Facebook

Budgets - Why Bother?

By Janet B. Rivard, M.B.A. - President, Peerless Financial Solutions Inc.

Let's face it, budgeting is no fun! No fun for the Executive Director, no fun for the agency's program staff and no fun for the Board of Directors to review or sometimes put together). So why bother doing budgets? The short answer of course is because funders, like United Way or private foundations, and bankers won't give you any money without them. But some would say that budgets are little more than wild guesses or long shot hopes and dreams which take up time to create but are of little use to the agency.

As trying as it can be, budgeting really is worth the time and effort if you do it right (and not just because you can't get any money without them!). The enlightened Executive Director and Board member know that budgeting is like planning a vacation. It includes a destination (where your agency will be at the end of the budget period), a road map (the income generated, costs incurred, assets acquired and liabilities assumed) and who will be doing the driving (department or program goals and budgets that add up to the entire budget). Budgets, just like vacation planning, can be for short periods of time (think of the short term project budget as planning for a weekend getaway), for an entire year (the annual family vacation) or as part of a long term strategic plan (an around-the-world adventure).

Like planning a vacation, budgeting is most effective when everyone who is going on the trip is included in the planning process. This doesn't mean that you need to build budgets by committee. Rather, you are seeking the input of the people who will be along for the ride. This approach makes sure everyone who is responsible for making the budget a reality will know where you are going, why you are going and what their role is in getting there. Just as you wouldn't plan a vacation with friends without asking them how much they can afford to spend on the vacation, you shouldn't build budgets without the input from the staff that will be responsible for delivering the results you want.

So why bother building a budget? Wouldn't a spontaneous vacation be more fun? See where the road leads and let yourself be open to the new and unexpected? While that approach may be fine for vacations (for some people), running your agency is, unfortunately, not like running your life! Whether you are an Executive Director or a Board Member, you have a fiduciary responsibility to your agency that doesn't allow for a laisse faire approach to budgeting.

Just as planning for a vacation will increase your chances of having a great vacation, so too does budgeting increase the chances of your agency meeting its goals and fulfilling its mission. How can budgeting do that? If done right, budgets are more than just a way to get money from funders. Budgets become tools for you to track how your agency and staff are performing versus your original plans. Like a road map, a budget allows you to see when you have drifted from your original course. You do that by regularly comparing your budget to your actual results. If you find that your agency is straying from the road map, you can make course corrections to get you back on target. If circumstances have changed so dramatically that you can't "find your way back home," the budget is still useful to explain where and why you got lost.

Hopefully, the analogy of building a budget and planning a vacation will help reduce the anxiety often associated with the budgeting process.

Janet Rivard served as Director of Finance at the YWCA of Central Massachusetts for eleven years. She holds a bachelor's degree from Holy Cross College and an MBA from the University of New Hampshire. If you or your Board would like assistance with the budgeting process, Peerless Financial Solutions Inc. can help. She can be reached at (508) 453-0485 or jrivard@peelessfs.com.

Audience: