Being Realistic About Budgets

You've probably heard this one before.  About the woman who was flummoxed when her bank sent her an overdraft notification. "But," she said, "but I can't be overdrawn.  I still have checks in my checkbook." That might be funny if I didn't work in the nonprofit sector where this seems to be an inherent belief, but instead of thinking that they must have money because they have checks, there seems to be an unshakeable belief that it's all right as long as it is on the budget.  As in, "We budgeted for this, so it must be okay," despite the fact that the gala, budgeted to net $100,000 grossed quite a bit less, or that grant, budgeted for $25K didn't come in at any level.

A budget, according to the dictionary, is “an estimate of income and expenditure for a set period of time.”  It’s your plan for what you will bring in and what you will put out.  To be useful, it needs to be based on reality.  And an understanding that if something can go wrong, it very well may go wrong.

Two years ago, I planned to finish some work in my home and finally make my backyard the haven I’ve been dreaming about for 17 years.  We developed a budget for the work, and ensured that we had quite a bit more in cash.  And then we had a massive construction failure.  Which used up the cash we had saved.  Just because I had a budget for finishing the work in my house and making my backyard etc., didn’t mean I could blithely fulfill my plan.  I had to go back to the drawing board.

Recently, I’ve worked with several organizations whose financials clearly show that for several years money going out has exceeded money coming in.  “Not a problem,” I was told, “our budget is always balanced.”  And I am sure they have checks in their check books.

The problem with ignoring this problem is that you don’t see the urgency in solving it.

These clients had hired me to help them with their development plans.  The ones who felt that they had no problem were frequently too busy to meet, nor were they truly invested in doing the work that fundraising entails.  Because they didn’t see their problem, they weren’t prepared to make the effort.  The clients who understood that their balanced budgets were only a goal, were eager to get moving, were part of the process and are now well on their way to bridging that gap.

Janet Levine Consulting works with nonprofits, helping to move them from mired to inspired. Learn how we can help you to have a realistic, funded and sustainable budget at www.janetlevineconsulting.com.