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Budgeting for Success

Mission first. What are the next three important things your nonprofit should focus on for next year?

In our constantly changing society, new technology is being introduced, new techniques are being developed, and new needs are emerging in our communities. It is easy to see why education and training are usually among the top three after mission each year. Technology is often on the list because of breakthroughs. Additional staff is also a frequent item on the list since society’s problems are rarely solved and the population is constantly growing.

Finding the money to pay for the current needs is usually a challenge. Finding the money to pay for the top three items on the list increases the challenge. Unfortunately, the response to the increased challenge is often to spend less on one or more of the top items.

Rarely does anyone over-budget for the top items. Because those are the top priorities, they are thought through carefully. When a nonprofit decides to spend less on one or more of them, a common consequence is lower quality and efficiency.

Of course, when quality and efficiency suffer, costs go up. However, it is hard to itemize the increase in costs associated with lower quality, effectiveness, or efficiency. In some cases, the cost of low quality, effectiveness, or efficiency is only reflected in the loss of clients or slower client growth.

It is usually easy to find support for “Let us postpone hiring, new technology, and training for a year. Having a surplus this year will make funding those needs easier next year.”

It is usually difficult to find support for “Let us postpone quality, effectiveness, and efficiency improvements until next year.”

Use mission, quality, effectiveness, and efficiency to justify the purchase of the tools necessary for success (technology, training, personnel, etc.).

Next Step:

Use your mission, quality, effectiveness, and efficiency as the driving force for all of the line items in the budget

Explain why an increase in each line item is necessary to strengthen the mission or raise quality, effectiveness, and/or efficiency

Remind everyone that your nonprofit’s reputation and past success is based upon your commitment to your mission, quality, effectiveness, and efficiency

Budgets quantify an organization’s priorities. Appropriate priorities increase sustainability, performance, and donor support.

If an outsider looked at next year’s budget, would your know what your priorities are?

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