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Count the Cost

October 11, 2021byCamille SmithinFinancial

As nonprofit leaders, we have been given an opportunity by the Lord to manage the money that He has entrusted us. We might have the best intentions, but without a plan, we can quickly get off track with money. Luke 14:28-30 says it perfectly :“For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to complete it?” Managing your nonprofit’s finances is a big responsibility, but creating a budget will help. Here are some tips to help you successfully start your budget. Before you get started: There’s some prework involved – you should gather 2021’s bank statements, credit card statements, receipts, and invoices. If you have this information for the prior year, gather that too. Having all these documents will ensure you are prepared to start your budget. Also it helps if you make your 2022 goals in advance so you can determine the expense or income associates with each goal. Example: if a goal is to receive a grant, then the income from that grant needs to be projected in your budget. Determine your expenses: Look at previous year’s expenses to see where you spent your money: website maintenance, rent, office supplies, marketing materials, payroll, contract labor, etc Factor any the cost for new programs, events, staff, etc. Do your research to determine costs but some may have to be educated guesses. Determine your income sources: Look at previous years donations and fees: Did you raise most of your money through a few people? Did you receive any money through fees or sales? Determine how you plan to fund your nonprofit next year: general donations (any recurring donations?), giving campaigns, grants, scholarships, membership, event registrations, etc. Gather all your data and plan a “budgeting day”:

  • Create a budgeting spreadsheet to work off of. If you need an example, email us (link to my email). Begin with columns that capture last year’s actual totals (if you have them), this year’s actuals to date, and then next year’s budget.

  • Enter all your expenses numbers in first, starting with hard costs and non-negotiables. Total to see how much $ you will need to raise to cover all expenses.

  • Enter your income numbers, projecting enough donations/fees to have a positive net revenue. You may have to adjust your expenses if your income protection is beyond reach.

Review your budget regularly: On a regular basis, you should take your actual income and expenses from the month and compare it your budget. This will allow you to make the appropriate adjustments for next month, such as cutting expenses or pursuing more revenue sources It’s never too late to start budgeting, so now is the perfect time to put a budget together for the last quarter of 2021, and look forward to 2022. If you need more help, reach out for a coaching session on Strategic Budgeting.

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