I am on about your budget again this week. As many non-profits are starting new years on April 1, it is a good time to talk about spending control. Remember a budget’s purpose is to provide motivation to stay within certain fiscal constraints.
People sometimes confuse the words budget and forecast. A budget is a tool to motivate and control spending. A forecast is what we think is the most likely event to occur. You might give the programming committee a budget expecting that they will not be able to achieve the revenue goal. Your forecast will show the best guess of what will actually happen. If you are having trouble separating the word budget from the word forecast, think about the weather. We have a weather forecast not a weather budget, because no one can motivate the weather.
In order for your budget to fulfill its purpose, it should show you monthly amounts for your revenues and expenses. One annual total for each category is not as useful. If your group has taken the time to break down the budget by month, then the group has a better understanding of the expenses of the organization and it will be easier to monitor how close the group is to achieving their goals.
A budget can be a useful tool, but only if it is carefully prepared and compared to actual results frequently.