The document provides an overview of basic budgeting principles for non-profits, including how to prepare an effective budget that is realistic, consistent, flexible and measurable. It discusses the differences between program budgets and cash flow budgets, and offers tips for cash flow planning such as accounting for seasonal fluctuations and timing expenditures according to payment deadlines. Effective budgeting for non-profits requires flexibility, transparency, and ensuring funds are used appropriately to balance organizational priorities with beneficiary needs.

1. BUDGETING BASICS
PDPM | A. HILLOCK & B. FISCHER

2. BASIC PRINCIPLES

• A budget should
• Directly reflect organization’s mission
& priorities
• Chart a direction for allocating and
maximizing use of resources
• Tend to history of finances and future
projections
• Futurity through rolling budgets
• Be tailored according to the scope &
size of program/project
• Be compared to actual performance
of projects
• Allows staff to isolate gaps/misdirected
funds

3. EFFECTIVE BUDGETING

An effective budget is
• Realistic
• Consistent
• Flexible
• Measurable
• Should plan for Short vs. Long Term Investments

4. PREPARING A BUDGET

• Determine programs & activities for the
budget period
• Budget expenses and revenues
• Based on historical data, forecasts &
economic climate
• Develop a draft budget
• Include previous yr budget, current yr and
cash flow
• Review/modify your draft
• Have board review and approve
• Revise if necessary
• Monitor and record budget activity

5. CASH FLOW VS. PROGRAM BUDGET

Program Budget 
Gives detailed costs of every
activity or input that goes into
program objectives, noting
dates of fund disbursement
(BUDGETING)
Cash Flow 
for monitoring the variance between
projected and actual income /
expenses on a recurring basis (usually
monthly)
(BOOK KEEPING)

6. CASH FLOW PLANNING

• Difficulties
• Volatility, Unpredictability (esp. with Disaster Relief)
• How to
• Account for cyclical and seasonal fluctuations in cash
inflow / outflow
• Adjustments made when cash inflow less than outflow
• May call for postponing expenditures/accelerating client billings
• Plan for lags between invoicing/billing for services and
actual receipt of cash
• Chart expenditures according to payment deadline
• Factor in debt repayments

7. WHERE TO START
WITH A CASH FLOW
Zero-Based Incremental
• Starts from 0, assuming • Assumption is programs
no program is and depts. are pre-
necessary and no approved
money spent • Only increases and
decreases in resources
• Orderly evaluation of
allocated
all revenues and
• Focus on changes since
expenses
previous FY numbers
• Aim is for quantitative • Less focus on rigid
measurability calculations

8. ADDITIONAL BUDGET REPORTS

• Annual, quarterly or monthly projects of income
and expenses
• For entire organization, its divisions and depts.
• Revenue projections by type
• Donations, gifts, grants, etc.
• Individual project and dept. projections
• Service delivery costs
• ie. cost per patient/beneficiary
• Cash flow – short and long term
• Historic and project fund-raising revenue & expense
• Staffing models

9. NON-PROFITS

• Flexibility!
• Contingency plans
• Lead-time for grant requests
• multi-year programs, etc.
• Unpredictable cash flows & contribution
revenue
• Can be dealt with by postponing expenditures,
accelerating constituent billings
• Money allocated appropriately*
• Under common law, non-profits have a duty to
donors/grantors to use gifts for the purpose the
funds were given

10. LEAN, ADAPTABLE & ETHICAL
• Transparency & sustainability
• Priorities in balance reflect priorities of the
organization
• Bear in mind the needs of the beneficiaries and
stakeholders
• Reporting mechanisms built in to alert management of
cause for change
• Budget inherently a “push mechanism,” but should
also be “pulled” by beneficiaries/stakeholders
• Should not only set ceiling prices, but also floor
prices

11. OTHER CONSIDERATIONS

• As much money as possible in federally insured,
interest bearing accounts
• Once cash reserves exceed operating costs,
consider longer-term investments
• Staff increases, technological investments
• Budget spreadsheets often, requested by third-
party stakeholders / [potential] donors
• Tracking of expenditures enhances ability to report
accomplishments