One of the most often neglected, overlooked, or under- emphasized
needs for most organizations is creating, and effectively using a
properly designed and formulated budget. I have created many hundreds of
budgets, and assisted/ guided/ counseled in the preparation of hundreds
of others. One of the greatest frustration to someone like me, with a
substantial background in financial services, as well as leadership
training and consulting, is the attitude that many involved in
leadership positions seem to possess about budgets. I have seen some who
just believe it is a somewhat meaningless exercise, and others who even
believe it is a waste of time. Others still, who often seem to believe
that they are properly preparing budgets, seem to simply look at
previous budgets, and, in essence add a percentage from year to year! Whether this is being utilized for a not - for - profit organization, any business entity, in personal financial planning, or, for example, as it pertains to realtors, in terms of operating their businesses, marketing themselves, and their client's houses, a keen understanding and/ or grasp of budget essentials, is helpful and needed.
Those who feel strongly about the need for budgeting effectively and
thoroughly believe in the three P's for creating a budget: Predicting;
Prioritizing; and Preserving.
1. Properly prepared budgets predict the needs of any organization, or entity. They look at revenue and revenue trends, and give realistic estimates instead of pie in the sky, or overly optimistic predictions. On the expense side, they thoroughly examine the operations and needs of the organizations, in every and all areas where there are possible expenditures. Will present levels of staffing be sufficient, are they too high, or is greater staffing needed? What are the costs/ benefits involved? What factor or factors might impact revenues? What is organization doing (or not doping) to attract and maintain members, as well as sponsors and donors? What is the overall business plan, vision, goals, and mission of the organization, and how might certain actions impact that? Is there an anticipation for any large expenditures? Does the organization maintain reserves in the areas of maintenance, etc., to address these potential expenses in a proactive, prepared manner?
2. What are the priorities of the organization/ entity on a short- term, intermediate term and long term basis? Are monies being spend in a prioritized basis, and is the money on programming, communications, and other areas being done on a priority basis, where the most essential, relevant, pertinent, and pressing matters being given priority treatment?
3. What is the organization doing to safeguard its monies, and other resources? Have alternative approaches been continuously examined and re- examined to assure the group is getting the most bang for its buck. Have operational efficiencies been employed fully? When was the last time the budget was prepared on a zero- based budget basis, where every expense item, program, etc., is reviewed independently, to see if it optimally meets the needs of the organization? Are reserves monitored, and fiscally prudent policies in areas such as investments, accepting and using donations, etc., the rule, rather than the exception?
The strongest organizations realize that while there may be times that an organization may get away with less emphasis on budgeting and budget policies/ philosophies, in the long run, the groups that take this process seriously, on a continuous basis, remain strong, throughout both good times and leaner times. Individuals, and those handling funds, or expenses, in the course of their businesses, should merely apply these organization rules, to their own scenarios!
1. Properly prepared budgets predict the needs of any organization, or entity. They look at revenue and revenue trends, and give realistic estimates instead of pie in the sky, or overly optimistic predictions. On the expense side, they thoroughly examine the operations and needs of the organizations, in every and all areas where there are possible expenditures. Will present levels of staffing be sufficient, are they too high, or is greater staffing needed? What are the costs/ benefits involved? What factor or factors might impact revenues? What is organization doing (or not doping) to attract and maintain members, as well as sponsors and donors? What is the overall business plan, vision, goals, and mission of the organization, and how might certain actions impact that? Is there an anticipation for any large expenditures? Does the organization maintain reserves in the areas of maintenance, etc., to address these potential expenses in a proactive, prepared manner?
2. What are the priorities of the organization/ entity on a short- term, intermediate term and long term basis? Are monies being spend in a prioritized basis, and is the money on programming, communications, and other areas being done on a priority basis, where the most essential, relevant, pertinent, and pressing matters being given priority treatment?
3. What is the organization doing to safeguard its monies, and other resources? Have alternative approaches been continuously examined and re- examined to assure the group is getting the most bang for its buck. Have operational efficiencies been employed fully? When was the last time the budget was prepared on a zero- based budget basis, where every expense item, program, etc., is reviewed independently, to see if it optimally meets the needs of the organization? Are reserves monitored, and fiscally prudent policies in areas such as investments, accepting and using donations, etc., the rule, rather than the exception?
The strongest organizations realize that while there may be times that an organization may get away with less emphasis on budgeting and budget policies/ philosophies, in the long run, the groups that take this process seriously, on a continuous basis, remain strong, throughout both good times and leaner times. Individuals, and those handling funds, or expenses, in the course of their businesses, should merely apply these organization rules, to their own scenarios!
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