Short Paper - Budgeting Acc 325 Accounting for Nonprofit Orgs September 24, 2023 Professor S. Hiotellis Budgeting can be a very time-consuming endeavor that must be completed for every organization.The budget for a nonprofit organization gives structure and substance to its plans.
It also plays a key role in prioritizing activities and fulfilling their mission.Additionally, it helps you focus on goals, - both short and long-term, keeps donors informed, and keeps the board members happy. (The Ultimate Guide to Nonprofit Budgeting) Budgeting can take many forms and steps in the budgeting process.The budget should reflect the organization's programs, mission, and strategic plan.The budgeting process should take approximately three months to complete and should be approved before the beginning of the new year.There are 10 steps in creating the budget. -Determine the timeline oEnsure there is time to review and discuss each step oApprove the budget before the beginning of the new year -Agree on Goals oSet program delivery goals oSet financial goals oClarify annual goals from the strategic plan -Recognize current financial status oReview current income/expense and compare to budget oMake forecast to the end of year oAnalyze all variances -Agree on a budget approach oAssign roles and responsibilities and the authority to make decisions oWhat amount of uncertainty can be included in the budget -Draft and Expense Budget oWhat are the costs to reach program goals oWhat is the cost to reach organizational & and strategic goals -Draft Income Budget oProject fundraising and revenue activities oProject new income based on those fundraising and revenue activities (Accounting for Governmental & Nonprofit Entities. P 508) -Review Draft Budgets oDoes the drafts meet the goals oReview assumptions and make adjustments according to goals, income and expenses oReview final draft -Approve Budget oPresent to committees if needed oPresent to the board for approval -Document Budget Decision
oCreate a file consolidated budget spreadsheet oNote all assumptions -Implement Budget oAssign responsibilities oIncorporate into the accounting system oMonitor and make changes as needed. When creating a budget, there are several important factors to consider.What are the organization's goals, estimate the income needed for the budget period, what are your expenses, and determine the surplus/deficit of the budget. Of the three considerations, income and expense are the most important in regards to budgeting.Reflecting on the income and expenses for the budget, you must examine what it will take to operate the organization, what types of fundraising will be performed and what are the expectations of donations. Will there be enough income to cover expenses?After that is determined, what types of expenses do we expect to incur?Will the expenses be the same as the prior year or are there other ones to consider? The individuals who are responsible for creating the budget include the senior management, the finance team, and the budget managers for the organization (CFO, Controllers, and Accountants).The budget managers oversee budget planning and processes, review individual / team budgets, allocate funds to different projects and functions, analyze budget spending, and optimize budgets based on that data. (The budgeting process for smart, modern companies) The finance committee verifies there are sufficient resources available to meet the financial obligations of the organization and the senior management ensures the budget is in alignment with the goals and the mission statement of the organization as well as confirming the budget is being followed as noted.
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