing program and fundraising expenses and ignore or not give equal attention to managing overhead expenses.
Making the Most of Your Time as a Board Member
To get the most out of your commitment to serve as a Board member of a nonprofit organization, think of your service tenure as an investment of time and resources. Like any investment, you need to choose wisely and strive for high performance. Our 4-part Pathways to Effective Board Leadership Series will help you assess and choose a leadership path that is aligned to your passion and capacity to serve so that you are in a position to complete your Board service without regrets or second guesses.
Ending Your Nonprofit Board Service on a High Note
Whether your Board service is ending because of term limit rules or because you have determined that “enough is enough,” planning for a successful exit as a Board member of a nonprofit organization can be as important, if not more important, than all your active service time added together. Exiting the right way with thought and purpose will ensure that organizational momentum will be sustained, and continuity will be enhanced.
How Inflation Affects Planning, Budgets, and Operating Reserves
Inflation has always been present at some level. When inflation is low, it lurks quietly in the corner of our minds. But when inflation is revving, the ringing in our ears will not go away. During periods of uncertainty and economic volatility, inflation tends to draw attention, often triggering regressive non-thinking reactions. Inflation needs to be treated as an economic reality to be confronted and a challenging obstacle to be solved, not as a call to action by itself.
Choosing to Serve an Additional Term as a Nonprofit Board Member
Nonprofit organizations generally have a set length for each Board service term, typically 2 or 3 years. The number of consecutive terms a Board member may serve can be constrained by term limits or be open-ended. In either case, at the end of your first Board term, a decision to continue or exit must be made.
Choosing to Serve as an Officer for a Nonprofit Organization
There is no perfect time to decide to serve as an officer for a nonprofit organization. However, the best time to consider this option is often just after you complete your first year of Board service and have relinquished your unofficial title as a “new Board member.” Insights gained from your first-year experiences interacting with Board members, management, and staff will provide a unique view that you would not have had prior to the start of your Board service term.