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Building
a better budget (even if you are allergic to numbers)
During
an interview with staff members at the New York Council of
Nonprofits, Jenny Chandler, Vice President at the National Council of
Nonprofits, learned how to build a better budget:
 In
an effort to get over my allergy to numbers, I spoke with the
terrific team of Kelly Mathews (Chief Operating Officer), Michelle
Jarvais (Chief Fiscal Officer), and Elizabeth Mathews (Senior
Accountant), who shared with me their “6 P’s” approach to nonprofit
budgets. See if you can find the “P’s” in their advice!
Jenny:
When you work with nonprofits to build a “better” budget, what are
your goals?
Michelle:
We’re going for a strategic process that helps you plan – not just
taking last year’s numbers and updating them. We encourage nonprofits
to look a few years ahead and take a multi-year approach because that
will result in a better budget.
Kelly:
In my work with nonprofits I often see folks not thinking through the
long-term effects of short-term decisions. An example would be a
simple cost-of-living adjustment. It’s great in the year it’s given –
it bumps up salaries and boosts morale. But has the nonprofit
projected out the impact of that adjustment for the next few years?
It’s going to change the revenue requirements for many years to come.
That could be huge.
Michelle:
We encourage nonprofits to think of their budget as a living,
breathing, guiding document. Your budget is not something that’s
approved by the Board of Directors and then locked in stone for the
rest of the year. It’s never going to be static. It’s going to change
month-to-month. It’s normal for the actual numbers to turn out
differently than you projected when you drafted the budget, so a
“better budget” is one that changes with the nonprofit’s experience.
Jenny:
It sounds as if you are suggesting that the board-approved budget
should be formally amended throughout the year?
Michelle:
Perhaps. Many organizations approve at least one budget revision
annually. But sometimes adjustments are anticipated and reflected in
the budget narrative so that a formal amendment isn’t necessary. If
the narrative is thoughtfully drafted it will explain potential
variances and alert the board to alternate scenarios.
Jenny:
Wait a minute. You just said, “narrative” – You mean budgets aren’t
just numbers on an Excel spreadsheet?
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