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Three Tactics for Communicating Difficult Budget Issues to Your Board
Difficult budget issues can often arise quickly and unexpectedly. To maintain a high level of trust with your nonprofit organization’s Board and remain transparent, collaborative, and inclusive, be sure to communicate in a timely and thoughtful manner.
The Benefits of Multi-Year Budgets
I have been a strong advocate of year-end budget projections that are updated monthly throughout the year. These budget projections help nonprofit organizations to keep track of their progress while providing an opportunity to react to changing circumstances in real time. The impact on the psyche is immediate and beneficial. This impact is enhanced when paired with multi-year budgets as shown in our Multi-Year Budget Financial Dashboard Template.
![TEMPLATE: 3-Month Rolling Budget [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/155123d1-883c-495d-9558-f39385027986/andres-dallimonti-kjqTlMHLci4-unsplash.jpg)
TEMPLATE: 3-Month Rolling Budget [SUBSCRIBERS-ONLY]
During periods of high growth or rapid expected and unexpected changes and disruption, this 3-Month Rolling Budget Template will be a useful planning tool to help your nonprofit organization strategize, pivot and change course, documenting your search for a sustainable and smooth path forward.
![TEMPLATE: Multi-Year Budget Financial Dashboard [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/7af9aba8-cf74-4d2a-90db-c53d81c47856/matt-noble-BpTMNN9JSmQ-unsplash.jpg)
TEMPLATE: Multi-Year Budget Financial Dashboard [SUBSCRIBERS-ONLY]
For evolution and change to be fully appreciated, nonprofit organizations need to include multi-year forecast budgets in financial reporting to show how the organization is evolving and how its programmatic goals and activities will be reflected in the future.
![Nonprofits Should Stress Test Funding on a Regular Basis [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1709039967092-YB0T6IZRJG0SL2GJJBHW/bridge-4562163_1920.jpg)
Nonprofits Should Stress Test Funding on a Regular Basis [SUBSCRIBERS-ONLY]
Stress testing a nonprofit organization’s funding seems like a frightening proposition, conjuring images of doom and gloom. This is not the case at all. Regular stress testing of funding will enhance strategic planning, raise awareness of changing conditions, and stimulate an earlier call to action. All funding sources, both strong and weak, will benefit from these regular efforts.
Q&A #70 – How Can I Explain the Bottom-Line Budget Impact of Multi-Year Grants?
The answer is to take a two-pronged approach. First, prepare financial schedules that show the anticipated annual usage of the multi-year grant for the life of the grant. Second, using this information, be thoughtful and assertive with your messaging to your Board. Communicating in a multi-year format will help to move attention away from the impact of a multi-year grant on any single-year budget.
Creating a Culture of Projections: Actively Engaging Staff in the Financial Planning Process
Creating a culture of interactive, financial projection-based planning must be a primary practice within a nonprofit organization. To effectively achieve this goal, organizations need more than standard historical trend analysis derived from monthly financial statements and financial dashboards. These reports are necessary and important but should be considered as the starting point. Staff and management must be actively engaged in the planning process to create a “culture of projections” in which interactive questioning, rolling forecasts, and forward thinking can thrive.
Operating Reserve Policies are a Perfect Vehicle for Targeting Your Budget’s Bottom-Line
Nonprofit organizations would greatly benefit from adopting a standardized policy for strategically targeting and managing their annual budget bottom-line. You could argue that there is no greater safety net for overall financial health than having a formal policy, or at least a budget working rule or guideline, for this important metric.
![A Revenue Aligned Budget is the Safe Way to Go [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1707673315940-XFXSSKR83RU6Y3ESIJXN/pexels-katerina-holmes-5905610.jpg)
A Revenue Aligned Budget is the Safe Way to Go [SUBSCRIBERS-ONLY]
I feel the time is right to stretch our budget planning and begin to envision operations from the perspective of a balanced budget aligned to a conservative estimate of revenue and funding for the next 12 months. I am now advocating for using a “revenue aligned budget” strategy that is realistic in nature, obtainable, with low risk and a high degree for success.
![Planning for the Next Annual Budget Cycle: Where Do You Start?[SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1707662595108-57DPZU9J8H2KWC84XO51/tartan-track-2678544_1920.jpg)
Planning for the Next Annual Budget Cycle: Where Do You Start?[SUBSCRIBERS-ONLY]
Compiling the annual budget for the next fiscal year is always a challenge and requires as much pre-planning as possible. During periods of unpredictable volatility, we need to get started early and consider new strategies we might not have used in the past. Top-down budgeting and stress testing your funding sources might be the best way to get started on next year’s budget.
![Annual Budget Process Assessment: Is Your Budgeting Process Helping to Drive Results? [SUBSCRIBERS-ONLY]](https://images.squarespace-cdn.com/content/v1/5e6ccadfb4659c1d51df14d5/1598878792048-O6I2OGDYPGIA1VU8IANR/alex-litvin-MAYsdoYpGuk-unsplash.jpg)
Annual Budget Process Assessment: Is Your Budgeting Process Helping to Drive Results? [SUBSCRIBERS-ONLY]
Stepping back once a year to take a high-level assessment of your budget system is both a best practice and a proactive exercise.
There are five important questions to keep in mind as you work through the assessment process.
Prepare a Burn-Rate Analysis and Dashboard
During a time of crisis, knowing the ins and outs of your burn-rate is vital because there are so many decisions being made quickly. Having a good handle on your burn-rate enables you to pay more attention to the variable cost side of the equation knowing you have already considered your operational fixed costs through a burn-rate analysis.