Who doesn’t love budgeting? Whether it’s getting your arms around spending at home, watching members of Congress debate on C-SPAN or sitting through meetings at the office, budgeting is one of the great joys of life…Right?
OK, not really. The feelings of most people toward this “estimate of income and expenditure for a set period of time” generally run from necessary evil to full-on loathing. But, every year, just like clockwork, budget time rolls around for non-profit organizations. Multi-purposed and multi-faceted, budgets are both an important planning tool and an ongoing point of reference. A board approved budget may even be required by your governing documents and not just an optional exercise.
A strong budget process is crucial to long-term success. Incorporating not only operating projections but also capital spending, proforma balance sheets and cash flow statements, along with estimates of bank covenant compliance are all best practices that should be considered.
Leaders need to set guidelines, strategies and expectations but should avoid dominating the entire process. Gaining input from others is often the difference maker between success and failure in planning.
- Involving a variety of stakeholders can save you from arrogance, the feeling that every plan will be a raging success simply because you thought of it. Having people empowered and willing to challenge your ideas helps you build stronger foundational assumptions for the plan.
- The counsel of informed people can help you avoid ignorance, the misguided notion that you already know everything there is to know about a given subject. Reduce the chance of the unknown by seeking out and engaging both subject matter experts and those with related experience. Weave that knowledge into every aspect of the process.
- Looking at a problem from multiple viewpoints can increase the relevance of the solution. Find the intersection of what your organization does well and what the community needs. Live out your mission and make sure your plans yield impact and not merely activity.
- Receiving input from those who will be affected by or charged with implementing the plan can leverage the acceptance of the plan. Build budgets from the bottom up wherever you can. Staff know their programs and interact with participants every day. Give them real ownership whenever possible.
- Finally, a participatory culture moves the organization to the ultimate goal of performance. Whether measured by financial metrics, donor engagement or mission impact, your organization will be stronger and built for long term success.
Lead by listening and get the right kind of “ance” in your plans!