Each year I teach a course at Belmont University on financial management for future non-profit leaders— people who never thought they would have to deal with finance. Between arcane accounting rules, the pronouncements of standards boards, and the names of governing agencies, they have a lot of ground to cover. When we get to the section on budgeting, you’d think we’re finally in the clear: just figure out how much money you have, decide how much to pay people, and what you have to keep on hand for rent. Right?
If only it were that simple. As I mentioned in a previous post, budgeting is an exercise both in imagination and commitment. More often than not, the various complicated layers of the non profit budget process mean that simple accounting just won’t cut it.
The Balancing Act: Grants, Departments, Programs and More
Let’s walk through a typical scenario. First, the basic non-profit budget breaks into departments, which is simple enough to follow. You might have to split up the rent bill between the departments, but as long as you don’t get too big, adding a few extra columns to the spreadsheet will usually do the trick.
Things start to get complicated when someone asks for details about next year’s grants. If you’re lucky, you’ll have some general operating grants, but inevitably the really generous ones are targeted to a single program. Since that program is embedded in one department, it becomes necessary to dig deeper down within the department to show how the grants and costs line up. It’s also possible that you realize you have to build some of it up by projects and different lines of service because the grant is about something more specific than even a program.
Different costs need to be allocated at each level. The top level, where you see the whole organization, provides the ultimate bottom line, the complete plan that the Board needs to approve and that all the stakeholders need to understand as their collective challenge. For a department budget, you can assign 100% of the department head’s salary and call it a day, but when you go to the program level, you have to decide how to divide that salary among the programs. Go down one more layer, and not just the department head but the program manager’s salary also needs allocation. In addition, this layer is crucial because it is typically where the most direct connection between resource allocation and direct services is made. Since funders often care about projects, it becomes necessary to make a case for projects and services with a pro forma budget to assist in the decision-making process.
Frustrations and Mental Gymnastics
Although the mathematic laws that govern budgets are not complicated, they make up for that with a kind of mental gymnastics — the ability to jump rapidly back and forth between views, levels, units, and time periods like an Olympian swinging on the uneven parallel bars. The mental work is made harder by the inevitable scramble to get the right numbers in front of you. Maybe they are on different sheets of paper. Maybe you have to toggle between tabs in a spreadsheet. Maybe some of it is not even available.
If you lack tools to grab the numbers for each level, see them, and move from one to the next, no one can blame you (especially my students) for throwing up your hands and not even trying to navigate it all. You’ll have nothing but budget vertigo and a headache to look forward to.
There is good news for non-profits who struggle to manage limited resources and complicated reporting requirements. With the right tools, it becomes possible to master the mental gymnastics that budgeting requires. Catapult ERP’s preferred solution, Serenic Navigator, specifically designed for use by non-profits, provides decision makers with tools to track revenues and expenses efficiently. With the ability to capture attributes of an organization’s business model using Serenic’s BudgetVision, non-profits can slice and dice data to build budgets and simplify the reporting process, providing a solution to complicated budget layers.
Do these challenges resonate with your company or non-profit organization?