Social Ch@nge

Budgets are an inescapable reality of non-profit life, and they’re especially important when everyone’s panicking about economic crisis. Here’s how to make a budget, and start 2009 off panic-free.

What’s a budget for?

Your organization functions on at least two kinds, a budget that covers your organization as a whole, and smaller program or project budgets. If you’re writing a grant, the most convincing part of it is likely to be the budget because it shows your donor who’s in there with them, and exactly what you plan to do with the money.

Our last post talked about taking on doing a quarterly budget as your non-profit New Year’s resolution – but we discovered there’s a bit of a dearth of resources on the internet on how to actually go about making a budget in the first place. So here’s the best advice we can offer, heavily influenced by Kim Klein and npguides.org, and years of staring moodily down into our coffee in the gentle glow of an Excel spreadsheet.

Don’t Panic About Numbers

The first step is: don’t panic about numbers.  Just start by making a list of everything you need for your non-profit or program to function. Seriously: lights, heat, telephones, internet, rent, water, office supplies, printing costs – the basics. You need, obviously, people in there. Put down their job title. If you need special supplies (for example, a health program needs condoms) or travel expenses, put those down on the list. Show the list to a trusted co-worker (preferably the office coordinator/secretary, who has arcane knowledge about the reality of your non-profit’s operating needs) and ask if you missed anything.

…But Find Out What Things Actually Cost

Ok, you have a list. Title it “Expenses”. Here is the tricky part – and it is the most important. Do not guess what these things cost. Find out what they actually cost, and write the price next to them. If you are estimating electricity costs for your whole non-profit, call the electric company. If you are doing estimating for a program, take a percent of your non-profits last electricity bill and put that in. If you are looking at printing costs, call the printer and ask them. If you put in someone’s pay, put in tax and vacation costs - check your government website or ask your non-profit’s accountant for help). Add all of these together. That’s how much money you’re going to spend. Take a sip of coffee.

For income, make a second list - on this one you put down all your sources of income - foundations, sponsors, grants, donors. An easy way to do this is to look at your last financial statement or annual report. Just remember - do not guess here, either. Find out what money you can count on, and which you can’t. If you are doing a budget for your whole non-profit, make sure you know what date your grants end, and whether they’re renewable. If you are doing a project budget and you have no idea about how to make this bit work because the truth is you have no income yet, and no idea where it’s coming from - take a lesson on grantwriting and what a grant budget looks like from npguides.org. Add up the numbers. If you have a team of volunteers involved in fundraising, you can put your fundraising goal in here (hint: your fundraising goal likely resembles the amount you need to make your income match up with your expenses).

Preliminary budget, you are finished.  If you did this as part of a team, start slapping each other on the back. If you did this on your own, start shipping it around to co-workers to see if they can spot problems.  You will probably find the income part of your budget shows you need to attract new donors or grants. This is how funding developers set up their goals for the year - by starting with a budget.

You’re on your way to surviving 2009!

One last thing. Budgets are fluid - this is why we talked in our last post about checking them on a monthly or quarterly basis to avoid nasty surprises. The budget you’ve just done is a first step to getting on top of your finances, but expect it to change fast as you plan fundraising, discover new costs and get feedback from the rest of your non-profit. In this spirit, Kim Klein teaches a really useful exercise on budget making in Fundraising for Social Change that involves making three budgets: a dream budget (super ambitious), a worst case scenario budget (where only the bare essentials needed to keep your non-profit open are included) and an average budget, which merges these two. This exercise lets you practice predicting income, and lets you get comfortable with the kinds and amounts of money your non-profit is dealing with. You can access some of her work online here, in our last post.