Competition for what drives your budget process can be fierce. Last year’s department budgets can be serious contenders. So can new ideas. There are the inevitable urgent facilities needs. And how about personnel costs? How do you prioritize funding for these areas when they all seem essential? And as you begin building your budget, what do you work through first? Those funding requests? Your 2018 ministry plan? The income projection for this new year?
One key to answering these questions and building a mission-focused budget is to create a budget process flowchart. That’s step one in a basic budgeting guide that ECCU produced for ministry organizations. To make that flowchart, you’ll need to identify three things:
- The major milestones in your budgeting process
- Who will be involved (Involve those who lead your ministry and operational areas.)
- Communication events necessary to roll out a completed budget
Once you’ve got your flowchart, here are your next 10 steps.
- Review your mission and vision.
- Forecast your income.
- Set up contingency plans.
- Allocate budgeted income to programs/ministry areas and operational support areas.
- Budget for cash reserves (liquidity).
- Adjust key objectives and outcomes to align with projected income/resources.
- Finalize your budget and annual plan.
- Communicate, communicate, communicate with your stakeholders.
- Implement the budget into your accounting software.
- Provide monthly budget-to-actual reports and track measurable variances.
As with any construction effort, you need to build your budget on a strong foundation. The cornerstones are your mission/vision and your income forecast. Once you’ve clarified your mission and vision, you can align your financial (and organizational) structure to it. And with an accurate income forecast, you can assign realistic numbers to budget line items.
Forecasting income requires doing some homework. First, you’ll want to look back at giving numbers over the past few years. This will help you identify trends and totals. Then you’ll want to assess current realities that could affect giving in the coming year. This includes things like unemployment, cost of living, general consumer sentiment, and donor/donation trends.
To learn more, check out 11 Steps to Basic Budgeting.