Dollars and Sense: NonProfit Budget Basics

Don't you wish it would be that simple? (Image by Tax Credits)

And now a post about money. Because as we all know, it’s what makes the world go around.

Okay, that’s a mild understatement. But it’s very mild in the nonprofit world. And unless you’re independently wealthy, you’re always fundraising, and looking at ways to stretch your dollars and cultivate donors.

Here’s the thing, though. Quite often, nonprofiters, cause advocates, and even entrepreneurs tend to be visionaries. They tend to be people with a burning passion to do something, make a change, and improve the world around them. When that mindset happens to come equipped with the skills of an MBA, magic happens. When it does not, which is often, the ability to execute the mission hits a big fat bump in the road.

This is why I recommend that nonprofiters across the board read up—heavily—on the following. This is especially directed toward those who start off it in the nonprofit world, rather than first spending the best years of their life in the for-profit world:

Auction draft
Your reaction should not be "What fresh hell is this?!" (image via plutor)

P&L Statements

Learn to read one. Get to the point where clicking on that spreadsheet put together by the finance people in your life—whether they’re the interns or the development staff—doesn’t fill you with dread. Know how to parse the information so that you know if the minus sign staring at you is a good thing or a bad thing. (Hint: It’s a great thing when the minus means you’re under budget, and not broke. But that’s assuming the spreadsheet’s set up that way—you gotta know the diff, right?)

Revenue vs. Income

A lot of organizations—in any industry—find themselves stumped when the steady stream of income, successful campaign, or full box office doesn’t translate into a profit. That’s because the two are not the same. And as anyone who has ever managed a business of any sort will tell you, it’s not enough to have money walk in the door. You need to have a cushion left over after all your expenses are met. Know what your expenses are, know what you need for your revenue to create income.  Speaking of which . . .

Pennywise, Pound Foolish

Non-profits learn to move mountains with little. Because that is what you do when the mission isn’t to make money but to serve a community. But! Know when it is better to spend the money. Hire the right people, and pay fairly for the core employees who will take you far (development, communications, management). Few things burn a hole faster through your budget than hiring the wrong people. And not just in terms of money, but time and relationships, which are invaluable.