Many nonprofit organizations will encounter several challenges when they begin crafting a business budget, from maintaining compliance to organizing income sources. Although these issues can cause a nonprofit to become discouraged or frustrated, working through the challenges and crafting a detailed financial forecasting plan can help it prosper.

Unstable funding

One potential problem nonprofits might encounter when creating their budgets is instability in their revenue cycle, resulting from donors falling through on donations, the government putting an end to funding and foundations withholding gifts. Because these income stream challenges can occur at any time, accountants and financial planners at nonprofits must always be looking for new funding opportunities. The inconsistency in funding means their budgets will likely always be evolving to account for incoming and diminishing resources.

Lack of financial planning background

A lack of financial education is another issue that may disrupt a nonprofit's ability to develop a realistic and effective budget. Many nonprofits do not have staff members with the appropriate knowledge for budgeting tasks, and thus are not equipped to put together a line-by-line budget as is necessary for a successful operation. Many of these organizations that have successfully crafted a business budget have you used nonprofit budgeting tools such as planning software to help them stay organized and keep track of all the essential details they need to include.

Small staffs

These financial forecasting solutions are also essential for nonprofits with a small staff. Employees often become so overwhelmed with other tasks that they put budgeting on the back burner. But with budgeting software, nonprofits can create a financial plan that encompasses their goals, and integrates income statements, balance sheets and statements of cash flow. These types of tools can also help nonprofits look at potential financing opportunities they may have in the future.

The unpredictability of nonprofit funding puts even more pressure on these organizations to have a clear idea of how they plan to meet their short-term and long-term financial goals. With the already burgeoning pressure many nonprofits face to survive, it's in their best interest to use whatever tools at their disposal to make budgeting not only an annual project, but a regularly conducted practice.

 

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