How can you ensure your nonprofit's budgeting and forecasting complies with industry standards?

1 Understand the standards

The first step is to familiarize yourself with the standards and guidelines that apply to your nonprofit's budgeting and forecasting. These may include the Generally Accepted Accounting Principles (GAAP), the Financial Accounting Standards Board (FASB), the Internal Revenue Service (IRS), and the National Council of Nonprofits (NCN). These sources provide you with the rules, definitions, formats, and principles that you need to follow when preparing and presenting your financial statements and projections.

2 Align with your mission and strategy

The second step is to ensure that your budgeting and forecasting align with your nonprofit's mission and strategy. Your budget should reflect your priorities, goals, and objectives, and your forecast should show how you expect to achieve them. You should also consider the external factors that may affect your income and expenses, such as economic trends, donor behavior, regulatory changes, and social issues. Your budget and forecast should be realistic, flexible, and adaptable to changing circumstances.

3 Involve your stakeholders

The third step is to involve your stakeholders in your budgeting and forecasting process. Your stakeholders may include your board, staff, donors, beneficiaries, partners, and auditors. By engaging them, you can gain their input, feedback, support, and accountability. You can also communicate your financial situation, challenges, and opportunities to them, and demonstrate your transparency and accountability. You should also establish clear roles and responsibilities for each stakeholder, and provide them with the necessary information and tools to participate effectively.

4 Use appropriate tools and methods

The fourth step is to use appropriate tools and methods for your budgeting and forecasting. Depending on your nonprofit's size, complexity, and needs, you may use different types of budgets and forecasts, such as operating, program, capital, cash flow, or scenario budgets and forecasts. You may also use different methods, such as zero-based, incremental, or participatory budgeting and forecasting. You should choose the tools and methods that suit your nonprofit's purpose, capacity, and resources, and that allow you to track and measure your financial performance and progress.

5 Review and update regularly

The fifth step is to review and update your budget and forecast regularly. Budgeting and forecasting are not one-time activities, but ongoing processes that require constant monitoring and evaluation. You should compare your actual results with your planned results, and identify any variances, gaps, or risks. You should also analyze the causes and effects of these variances, and make any necessary adjustments or corrections. You should also update your budget and forecast based on new information, assumptions, or scenarios, and communicate any changes to your stakeholders.

6 Learn and improve continuously

The sixth and final step is to learn and improve your budgeting and forecasting continuously. Budgeting and forecasting are not only tools for financial management, but also for learning and improvement. You should use your budget and forecast as sources of data, insights, and feedback, and use them to evaluate your performance, impact, and efficiency. You should also identify your strengths and weaknesses, and seek opportunities for improvement. You should also seek best practices, benchmarks, and guidance from other nonprofits, experts, or resources, and apply them to your own budgeting and forecasting.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?