Blog.
Most Recent Posts
VIDEO: Establishing a Timeline to Prepare an Annual Budget | 5-Minute Lessons 4 Nonprofits
SE4N's A. Michael Gellman provides a short lesson on the scheduling and timing of the different phases of the budget building process for nonprofit organizations, including how much time to allot for budget preparation and approval and how to structure a work plan for creating initial and final drafts of the budget, seeking feedback from staff, management, and Board members, through the end of the budget approval process.
The Functional Approach to Budgeting for Expenses
Often, we refer to the size of a nonprofit organization by the total expenses within its annual operating budget. This emphasizes the important role of expenses in the budget while also serving as a measure of an organization’s capacity to provide programs and services. To get the best possible budget for expenses, nonprofits should use a functional (programmatic) approach that better displays the cost of programs, activities, and operations and encourages staff ownership and accountability.
Budgeting for Salaries is Key to the Nonprofit Budget Building Process
When preparing a nonprofit organization expense budget, I generally favor using a programs and operations approach rather than an expense by line-item method. The one exception is budgeting for staff costs (salaries, employee benefits, and payroll taxes), which is usually the largest expense line-item in a nonprofit’s budget. Preparing a separate labor budget at the front end of the budget building process will enhance planning and improve management of the organization’s workforce.
Budgeting for Nonprofit Organizations and Why It’s Important to Start with Revenue and Support
Assembling a budget for a nonprofit organization often feels like an endeavor that requires more artistic methods than scientific computations. This is especially true when it comes to budgeting for revenue and support, which is usually hard to predict with accuracy. To help balance the art (intuition) with the science (analysis) of budget building, consider using a “funding-first” approach.
VIDEO: Applying the Segregation of Duties Principle | 5-Minute Lessons 4 Nonprofits
SE4N's A. Michael Gellman provides a short lesson on the importance of the segregation of duties (SOD) principle to nonprofit organizations, explaining how SOD is crucial not just for its standard checks and balances role, but also to help ensure that a transaction or process is a good use of resources, aligns with the mission, and enhances sustainability.
The Importance of Budgets to Nonprofit Organizations
The word “budget” has almost universal recognition. Budgets have a very broad spectrum of usage and applicability beyond just nonprofit organizations, ranging from large entities (governments, Fortune 500 companies, professional sport teams) to small businesses, individual entrepreneurs, and even smaller applications such as families juggling home budgets and providing their children with early exposure to budgets through managing allowances.
How Intermediate Cash Fund Pools Support Long-Term Investment Portfolios
Nonprofit organizations should expand their cash management policies and procedures to include provisions for establishing and maintaining intermediate cash fund pools. This will not only enhance protection and management of operating (short-term) cash funds, but also act as a conservative buffer for long-term investment strategies, allocation targets, and portfolio risk management.
How Inflation Affects Planning, Budgets, and Operating Reserves
Inflation has always been present at some level. When inflation is low, it lurks quietly in the corner of our minds. But when inflation is revving, the ringing in our ears will not go away. During periods of uncertainty and economic volatility, inflation tends to draw attention, often triggering regressive non-thinking reactions. Inflation needs to be treated as an economic reality to be confronted and a challenging obstacle to be solved, not as a call to action by itself.
Use Key Assumptions to Focus and Frame Planning and Messaging
My favorite “go-to” tactic for working though complex planning challenges is to develop a short list of “key assumptions” that focuses on strategic objectives and desired results. This approach helps to simplify messaging and fast-track consensus and approval by diminishing feelings of negativity and confusion.
The Overlooked Effects of Changing a Fiscal Year-End
“Should we change our fiscal year-end?” This an interesting question that will naturally pop up over time for many nonprofit organizations. As with most complicated, multi-layered questions, the highly visible positive aspects need to be balanced against potential negative outcomes that are often hidden or ignored. One often-overlooked downside of a change in fiscal year-end (FYE) is the impact on an organization’s operating reserves.
Applying Segregation of Duties Beyond Standard Checks and Balances
Segregation of duties is a bedrock principal of internal accounting control systems and is visible in many elements of nonprofit organization accounting policies and procedures. Without segregation of duties, internal accounting control systems would not be safe or effective. Less often recognized is the powerful impact segregation of duties can have when applied to operational planning and resource management.
To Be Sustainable, Nonprofits Need to Have Profits
It is difficult to search for a single aspirational goal that works for all nonprofit organizations because nonprofits are a lot like people, with no two organizations exactly alike. However, I believe there is one aspirational goal that most nonprofits have in common: to have a long, stable, and sustainable existence. To achieve this goal, nonprofits need to commit to making a profit.
Capital Campaigns and the Impact of Donor Fatigue
Capital campaigns generate a lot of excitement and buzz for nonprofit organizations. Leveraging and harnessing this energy feeds hope for a brighter future. However, nonprofits must maintain a focus on protecting long-term financial health. At the conclusion of the capital campaign, the organization must be in a stronger position. One critical consideration is gauging the negative impact on current and future cash in-flows resulting from donor fatigue.
VIDEO: Establishing a Cash Management Target Policy | 5-Minute Lessons 4 Nonprofits
SE4N's A. Michael Gellman provides a short lesson on cash management target policies for operating and intermediate cash funds.
Time to Take a Fresh Look at Old Board-Designated Funds
In my professional life I view many financial statements from a wide variety of nonprofit organizations, and I am always amazed, but not shocked, by how many of these nonprofits have Board-designated funds sitting on their balance sheets. Two questions immediately come to mind. Why where they originally established? Is the purpose still relevant today? Often the answers lie in understanding the circumstances occurring at the time the Board originally designated the funds.