Non-profit or Small Business Budgeting for the Fiscal Year in Five Easy Steps

When you just say this word, it is sure to clear the room.

Just mentioning the dreaded topic sends staff members, executive directors and CEOs running for the exits.

But before your colleagues or bosses plug their ears and curl up in the fetal position on the couch in the lobby, have your reasoning ready. The steps for doing it are pretty simple but for many it is as scary as a snake pit and even more hazardous.

The topic we’re speaking of? Budgeting, of course. office_budgeting

Now before you close out this blog page thinking this topic is too traumatic, please consider this from an experienced accountant: You can create a reasonable, practical and understandable budget for your non-profit organization or small business. There are several steps you have to take to get there, however.

So, here are Five Steps to Budgeting for your Non-profit Organization or Small Business:

  1. Admit you need to budget and create a “budget committee”: The first step to creating a real budget is admitting that you need it. Usually, the payroll manager, staff accountant, executive secretary or even the CEO/Executive Director make the first move and say it’s time to create a budget for the fiscal year. Once that first big step is taken, appoint a “budget committee”. This committee should include department heads, head accountant/financial officer and board chair. They need to have the statements from the last year (three preferably) and access to all relevant financials.
  2. Estimate costs or income required to meet your profit objective/goal.: Using the previous year’s expense or budget as a starting point, begin reviewing each line item and see if any item can be added or deleted. Of course, last year’s budget is only one factor in crafting this new budget. If there are new employees to be hired, new programs or activities or new equipment or inventory to be purchased, then estimate the costs using an itemized list of all the expenses involved in reaching those goals. Also, don’t be conservative in your cost estimates. Research actual costs (including freight or maintenance) and err on the side of it costing more if you don’t have an exact amount.
  3. Estimate the amount of revenue and the dates when it will be generated: What is your expected income this fiscal year? Do you expect a 5% rise in revenues? This can be very difficult to estimate as there are so many factors: sales, donations, competition and even the economy. This is where your department heads and fundraising team can give you objective (hopefully) revenue estimates using the customer or donor base as their guide. In this case, it’s better to be conservative on revenue estimates. Overestimating revenues could be disastrous. Also, set a timeline for cash flow based on donor events, sales and holiday events.
  4. Compare the estimated revenue to the estimated expenses along with the timeline. Once the raw figures have been entered onto the budget spreadsheet, compare the revenue and expense estimates. Do they match? What is the projected profit? For the non-profit budget: do the expenses and revenues zero out? Make sure all figures add up correctly. (A misplaced comma or decimal point can play havoc with your budget and cause some hurt feelings, too.) Please note: Non-profits need to stay within their program allocated costs. Make sure your budget items do not exceed the exact money allotted to certain programs based on specific allocations (grants, scholarships, donations) for each program.
  5. Develop the final budget: Now that everyone has signed off on the draft, develop the final working budget. Double-check all figures. Once that is done, you can then submit it to the board, CEO/Executive Director or other recognized authority for approval.

Now you see, budgeting isn’t that bad! Five steps and you’re there!

If you are intimidated by the process and need guidance, JFW Accounting Services LLC can help you from beginning to end. We will even help you monitor it during the year. Please give us a call (301) 684-3932 or send a message to if you need more information.

Our CPA (Certified Public Accountant) Advice: Spouse Deductions for Business Trips

Show that there is a business reason for why your spouse accompanied you on a business trip and you can deduct the cost of his or her trip.
Here’s what to do if your spouse travels with you to a business meeting, a convention, or other business event.
  • Make sure your spouse understands your job responsibilities.
  • See that your spouse discusses the event’s general business purpose with other spouses who attend. Be sure that spouses are invited to business event functions such as dinners and seminars.
  • Have all your meals with business colleagues and bring your spouse. Be sure that business is discussed at these meals and that your spouse takes part in the discussions.
  • Have your spouse write you a memo with business suggestions based on information gained at the business event.

Financial Accounting Advice: IRS Form 911

There is now a written procedure to request the IRS to stop imminent action. If you expect the IRS to commence imminent action against you, you can apply to stop that action if it will cause serious hardship.
To get emergency help, use Form 911. It’s called Application for Taxpayer Assistance Order. Complete the form and send it to your local Taxpayer Advocate Office. For the address of the Taxpayer Advocate Office in your area, call the National Taxpayer Advocate toll free number 1-877-777-4778.
A Form 911 application is given top priority by the Taxpayer Advocate Office. All enforcement action is halted while your application is being reviewed. The IRS states that most taxpayers can expect action on a Form 911 application within one day.

Payroll and Cashflow Problems: Business Success that Leads to Failure

There are times when a rapidly growing business is so successful that it suddenly finds itself in real trouble. As one success follows another, management becomes too risk-oriented and before long, the company discovers that its growth has outstripped its financial resources. The result is a negative cash flow position that makes it virtually impossible to operate.

In the glow of success, some growthminded entrepreneurs tend to create their own cash flow problems. They offer overly generous credit to customers who don’t deserve it. They fail to realize that current expenses – such as payroll – won’t wait and are sometimes payable before sufficient receivables have been collected.

The faster the growth, the greater the cash shortfall, and the “successful” company may soon find that it can’t pay its bills. If the business is not able to get additional financing, it may be forced to close its doors.

Rapidly growing companies should take steps to prevent this situation before it happens. The impact of extended credit terms should be carefully measured against expenses before credit is granted.

Cash flow projections should be reviewed constantly. Receivables should be closely monitored and strong collection procedures should be consistently enforced. Payment schedules should be negotiated with vendors. And additional sources of capital should be explored before a cash crunch hits, so that operating funds are available when they’re needed. Without these safeguards, rapid success can mean unexpected failure.