Small Charity Budget Planning: Keeping it simple and effective
If you’re part of a small charity, budgeting might feel like a daunting task - but it doesn’t have to be. With a few simple steps and the right tools, you can build a clear, effective budget that supports your charity’s mission and helps the charity to stay financially healthy.
Why does a small charity need a budget?
If you were planning a trip to a new destination, would you just get in the car and drive? Probably not, otherwise you could get lost, or keep going round and round in circles. You might just be able to get in and drive, but most people would plan the trip - look at the map, see the route, figure out how long the journey would take, and then put the information into your SatNav which would give up updates on any long delays or road closures.
A charity budget is exactly like your map or SatNav. You are mapping out what you’d expect to happen. It could be over 12 months or longer, or a rolling budget that you update every few months so that it’s always looking 12 months ahead.
What makes a strong charity budget?
A good budget is more than just numbers - it’s a plan that empowers your charity to thrive. When starting a budget plan, you need a clear picture of both your income and your expenses. Start by identifying all sources of income, such as donations, grants, contract income, legacies, fundraising events, etc that you are expecting in over the period you are budgeting for, and when you expect them to come in. Then list out your expected expenses and when you need to pay them: rent, staff costs, delivery costs, admin, and so on. You could do this for each month, or any length of time that is right for your charity – it could be weekly if finances are very tight, or quarterly if your review period is longer.
A well-planned budget gives you visibility over your finances for that period (usually the next 12 months). It helps you:
- Spot shortfalls before they become a problem and give you time to make changes
- Adjust spending as the year unfolds
- Make informed decisions for growth and sustainability – for a very small charity the budget can also become your cashflow forecast, helping you manage your cash as well.
Keep it simple
Your budget is just an estimate. Don’t aim for perfection but do aim to be realistic. It’s better to be conservative with income expectations and transparent with costs. And remember - your budget spreadsheet doesn’t need to be fancy. Even a simple layout in Excel can do the job perfectly.
Once you have your basic budget, you can then save a copy and run through some ‘what if’ scenarios and the effect that will have on the overall income and expenditure i.e. if you’re planning on starting a new activity, you can put in the expected income and costs for that. If you’re looking at how your charity could survive if the worst happens or if there was a sudden downturn of income what would be the impact: We all know what happened in March 2020 when Covid hit, and everything literally changed overnight – you can now stress test your budget with whatever you might like to, or think could, happen, both for positive and not so positive circumstances.
Need Help?
If you need support putting together your charity’s budget, get in touch with the Beeston-Clarke Accountants team.
NCVO (The National Council for Voluntary Organisations) also has some great resources for charities to access, including budgeting and cashflow guidance.