Rating statistics for this page
3.4 out of 5 from 42 votes
Preparing, developing and managing budgets in a non profit organisation.
A budget is the financial description of an action plan outlining how you will use your money, based on knowledge and assumptions against which you will measure your actual performance. It is important to be honest about what you can manage in income and expenditure, so that you develop a realistic budget that helps you weather the unexpected throughout the year.
Key questions to consider when developing a budget:
- what are our objectives?
- what activities will be involved in achieving these objectives?
- what resources will be needed to perform these activities?
- what these resources will cost?
- where the money will come from?
In addition to helping you to measure your organisation's financial performance, budget management can:
- stimulate your planning, helping you to coordinate and control the use of your resources
- encourage realism so that plans are achievable within available resources
- help improve the quality of plans, as staff are helped to focus on and discuss service priorities
- improve clarity of vision and staff motivation.
Budget management involves two processes: preparation and control. These should not be seen as separate processes, as one informs the other.
Your organisation should regard budget preparation as the joint responsibility of finance and non-finance staff. Each group brings their own areas of knowledge and expertise which contribute to creating realistic and informed budgets. The trustees will need to have a say in budget planning as they have the legal responsibility for approving the annual budget.
There are three questions that underpin budgetary control:
- how are we doing?
- how much of the budget is left?
- what will it look like at the end of the year?
Source: Published with permission from Cass Centre for Charity Effectiveness. This material is taken from "Tools for Success: doing the right things and doing them right", published in October 2008. Download or buy your copy from Cass Centre for Charity Effectiveness.
- Finance Hub - Introductory pack on funding and finance: guide to financial management
- Help with preparing charity accounts and reports (Charity Commission) - includes information for charities with turnover of £250,000 or less, £500,000 or less and over £500,000.
Have your say
How are budgets controlled in your organisation? Who is involved in budget setting and management? What are the difference stages and how long does the process take? How do you involve staff and volunteers in the process? How do you make sure you can respond quickly to urgent need?
Ask questions, share your experience and have your say on the Budgets and finance forum.