Many people feel that “budgeting is budgeting” regardless of the organization that you are in. That is not always the case. Nonprofit budgeting is a great example. Effective, precise budgeting is far more essential in an organization with slim margins and organizations that need to carefully manage cash. No where is this more true than in the not-for-profit sector.
Budgeting in a nonprofit is not only “mission critical” it is essential for viability or sustainability.
A nonprofit must carefully prepare for the forthcoming fiscal year by managing resources and ensuring that it can properly and effectively fund the organization strategy. At the same time, a nonprofit has limited resources for budgeting solutions. So the organization with the greatest need has the fewest resources to apply to the problem.
Nonprofits need to consider more than just the “cost” of a new budgeting system. They need to consider cost of IT support and resource requirements for implementation (including new user training). Ensuring that staff are engaged and on board with organizational strategy is another key consideration for nonprofits.
Many employees are drawn to the organization because of the mission (not necessarily the salaries or benefits). So it is extremely important that nonprofits take every opportunity to engage these individuals in the strategic planning process. End-user acceptance for a new product is a critical consideration in engaging staff in nonprofit budgeting.
Because of these considerations or “barriers” to change, many nonprofit organizations continue to budget using Excel worksheets. Many consider Excel to be an essentially “free” solution. However there are many hidden costs with this approach. These hidden costs include frustration with the lack of flexibility from the department managers, manual collection of information, and re-keying of data for the financial team. And of course, the potential of errors and a lack of strategic insights from reporting and analysis. The benefits of a purpose-built solution for nonprofit budgeting far outweighs the cost.
To illustrate these benefits, consider the 5 Key Software Evaluation Criteria for Nonprofit Budgeting Solutions:
- User experience is particularly important in a nonprofit because department managers are less likely to be comfortable with Excel. In addition, they are often unfamiliar with budget preparation. These staff would prefer to have a system that can walk them through the budget process with a guided-user experience.
- Flexibility – Department managers want the flexibility to budget their departments the way they think about them. This means that each user needs to have independent functionality to budget different accounts, different ways, depending upon need.
- Intelligence – We refer to “intelligence” as the system’s built in knowledge of budgeting, forecasting, workflow, revenue, expense, personnel, and equipment. For nonprofits, perhaps more so than any other sector, budgeting is critical to success. The budget needs to be aligned to the strategy and the strategy needs to drive the budgeting process. This cannot happen without built-in intelligence.
- Cost of ownership – Cost of ownership has multiple components. There is the cost of the software, the cost of the hardware to support it, the cost of the implementation of the product and the personnel cost of maintaining the application. Successful nonprofit budgeting requires minimizing or even eliminating some of these costs. Nonprofits simply do not have the funds for large-scale applications that require Fortune 500-type resources.
- The Cloud – Cloud computing is a must for nonprofits. It offers the best user experience, the most flexibility to budget where and how each department head wants to budget, and it has built-in intelligence to deal with the complexities of nonprofit budgeting. And finally, because there is no hardware or software to buy and install and it is subscription-based, it offers the lowest overall cost of ownership and the shortest implementation times.
Effective nonprofit budgeting is required for sustainability.
Packaged, cloud-based applications that allow for superior user experience and flexibility with low cost of ownership can make a huge difference for these organizations – and for their most valuable resource of all: their staff.