Careful budget planning for Not-for-Profits is critical as it provides a guide to how you intend to use your organisation’s resources. Budgets also provide a mechanism to monitor performance by identifying variations and then deciding what action needs to be taken. In addition, they can also allow program managers to be responsible and accountable for the performance of their program area.
Tracking Unspent Budgets
One reason why budget planning is important for Not-for-Profits is that often grants are linked to contracted outcomes so budgets need to accurately reflect that those outcomes can be achieved without additional costs. For example, if you have spent 75% of a grant yet only achieved 20% of the agreed outcomes then you may have a significant problem. In the extreme, this can threaten the viability of the organisation or adversely impact on other projects as funds may need to be redirected. This can even jeopardise future funding from grant providers. Therefore, a report that summarises the % of funding linked to the outcomes needs to be prepared so any variations are identified early. They can then be investigated and appropriate action taken if needed.
This also highlights the importance of the budget for managing the unspent funds. Often grants are received in advance and this can give the appearance of an excess of funds in the bank account when in reality they are tied to specific projects and should not be used for other operations. A reconciliation of these unspent funds that links them to the actual project as well as the cashflow forecast to indicate when they are planned to be used is vital. Reports such as Calxa’s “Unspent Budgets Report” summarise where the project is at and compares this to total project funds allocated, identifying potential problems early and prompting appropriate action.
Benchmarking Future Activity
Budget planning also provides a benchmark for future activity. When preparing next year’s budget or a submission for a new grant the performance against the current budget provides a valuable guide, as long as you understand the reasons for variations.
Board Reporting and Good Governance
Whether you are on a Board or answering to a Board, reports should be prepared monthly that compare the actual results against the budget. Variations should be identified with an explanation as to why they have occurred . In some cases they may be due to timing differences, the budgeted item may have been incorrectly calculated, the activity did not occur when planned or there may have been a new activity that wasn’t foreseen. Variances often are normal day-to-day occurances, it is the reporting of such variances that allow a Board of Directors to make diligent decisions and achieve good governance. Calxa has an option to highlight exceptional variances on budget reports based on a dollar variance, a percentage variance or both.
The essence is that it is vital to understand why the variations have occurred so that an appropriate course of action can be undertaken if needed.
Where does Technology fit into this Complex Task?
Using technology to fasttrack the budget planning task makes sense. Calxa Premier has features that specialise in helping Not-for-Profits to simplify the job at hand:
Shortcuts and Budget Factory: Saves a lot of time with setting up multiple budgets in that initial stage.
Account Trees: Re-arranges Chart of Accounts helping with acquittal of the various grants and providing reports to boards at the right level of detail.
Business Unit Lists: Allows reporting on individual projects or groups of projects.
Templated Reports: Selecting from a list of over 40 reports allows accurate and professional reporting.
The great benefits from using this kind of technology are the time saved and the confidence to rely on non-manipulated data. Download a trial and try this for yourself .