Streamlining the Annual Budget Process for Nonprofits | npENGAGE

Evaluating and Streamlining Your Annual Budget Process

By on Sep 21, 2020

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Mention the phrase annual budget review and you might hear a collective groan from department managers and the accounting department. On one hand, successful social good organizations need a thorough budgeting process. On the other hand, why do most participants consider it such a chore?

Budgeting certainly sounds simple enough, right? Use the current year‘s budget to date, project the remaining months, use a multiplier, include planned capital expenditures, and there you have it –  you’ve got a budget. Hopefully, you didn’t choke on your morning coffee reading this. If annual budgets were that simple no one would dread this annual task. Instead, you would throw a budgeting party!

Why are annual budgets a challenge?

Most managers are not accounting workbook experts

“Why do you need all this detail, and why now?” This common sentiment among department managers, expressed when the budget season rolls around, reflects the challenge they face adding another responsibility while juggling their regular duties. Consequently, budgeting and budget documentation tend to take a back seat to the daily requirements of the organization’s mission.

That complicated Excel file from accounting with Do-Not-Touch formulas elicits an eye roll and a filed under later status. When later finally rolls around, department managers, not known for being Excel power users, overlook, replace, or fail to use the built-in formulas in the document designed to help them.  Don’t be surprised if a well-meaning manager messes up those painstakingly-built formulas. No matter how many explanations you provide. Prepare for responding to ongoing confusion and frustration.

Version control issues and errors complicate the process

We’ve all experienced the scenario where multiple versions of an Excel file circulate during budget season, all with (unreconciled) changes throughout. How confident are you with the results? Which is the latest version? Do you even have the latest version?

The budgeting process can be confusing

Annual budgets include many components, from salaries to capital expenditures to multiple revenue streams. These components usually require different methods for capturing and reporting. Managers submitting a budget may also have varying ways of looking at their budget, and very different needs. Yet, these budgeting managers must report all these different needs and viewpoints using one, central budgeting document.

How to streamline your annual budget process

The annual budget is a very important document and will help guide an organization’s expenses and activities for any given year. By nature of its importance and complexity, the budget process is going to be involved. But the process can be improved. Here are some steps that could help you improve your processes.

 

Start by fully defining and standardizing your annual budget workflow

Before you start your next annual budget review, meet with all your key stakeholders. In addition to going over the lessons learned from the previous year, take time to map out your entire budget workflow. Identify what needs to be submitted by whom along with the approval process. Standardize your workflow and address any potential bottlenecks. Also, use the planning meeting to identify the supporting information managers may need to complete their initial budget submission.

 

Communicate the process and expected deliverables to your team

Be sure to clearly identify due dates and the supporting documentation requirements. If possible, provide examples so managers understand what kind of information they need to submit. To keep the process flowing, implement a notification system that alerts stakeholders and managers of next steps and expectations. This notification can be as simple as an email reminder of a pending deadline or a budget submission requiring approval.

 

Eliminate version control issues by using a single platform

Version control errors are challenging when using multiple Excel files distributed throughout departments. With every new version, the risk of errors increases exponentially. However, a single budgeting platform can easily eliminate the version-control nightmare. A single budgeting platform will help streamline your entire budget process, from initial budget submission through final approval. Most platforms include user-defined security to provide managers easy access to information for completing their initial budgets.

 

Create centralized storage for supporting documents

If you’re using a budgeting platform, make sure your solution includes the flexibility to attach supporting documents to any line item. Managers can simply attach these files when creating their initial budget. Moreover, these attachments are easily retrieved the following year.

A checklist for selecting a budgeting platform

All organizations have their own unique way of preparing budgets. When selecting a budgeting platform, be sure you choose a solution with the flexibility to conform to your workflow. Here’s a convenient checklist for evaluating and selecting the right budgeting solution for your organization.

  • The solution seamlessly integrates with your cloud fund accounting solution to eliminate the need for dual data entry
  • The solution allows importing position information from your payroll solution
  • The solution allows budgeting by your fund accounting solution’s account, project, and any combination of transaction codes (all 5 tables) including percentage distributions
  • The solution allows supporting documents and worksheets to be attached to any line item, including non-salary items
  • The solution tailors the approval process to your organization’s workflow and includes email notification and security-controlled access

Download Blackbaud’s free Buyer’s Guide to Fund Accounting Software

According to CFO.com, the time needed to complete a budget can range from 25 days to 56 days or more. In other words, some organizations take twice as much time to create a budget as others. Selecting the right budgeting solution will help you complete your budget process in a timely manner, leaving you with more time to focus on your organization’s mission.

Join Chuck for his bbcon session Evaluating and Streamlining Your Annual Budget Process”  to learn what the new budgeting process looks like and what organizations have done to analyze and improve their current budget practicesRegister today!

ABOUT THE AUTHOR

Chuck Hays is the director of application services at Zobrio, a software and IT services company focused on the nonprofit sector. He comes with 15 years of experience with Blackbaud’s software portfolio. As the principal consultant, Hays was an expert for both Financial Edge and Raiser’s Edge. Hays has consulted with 100s of organizations and 1000s of end users, spanning organizations of all types and sizes. At both Blackbaud and Zobrio, Hays has interfaced with a full range of end users in all different roles and departments within an organization, such as development, the finance office and the advancement offices. Hays has also worked for a non profit for several years, giving him unique added real life perspective and understanding.

Hays has experience helping organizations to convert from a variety of disparate systems to fully-utilizing modules in Raiser’s Edge. Hays also has robust experience working with many different software solutions and external systems that is commonly required in a development office.

Hays has significant experience consulting with organizations processes and recommending best practices. In fact, Hays was a speaker at the recent BBCON 2019 on the topic of Process Mapping.

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