Your nonprofit accounting software can be used to build better budgets. The budgeting process is one that many people view as a tedious exercise, but it really is a simple tool that can help you detail unique features of the income and expenses needed for your nonprofit.
An annual budgeting cycle can help you evaluate your nonprofit needs and make any necessary adjustments for future activities. Having a budget revision process in place cuts down on emergency redirects of funds, complaints of insufficient funding, and ignorance of what’s in your budget.
Knowledge is power and using nonprofit accounting software for your budgeting process is one way in which to manage the process better. The software can be used to manage annual budgets, compare previous cycles, and identify areas in which spending is increasing. It’s a useful tool to help your nonprofit manage its money better.
Review Current and Past Expenses
The first step in the budgeting process is to review the past and current budgets. Compare allocation against actual spending. You’ll see patterns in your monthly assessments. Certain areas may fall consistently short, while others show surplus revenue. These are both indications of areas in a budget that need revision.
Don’t forget that during the budgeting process, it’s best to include multiple people from different areas and departments. The more people helping with budgeting, the more comprehensive picture you will have of your organization’s financial needs.
Department heads and team leads should be invited into the budget revision process. Ask them to update their departments on best practices related to spending habits and revenues to maximize bottom-line potential for the overall organization.
Short-Term Projects and Your Budget
Monthly budget reviews and revisions are especially good for short-term projects. Short-term projects require regular budget checks to account for unplanned expenses and delays. Once the project is complete, you may be able to return to a fixed budget.
One of the benefits of the budget revision process is to create space for one-time events that have affected the budget. A setback, delay, or unexpected cost could throw an entire year’s budget off if adjustments are not made. Updating the budget now ensures that you’ll account for everything while it is fresh in your mind.
Zero-based budgeting holds that your income and expenses equal zero at the month’s end. For nonprofit organizations, this makes perfect sense. After all, you want to re-invest all your income into your activities that support the mission.
Should you cover all your expenditures and still have income left over at the end of the month, you can allocate them to other tasks and months. Don’t skip this step as it compromises your chance to make that variance work for you.
Using this strategy within your budget planning process can help you get out of debt, increase annual bottom line revenue, and/or invest back into your company so that your overall potential and effectiveness is maximized.
Consistently evaluating your budget monthly, conducting annual budget reviews, and focusing on zero-based budgeting are all ongoing tasks. It’s not a once-and-done process. The more you keep it updated, the easier it will be to continue.
Nonprofit accounting software makes budgeting easier than ever before. With previous months, quarters, and years’ worth of data at your fingertips, you can easily spot patterns of spending and income that can be used for better financial planning.
Abila MIP for Budgeting
Abila MIP offers a robust nonprofit financial accounting software package that makes budgeting easy. With Abila MIP, you can:
- Examine expenses and income for specific time periods to adjust budgets.
- Review previous audits and use the information contained in them to build new budgets.
- Expand budgets according to your organization’s needs.
- Keep information secure in Abila’s cloud.
Abila MIP and Abila MIP Fund Accounting offer a rich set of resources that empower nonprofits to manage their budgets with ease. Find out more from RBP Methods.
RBP Methods helps right-brained people navigate a left-brained world. We offer nonprofit software and consulting services. We’d love to talk to you about your online fundraising or other needs. Contact us today or call 503-648-9051.