In April, our team fielded calls from nonprofits through our virtual office hours. Over the next several weeks, we will highlight some of the questions posed to us along with our answers. Our hope is to help your organization, as these may be questions you are pondering, too.
Q: How do I forecast my budget/make staffing plans when there is so much that is unknown?
All budgets are based on assumptions of how much will be generated in revenue and how much will be spent in the next fiscal year. We often determine these forecasts based on past behavior of what was actually realized in previous years, and on predictions of what will be true for the twelve-month cycle to come.
Creating an organization’s operating budget can be a challenge in “normal” times, and we are all too aware that our community’s financial and physical health has no semblance of normal these days.
A: For budget forecasting, we suggest creating mini-fiscal years by breaking the new fiscal year into quarters and planning based on three- or six-month intervals.
The chief executive of one organization we spoke with expressed great relief in thinking about a budget projection for only six months. Here’s how she plans to break it down:
- Forecast the first quarter of the new fiscal year (July–September) based on minimal revenue due to the current state of shutdown operations.
- Forecast the second quarter of the new fiscal year (October–December) based on a gradual reopening and partial operations.
- She would not even begin to think about the second half of the fiscal year (January–June) until the beginning of the second quarter (October).
- Her Finance Committee would approve the half-fiscal year budgets and would be involved in quarterly reviews and reforecasts.
The chief executive of another organization was already invited to think about quarterly budget forecasts from a major funder, the Greater Columbus Arts Council. GCAC was so ahead of the curve that they invited all operating support grantees to forecast only one quarter at a time. And, rather than one grant application for next fiscal year, they created phases on May 1, September 1, and December 1 to give arts organizations the opportunity to catch their breath, re-assess, and plan. Kudos to Tom Katzenmeyer, Alison Barret, and everyone at GCAC for this thoughtful approach that serves the organizations and the community so well.
A: For staff planning, we suggest inviting your team into the process.
Another chief executive we spoke with has a good amount of cash-on-hand and was successful in their SBA PPP loan application, which gives her confidence in the short term that she will be able to retain all of her employees.
However, the workflow is not consistent because so many projects are on hold, and given the uncertainty, she is unable to predict when they will be back in high gear. Some staff members have little to do but that could change in a moment, as it did with the shutdown.
We suggest making the assumption that it will be 18+ months that the team will not be physically present with their constituents. With this baseline assumption, invite the team to rethink their operations and determine how they will deliver the promise of their mission in this new reality.
These are trying times, and the chief executive should not have to tackle these challenges alone. Harnessing the creative energy and strategic thinking of her employees is the right mix of productivity she and her team need.
Article by: Kerri Laubenthal Mollard, Founder & CEO
