Communicating Your Finances
Making Your Budget the Backbone of Your Nonprofit - Part 7
How can I use a budget to communicate with my board and other audiences?
Using your organization's budget as a communication tool allows you to vocalize ideas and strategies to your employees, board, and potential funders (“stakeholders”) in a quantifiable way. It will also encourage you to articulate and quantify your goals to yourself (important, but maybe less obvious).
As review, budgets help to:
- Set and clarify goals
- Allocate (sometimes scarce) resources
- Provide a road map for management, program directors, other staff, and the board
- Allow management and the board to monitor progress along the way
There are many types of budgets: project, program, strategic, and organizational. All of them help communicate your plan of action to different stakeholders. For instance, the budget of a particular project or program can be used as a communication tool to help you share concrete numbers illustrating the ideas about the project/program with team members and/or external donors.
In addition, you can discuss full-cost budgeting with employees, board, and external funders, to help illustrate your future plans and other one-time needs for the organization. It is very helpful to show your stakeholders that you are indeed thinking about and planning for long-term sustainability. The following are a few examples of different full-cost items that should be included in your budget and discussed with your different constituents:
- Working capital needs to help with cash flow when revenue is slow to come in
- Fixed asset needs, like purchasing computers or a new vehicle
- Rainy-day emergencies (e.g., in case a vehicle unexpectedly breaks down or insurance suddenly rises)
- Debt principal repayments
Using multi-year budgeting is also a strategy for communicating your long-term ideas for where the organization is headed.
And lastly, it is important that your organization's financials are easy for stakeholders to understand. Your budget should:
- Be one page in length
- Give enough detail to be able to assess and make certain decisions, but not too much detail that folks get bogged down in tangential discussions
- Include assumptions and notes
- Include a narrative of significant changes in the operation and plans for the future, including detailing further contingencies in case the economic environment continues to be volatile
- Include select charts and graphs for those stakeholders that are less likely to appreciate the numbers
- Be presented, discussed, and compared to actual year-to-date results at periodic board meetings (every board meeting, if the organization is in crisis)
Throughout this series, we used our case study, Help for Homeless Youth (HHY), to help illustrate key concepts and examples. HHY and its ED, Jordan Johnson, are the composite picture of the many inspirational organizations and leaders I’ve met and worked with who are passionately committed to helping their communities. I’d like to close this series with a real-life example of a client who used a new approach to budgeting to change the course of her organization’s future. Read how Executive Director Laurel Raczka transformed Philadelphia’s Painted Bride into an organization with an adaptive budget, no more deficits, and reserves that are starting to grow.
That’s the end of our blog series. Hope you enjoyed it! Please feel free to reach out to me or any one of our consultants at email@example.com.