Budget Management for Nonprofits

It is the start of your organization's fourth quarter and the dreaded budget question arises – What are we going to do next year? Sound familiar. With many organizations, budget time can be a daunting task that involves multiple individuals and days, maybe weeks, of compiling and crunching numbers just to get the base set. Then comes the approval process and the back and forth of numbers – you can have the indicated amount for office supplies, but not the one for travel and meals, and your administrative expenses can't be nearly this high. Of course, we cannot forget the biggest question for most nonprofits: From where is our funding going to come. The remainder of this article presents some ideas to help you answer these dreaded questions.

Using multiple funds and calendars
One important aspect of preparing each year as a nonprofit is setting up your funds. As you know, trying to manage too many or too few funds causes accounting nightmares. A typical approach some nonprofits take is to set up a single fund for each type of funding they receive. They also take advantage of using multiple fiscal calendars.

When you have funding, say a grant, that you receive in July and you have a year to use it, this means it does not expire until June of the next year. If you have your organization's fiscal calendar set up to run January to December, it can make it a little difficult to manage funding that crosses years. With a product like DENALI, you can have multiple fiscal calendars; meaning, your organization can stay January to December, but you can set each fund up to run differently, for example July to June. Also in DENALI, you can run reports based on your organization's calendar or your individual funds! This flexibility helps ensure accurate numbers when you need them.
Monitoring funding
Another challenge for nonprofits is monitoring funding effectively. There are various ways by which to monitor your funding. You can use spreadsheets to track what you have, what you have used, and what you have remaining. For those of you that have tried this method, you know it can be time consuming and lead to unintentional errors. Then, when it comes to reporting you have to manipulate the spreadsheet to create graphs or charts and manually type up reports that contain the necessary figures? If you want to run reports from your accounting package, then you have to do double the work by reentering your funding in it: another place for unintentional errors to occur. Take advantage of your accounting solution!

By using a product like DENALI, you can enter all of your funding through an add-on product, like DonorExpress. Because you can fully integrate DENALI modules, you only have to enter the information once and then posted automatically to the appropriate modules. This way, when you are ready to run reports to monitor your fund balances, you can do so quickly without having to enter information multiple times.

Streamlining the budget process
So how can you streamline the budgeting process and maximize historical data as a starting point. Electronic spreadsheets work well, especially if you have multiple departments. For example, our Chief Operating Officer (COO) has a spreadsheet file for each department that he sends to the department managers with last year's budget information in their file. The managers update the budget figures for next year. Of course, these preliminary estimates go through a standard approval process and then adjust as needed.

The nice thing about this method is that it decreases the COO's overall workload because he can merge the file contents into one file and then import the budget information into our accounting system after it is final. The latest DENALI product line includes a flexible, highly interactive budgeting tool that allows you to import quickly all or part of your budget file. You can even go a step further with DENALI's tool and export last year's budget by department!

As a recap, funding, budgeting, and managing a nonprofit organization presents challenges. Challenges that the proper accounting solution can ease or even eliminate, thus freeing time for you to focus on what matters most—serving your clients.