I felt sick to my stomach. After a month of avoiding a serious look at our budget and a reforecast for the next six months, I was seeing a deficit of ($80,000). I knew that grant funding had not come in as expected and that donations were slower than previous years. I knew that we had included more stretch goals than baseline fundraising goals. I rechecked my forecast as the dread and fear sunk in. Then I got to work cutting our expenses. First, I went to the things we didn’t need for programs, the perks. Like the donuts we occasionally brought in for staff meetings. The meal we provided for board meetings. I scoured my office. What else could I cut? The water cooler bubbled. I could cut that. We didn’t need the delivered water. That was extravagant. I went to the supply orders over the past four months. I looked into reduction of our printing expenses. I banned colored printing. It’s been over six years since this happened and I can still feel the dread in my stomach.
I was doing everything to avoid the personnel budget line. Our people are what make nonprofits work. Without them our impact would shrink. These people were my friends.I would not recommend cutting staff or salaries without first looking under every single rock. I totaled up my work and felt even sicker than before. I had only saved $7,000. My deficit remained ($73,000). Then it hit me: it’s not about the donuts.
A Broken Budget Process
The forecast told me what I already instinctively knew: our business model wasn’t working. Not only did we have issues with donations (funders had switched focus since the recession, and there was a competitive landscape for individual contributions)—but our budgeting process in and of itself was broken. We didn’t acknowledge the true funding environment. We did not challenge our assumptions. But finally, we were forced to face our reality.
Here at Propel Nonprofits (formerly Nonprofits Assistance Fund), we talk about collaborative budgeting. We recommend that your budget process is inclusive of other staff members and the full board. When you include more people in the process, you are able to hold each other accountable to realistic assumptions. Working together, you can be more creative in your solutions. You have more time during the budget process to address issues with your business model than you do, like I did, in the late hours four months into your year.
We’re here to support you in your work.
May your budget assumptions come true and may your donuts be plentiful.