Building a Meaningful Budget Starts with the Right Question
By Scott Robertson

Scott Robertson
Scott Robertson
Nonprofits that may struggle with developing a budget will find it easier, and more likely to result in a robust budget, if they adapt the traditional methodology of a research project.

Start by asking, “How can we develop a budget that will serve as a strong guideline by truly reflecting our goals, resources and obligations?” Once this question is communicated throughout the organization, the work on the budget development process can begin. An ideal starting point will be created with a question that inspires a shared vision, encourages innovative thinking, and creates staff buy-in for the task at hand.

The next, and perhaps most critical, step in the process is data gathering. Data gathering can be done in several ways. As many as possible should be utilized in the effort to capture as much relevant information as possible that can be used as building blocks for the budget. They include budget meetings and a budget survey.
  • Conducting budget meetings with managers for their input, referring to prior year’s history and macro-environment developments, i.e., new government regulations, is a key data gathering tool.

  • One of the most effective means to gather data is the budget survey. A survey given to your managers asks specific questions about upcoming needs and goals for each program/department. Sample questions include: Will there be any program changes, i.e., new initiatives, phasing out of existing projects, etc.? Do you anticipate new funding/revenue opportunities? Are there opportunities for process improvements that will lead to greater efficiencies and cost reductions?

    A survey will yield valuable feedback that otherwise may not be available. The survey format will allow employees to be more reflective and open with their responses to fiscally based questions.
After the data have been gathered, the data analysis can begin. Start by determining what information is relevant and reasonable to include in the budget. Whenever possible, review the data with managers to obtain a greater understanding of how their program/department goals align with the goals and resources of the organization.

Some of the questions raised during this process should include: Are staffing levels in line with revenue and growth projections? Are there adjustments relative to seasonality to be considered? Do planned expenditures demonstrate how desired outcomes will be achieved? Is there any funding or delayed spending that should be carried forward into the new fiscal year?

Responses to these questions will provide a wealth of budget building knowledge, enhance communications, and potentially lead to discovering operational process improvements that can be immediately implemented. This analytical mode of thinking will lead to the next step in the process, which is the actual creation of the budget itself.

As you commit numbers to each line item on the budget ,make notes to document how you arrived at those numbers, and include any calculations, such as the expected number of individuals in a program X reimbursement rate = projected revenue. After the numbers are finalized, provide a synopsis to your audience, which will most likely include managers, directors, the board and finance committee. The synopsis should include the highlights of the budget and how it addresses the opportunities and goals for the upcoming year.

A final and ongoing step in the budget process is the monitoring of budget verse actual results. This variance analysis should be conducted at least on a monthly basis. Tolerance parameters should be established, for example, any variances that are over/under 5% of the budgeted amount should be investigated further. The variance analysis should also provide valuable data for the next year’s budget as well.

The important thing to remember is to consider the alternatives of not having a proper budget in place, as that can include a lack of accountability, over spending, missed opportunities, and underutilization of funding.

There are no shortcuts when you are building a meaningful budget. However, once this process is in place, it will become easier to create budgets for the following year. Everyone previously involved in the budget process will be familiar with the expectations and timing for the development of the new budgets.

It's advisable to begin your budget process four to six months before it is due to ensure ample time to develop a detailed budget that will win the approval of the people involved in the budget building process, as well as everyone impacted by budget decisions.

Scott Robertson is the budget & contract/grant manager for Greater Lynn Senior Services. Email him at or call 781-586-8504.
April 2016