Every NGO and every project needs to have a budget. A budget describes the money that an organisation plans to raise and spend for a set purpose over a given period of time.
“Failing to plan is planning to fail.”
The budget plays an important role in every stage of NGO work: planning new work, raising funds, implementing activities, monitoring work and evaluation.
The programme cycle and the financial cycle go hand in hand.
Writing a budget involves answering a number of questions, that can only be answered byprogramme staff and finance staff working together: They start with plans and goals, not numbers:
1. What objectives are we trying to achieve?
2. What activities will be involved in achieving these objectives?
3. What resources will we need to carry out these activities?
4. What will these resources cost?
5. Where will the funds come from? What will the source be?
6. Is the result realistic?
This might look like hard work, but we actually work through these questions every day, when we handle our own personal money. You can see a short illustrated example here: Rudi goes to the cinema.
A good format to start with is a detailed budget worksheet that can later be summarised or re-coded to match donor formats as needed. After the budget has been prepared it needs to be approved by the Board and / or donors.
Implementing the Budget
The person with the responsibility for implementing a budget is called a ‘Budget Holder’, and is usually a Programme or Project Manager, not a finance person.
They use the budget to guide the implementation, checking BEFORE spending that items are budgeted for, and allocating expenditure to appropriate budget lines.
Budget holders should focus on delivering the project objectives within the total budget rather than on spending all the cash outlined in the budget.
Over or under spending within reasonable limits is not a problem as long as there are good explanations (but check your grant conditions, as some can be more restrictive than others).
Read the full guide and download a template budget spreadsheet from award-winning UK registered charity Mango here.