The holiday season has ended and the long, wintery months of January and February are upon us, bringing with them mounds of snow across the country and limited hours of daylight.
It is fitting, perhaps, that such a treacherous time of year is the prime time to tackle what many of us find to be a treacherous task: budgeting.
For the majority of organizations whose fiscal years end on June 30, now is the perfect time to assess how the organization's actual results compare to its budget. (And for organizations on a different fiscal year schedule —dare I say—it is always a good time to review a budget!)
With four full months left in the fiscal year, organizations have the flexibility to make changes in some areas of discretionary spending if unexpected events have caused budget overages. For example, an organization may postpone the purchase of a new computer if the resources that were budgeted for it were used instead to fix a broken water pipe in an emergency. Or, if fundraising to date is lower than the organization had expected, the development office, perhaps with direct input from program managers, can develop a short-term, focused campaign to meet the organization's goal before the end of the year.
In the more pleasant alternative, when things are going well from a budget perspective, with four months remaining in the fiscal year, an organization has the opportunity to make programmatic or operating adjustments, assuming the board and organization's leadership consent. For example, an arts-in-education organization may have additional resources to support expanded enrollment in an after-school program during the spring semester. Or, from an operational perspective, an IT manager may have the flexibility to take advantage of a particularly good discount to accelerate the purchase of a new (and much-needed) software system in the current year, instead of postponing the purchase yet again.
Early in the calendar year, however, is not only a time for looking back at the fiscal year results to date. Perhaps more important, it is a month for looking forward and planning for the next fiscal year's budget. Since boards tend to review and approve budgets for the following fiscal year in May, many organizations find themselves scrambling to develop a cohesive budget days before the meeting when the budget is slated for discussion and approval. By starting the budget process now instead of, say, three months from now, the process will be considerably less painful for all involved. Plus, the quality of the budget will be much better if the process is a smooth one, rather than frenetic and chaotic. After all, a high-quality budget and serene budget process allow an organization to focus on what really matters: its programs.
With a bit of notice and some professional courtesy, an organization's executive director and financial team can make sure to include key personnel from the development office and certain program managers in the budgeting process. And input from staff throughout the organization (at all levels, frankly, if an organization's leadership will allow) will help ensure the resulting budget is more accurate and more attainable. If the organization can allow control and ownership of the budget process to be felt by staff in all departments within the organization, non-financial personnel may be much more willing and able to work within budget parameters, making the budgeting process more successful (and dare I say less painful?) in the long run.
With a little planning, some advanced notice, and a bit of extra budget homework, an organization can be certain that at this time next year, it will be celebrating the budget process as a welcome bit of spring-like relief during the treacherous months of January and February.
Elaine Grogan Luttrull, CPA
© 2011, Minerva Financial Arts
CPA Elaine Grogan Luttrull founded Minerva Financial Arts to bridge the gap between finance and the arts. In addition, she is director of financial analysis for The Julliard School and volunteers with the Arts & Business Council of New York.