Budgeting for nonprofit organizations


The process of planning for organizations resources is an investable task for nonprofit organizations, just as it is for profit making organizations. A budget refers to a well executed plan that outlines how an organization will allocate its scarce resources among the various organizational competing needs to facilitate efficient and effective attainment of the organizational goals. Budgeting involves planning for all organizational resources, finances, human resources, and time. Apparently, all organizations have to engage in routine planning for these resources, this is irrespective of whether they are in business for profits or not-for profits. Arguing on a similar note, this paper will determine the importance of budgeting to nonprofit organizations, while giving an analysis of the various facets of budgeting in such institutions.

The relevance of a realistic budget to nonprofit organizations is a common question among various managers today. In answering this question, it is first important to define what a budget. According to Piche (2009) a budget is an accounting and planning tool for managers in different organizations. From a business operation’s viewpoint, a budget is a tool that comprehensively lists all the planned expenses and revenues; it is an organization’s blueprint for the utilization of resources in the coming years. To a nonprofit making organization, the relevance of a realistic budget weighs down to its mission. A mission is a statement detailing the organization’s objectives and goals. Evidently, realizing such a mission without a detailed plan and budget makes the mission a mirage. A realistic budget functions to make tangible the organization’s objectives and goals by clearly stating what the nonprofit organization intends to achieve in the following years. In such a way, the budget enables the nonprofit organizations achieve important milestones. For example, the budget enables avoid resource allocation conflicts that are common when using the rule of thumb. In addition, a budget enables organizations set benchmarks, which act to indicate the progress being made by the organization.

Nonprofit making organizations are succinctly different from for profit organizations in a number of ways; most of which warrant the need for budgeting among the nonprofit organizations. As aforementioned, the core objective of nonprofit organizations is to fulfill the demands of its mission statement. The performance of nonprofit firms is measured against the firm’s mission statement. Financially, nonprofit organizations depend on acts of philanthropy, this means that the organizations operations rely on accountability in order competitively source out for funds. Further, the governance board of not-for-profits is relatively larger than for profits and are comprised by non-paid boards, which preside over the paid professionals running the organization (Epstein & McFarlan, 2011). The importance of a realistic budget, hence, cannot be over stated, at least considering these factors. For example, the nonprofit organizations can only source for funds if they can produce a budget, which manifests their accountability. Further, considering the diversity in such organization’s board management, a budget emerges as an important tool for avoiding conflicts as it shows how all organizational resources were utilized.

With the state of advancing technology in the accounting field, budgeting has become easier and more effective for organizations. Presently, there exist various accounting software that offer management with a range of accounting solutions, budgeting included. Budgeting software enable organizations integrate their budgeting processes with other organization performance metrics providing them with an integrated system that greatly saves them on time while increasing efficiency (Shim & Siegel, 2012). One such software is the IBM Budget software, Cognos. The IBM budgeting software provides businesses with a wide range of accounting solutions that include tracking of numbers and spreadsheet debugging, integrating data from different departments, generating financial reports, and creating budgets that are updatable with changing needs. IBM Cognos combines an in-built analysis memory with an intuitive data-presentation visualization interface that enables users to share data from various corporate servers and personal computers. The software allows users to share their analysis with other users by enabling them publish the analysis to a central server. Besides the scalable reports and query studio that the software offers to users, many users find it especially important due to the mobile features it extend to users. Users who have used the software before, are positive about using it in the future due to the utility levels they derive from using it.

Used for budgeting purposes in non-profit organizations, the IBM Cognos would be adequately effective. Considering that most nonprofit organizations are comprised of various branch networks, the mobile features provided by the software would be very important to them. Using the mobility features, the nonprofit organizations stand better placed to integrate analysis from the different branches as well as from the different cost and revenue centers in the organization remotely. The software also uses an ad hoc approach to report generation, which means that it can be used to generate reports for the divergent needs of nonprofit organizations; managers, funders, and employees. The software is. However, expensive considering that there are other software firms offering software solutions for nonprofit organizations budgeting needs, but only on a small scale basis. The software also requires very technical staff for the purposes of its maintenance and support, factors that could lead to increased costs associated with its use. In large nonprofit organizations, however, the software would emerge as convenient feasible.


Epstein, M. J., & McFarlan, F. W. (2011). Nonprofit vs. for-profit boards: Critical differences. Strategic Finance, 92(9), 28-35.

Piche, M. (2009). Planning and budgeting in non-profit organizations. CMA Management, 83(2), 22-27.

Shim, J. K., & Siegel, J. G. (2012). Budgeting basics and beyond (4th ed.). Hoboken, NJ: John Wiley & Sons.

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