Financial Planning 101: How To Master Your Budgeting and Forecasting in 2024 w/ Don Needs

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April 6, 2023

Last Updated:

January 11, 2024

Welcome to "Financial Planning 101: How To Master Your Budgeting and Forecasting in 2024"! In this webinar, we will cover the essential elements of budgeting and forecasting to help you make the most of your financial resources this year. We will explore different types of budgeting methodologies and identify which ones are the most effective for different scenarios. You will learn the step-by-step process for building a budget that sets you up for success and understand the difference between budgeting and forecasting and why your organization needs both. We will also discuss how technology can be used to speed up the budgeting and forecasting cycle and introduce you to Instrumentl, a powerful tool for finding, tracking, and managing your grants all in one place, saving you time and money.

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Takeaways by the end of this Instrumentl Partner Webinar:

  • How to identify the different types of budgeting methodologies and which ones are the most effective
  • ​The step by step process to building your budget for success
  • ​Understand the difference between budgeting and forecasting and why your organization needs both
  • ​How to utilize technology to speed up the budgeting and forecasting cycle
  • ​How Instrumentl saves you time and money in finding, tracking and managing your grants all in one place

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Don Needs has been with Jitasa since 2013, starting as a financial analyst and working his way up to Chief Financial Officer. He joined the Jitasa team after earning his MBA from Boise State University and many years of experience as a business and budget development consultant for various companies in the Boise area. Don recently became an accredited Certified Management Accountant.

Instrumentl Partner Webinars are collaborations between Instrumentl and its community partners to provide free educational workshops for grant professionals. Our goal is to tackle a problem grant professionals often have to solve, while also sharing different ways Instrumentl’s platform can help grant writers win more grants. Click here to save a seat in our next workshop.

Click the video link below to start watching the replay of this free grant workshop, or check out the transcriptions below the video.

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Financial Planning 101: How To Master Your Budgeting and Forecasting in 2024 w/ Don Needs - Grant Training Transcription

Dionna: Alrighty. Hi, everyone, and welcome to Financial Planning 101: How to Master Budgeting and Forecasting In 2024 with Don Needs. This workshop is being recorded and slides will be shared afterwards. So, keep your eyes peeled for a follow-up email later today in case you want to review anything from today's session. My name is Dionna -- uh-oh, I got some back -- echoing back. Oops, make sure people are muted. Then I'll jump back in.

Like I was saying, my name is Dionna Arimes and I'm the Partnerships Marketing Manager at Instrumentl, and I will be your host today. In case it's your first time here, this free grant workshop is an Instrumentl partner webinar. These are collaborations between Instrumentl and community partners to provide free educational workshops for grant professionals. Our goal is to tackle a problem grant professionals often have to solve, but also sharing different ways Instrumentl’s platform can help grant writers win more grants.

Instrumentl is the institutional fundraising platform. If you want to bring grant prospecting, tracking, and management to one place, we can help you do that. If you have questions throughout the presentation, please put three hashtags in front of your question so it sticks out in the chat. I will also keep track of all questions asked during Don's presentation so we can jump right into them during the Q&A at the end. Lastly, be sure to stick around for today's entire presentation. At the end, we will be sharing with you some freebie resources. More details to come after Don's presentation.

Now, with all that housekeeping out of the way, I'm very excited today to introduce Don Needs. Don Needs has been with Jitasa since 2013 starting as a Financial Analyst and working his way up to Chief Financial Officer. He joined the Jitasa team after earning his MBA from Boise State University and many years of experience as a business and budget development consultant for various companies in the Boise area. Don recently became an accredited Certified Management Accountant. And we're very excited to have him here with us today.

With that, Don, take it away.

Don: Awesome. Thanks a lot, Dionna.

All right. So before we get started a little bit about Jitasa, we are a bookkeeping accounting service firm that serves only the nonprofit sector. So, we serve nonprofits with any mission, nonprofits with any size, and then, really, nonprofits in any state really serving everybody from federation size organizations to startups in every sector.

So, our agenda today will really be focused on budgeting forecasting at an organizational wide level. Some of these can apply down to a grant level budget but really work through methodologies that we like to use when we're working through budgets or forecasts for our clients. So, we'll kind of go through what's the difference between a budget and forecast. We'll look at steps in the budgeting process. We'll take a look at really the forecasting cycle and kind of what that means and what that generally looks like. And then we'll go open it up for some Q&As.

So first, we'll start out with what is a budget and a forecast. It's really common that these are used interchangeably, even though they're different functions. So, a budget is actually what we want to happen. The purpose of a budget is really to be inspiring, motivating. It's typically pretty detailed. It typically is performed on annual intervals, although that can depend on each organization and really often used as a motivational and a coordination tool throughout an organization to really keep everybody aligned.

Whereas a forecast is more looking at what we think is going to happen, this is really an unbiased view of the future. It's really looking at expected outcomes versus targets or versus prior years. While you're forecasting, you're going to have a lot more limited details. And this allows for more rapid iteration and decision making within the organization.

Forecasts are typically performed on monthly or quarterly intervals. So, the biggest thing here is that the budget is kind of aspirational on what we want to happen. A forecast is purely what we think is going to happen. And sometimes those are the same things. Sometimes those are completely separate. Okay?

Budgeting and forecasting. We’d like to look at it as similar to kind of navigating a ship in the ocean. So if you're going to set sail, you're mapping your destination from the start to the end. The path of your ship is going to be continuously monitored over time. And there's usually going to be some unforeseen obstacles or circumstances such as if I'm sailing ship, I may have some bad weather that kind of throws me off course. So then, you have to take some corrective action that's going to help steer the ship back on course.

So, that's kind of how we like to look at how budgeting and forecasting are kind of used together is kind of your map, your destination. That's kind of the budgeting process. But then forecasting is going to be really tracking where you're at and where you need to go to kind of reach that end destination.

So, we'll take a look at the budgeting side, some kind of step by step methodologies that we like to go through when kind of developing our organizational budget. But the first thing we'll do is do a poll. That is, are you currently budgeting? Dionna will launch that for us here in a second.

Dionna: Yes. Here we go.

Don: Awesome. All right. So, we have our options here. Yes, with Excel. Yes, with budgeting software. Or no.

Dionna: It looks like we have about 70% of the answer.

Don: Awesome.

Dionna: 80%. Just give it a couple more seconds and then --

Don: Yeah, no problem.

Dionna: All right. It looks like we're reaching a lot. So, I'm going to end the poll for you and launch the results.

Don: Okay. Great.

Dionna: There we go.

Don: All right. So, we have yes with Excel. So, it's really common. So, good job for those who are budgeting. Others are using some budgeting software. So, that's great. And then we have some folks who are not budging. And that's great as well. It’s a great opportunity to get started.

So with that, we'll kind of move into the do's and don'ts of budgeting. So kind of from a higher level, how we like to approach, just in general, the budgeting process. So some do's are -- as you start thinking through your budgeting, you definitely want to involve all key stakeholders within a process. So, that includes not only your board members, but other folks on your team in different departments to make sure everybody kind of has a say in a collective input on kind of the direction of where your organization is going.

Next is that we definitely want to use reasonable assumptions. Definitely don't want to be set up for extreme failure. So, always going to balance goals versus reasonable assumptions. We always want to communicate our budget to everybody involved in the organization, and really want to work to understand your critical drivers and KPIs. And then one of the most important parts is always staying agile in, really, as you're building your budget just understand different scenarios, different sensitivities; meaning, that there are some items that are really going to drive your budget versus some that are really immaterial. And then really stay flexible when there are significant changes that need to be made.

Some major don'ts for your budget are definitely, don't be unrealistic. And set yourself up for -- and don't set yourself up for failure. Having stretch goals is okay. But it's actually demotivating to have something that's unrealistic laid out in front of you. Don't overestimate demand or underestimate labor. This is probably one of the areas we see the most in really being very aggressive on what funding an organization thinks is going to come in. And that can really kind of set you up for some failure later on. So, always be in -- making sure you have a good balance between not too conservative, but definitely not too aggressive on your funding.

Don't budget in silos. So, again, make sure your development team is involved or your fundraising team. And everybody has a cohesive vision of kind of what the organization is trying to work towards. Don't forget about the possibility of economic changes. Very important in today's environment and with the last couple of years with COVID. So, always think through inflation, interest rates, a lot of those things that your organization may not control but will have an impact on your financials. And lastly, don't fixate on immaterial items that really won't influence your overall budget performance.

So with that, we'll go through steps in the budgeting process. So, really, there's a few -- there's multiple ways you can attack a budget. So this is -- it's not one-size-fit-all. This is one we like to use, but there are different ways of attacking a budget. So, this is one methodology that we like to use.

The first is going to be, define your budget cycle. Next is going to start with your end in mind, then we're going to want to ensure that we have up-to-date historical financial data, then we'll want to analyse that data. We’ll then look to align our resources. We'll set our revenue targets. We'll iterate through our budget, and then we'll work to approve and implement.

So, really, step number one is going to be to define the budget cycle. So for those of you who are new to budgeting and this hasn't been defined, this is something you want to make sure that everybody is on board with the length that you're going to be budgeting out. So, you may be budgeting on an annual basis. That's very typical. But if you're a newer organization or you've never done budgeting before, there are times when it makes sense to really do your first budget on a semi-annual basis, or even quarterly to kind of dip your toes in and get your feet wet on kind of the process.

The next step would really be ensuring that you have an adequate timeline to build and implement your budget. So if your budget is due in December, by your board, you want to make sure that you have at least a couple months to really work through that with your team. So, you want to make sure that your board members and everybody involved are aware of kind of that timeline of when the budget is supposed to be due each year, or each quarter, or each six months. And then you want to make sure you go through an official approval process so that everybody's working off of the same document and same vision for the budget that was implemented. Because oftentimes, your original draft budget will change throughout the process. And really, the key point here is ensuring that all stakeholders know the budget timeline.

So once you've kind of defined your timeline of when you want to have your budget really done by the timeline, it’s going to take time to put it together and implement. You really want to start thinking through starting with the end in mind. So, what are your dreams and aspirations and goals that you want to accomplish in the year? So, are you looking to expand current programs, fund new programs, perhaps build surpluses for sustainability? The biggest goal here is to make sure everybody's rowing in the same direction.

And again, on the budget side of things, we're trying to really be aspirational. And this is really what we want to happen for our organization throughout the year. And then again, really trying to agree on a collective goal with all stakeholders.

Next step, after we've built out our budget timeline and we've kind of set the vision of what our budget is for the year, we want to ensure that we have accurate historical information. So, this is a really key critical component is the more up-to-date your information is, the easier it's going to be to project out what's going to happen the next year. Because all of your assumptions and your data and your drivers that you create your budget, it's all going to be a lot of it based on historical performance. So, it is really important to have that historical financial information up to date.

Once we have all that information together, that's really when we're going to start analysing our historical information to really understand the data. And what we're typically looking for is a few things. Number one is we're really trying to understand what's called common size. And that just means a percent of the total. So, if my organization has $500,000 in revenue for the year and 400,000 of that comes from grants, I really want to spend my time understanding the grants because that's really going to drive my budget for the future years. Or if on the expense side of things, if 80% of my staffing -- or sorry, 80% of my spend is from staffing, I really want to make sure that I spend a lot of time into that area so that I'm focusing on the items that are really going to drive my budget as opposed to we may have some minor other expenses such as a Microsoft Office 365 subscription, or something. That's really not going to break the bank if we get that right on or spot on. But we really want to focus on those bigger dollar items that are in your historical financials.

The next piece is we really want to work to understand relationships between financial items. So, that's the revenue expense impacts of new initiatives. So if you're starting a new program, how does that impact your staffing? Or how does that impact your supplies? What's needed for that program? And really try to understand the relationships in those areas. Another one is, if maybe I'm going to hire a new marketing Search Engine Optimization contractor, so we would expect that our donation -- or probably our online donations or fundraising would go up to next year. So, really, making links between new initiatives, what that spend is, and then kind of what the funding or revenue offset is. Really want to try to understand those to try to build as accurate of a budget as we can.

So once we've gone through that process, we've set our timelines. We understand -- we've set our timelines. We have our end in mind. Our historical data is caught up. We kind of understand the relationships of our revenue expense items, how they relate to each other, we understand our biggest areas of spend, our biggest areas of funding. That's really when we're going to start to build out and align our resources to really try to determine our cost or reach organization and goals. So this is, again, where we're going to focus on common size items and new initiatives. So, we're going to focus on those spending of items that are the biggest -- that have historically been the biggest part of our overall spend. And then we're also going to layer on new initiatives. So, we have these brand new initiatives that have historically never been a part of our organization. We're going to make sure we spend some time to understand what makes up those new initiatives.

We're always going to document our assumptions. That's very important in the subsequent stage we'll go through. We always want to make sure we understand where the spend is coming from. So an example is we may have our ongoing staffing today. But again, maybe we're hiring a few additional resources for a new program we're starting. We really want to understand what's happening today versus what we are adding in. And we always want to make sure we document that.

We always want to understand recurring spend versus one-time-spend. And so, if you have a major event that maybe you're going to spend $100,000 on a special event in November of each year, you always want to understand that that's going to hit in November versus it's not just $100,000 spread over 12 months. That's really going to help from a cash flow perspective. And also, when you're monitoring budget versus actuals, you'll kind of be skewed if you have this big one time spend that's really actually spread over 12 months.

And then lastly, you really want to work towards identifying discretionary versus non-discretionary spend. And this is as you work through the different spending areas. You want to understand what is a nice-to-have spend. So, something that you really want, but your organization doesn't have to have versus must have. And I look at must-haves like what's the minimum bare essentials to keep the lights on. Again, this is good to start thinking through those at this stage because we may have to revisit those in a subsequent step here.

So, an example of kind of what we'd be looking at, from the expense side of things, we have our organization that their total expenses are 100 or 850,000. We'll see that about 80% of it is between salaries related to contract services. So because this is a large part of our budget, we're probably going to break out into this salary detail and list position by position and really start date by end date, or things like that.

We want to know everything that goes into this $500,000 and $150,000. We really want to have that dialed in and documented, so we know what our assumptions were going into the year. Whereas if we look down at these other items here, most of them are 6% of the budget to 2% of that total budget.

Not to say they're not important, but if we miss on one of these, it's not going to be as major of a budget impact as it will be if we miss on understanding our large common size items that are a percent of the budget. So, we may have travel and conference expenses from each year. And again, maybe it's 20,000. Maybe it comes in at 25,000 this year. That's actually not too bad. That's okay. Because if our total budget is $850,000, we're really still only hitting $855,000. Whereas if we had a 10, 15% variance within here, within these salaries related ones, we're talking about a 50,000, $60,000 variance here that we would have to address.

So, the biggest points here are always breaking out again, really spend time to detail out those items that are the largest percent of your budget, and then really diving in to understand what items are discretionary versus non-discretionary. And you'll kind of do this in two areas. So within our salaries related and as we break out our salary details, we may go through our positions and say, “Okay, here are nice to have positions.” So, maybe we're going to hire a new office manager. We really want to do that. But it's always nice to know that that may be a nice to have and not a necessary thing should we have to kind of -- maybe we don't hit our funding goals for the year. So again, understanding what are kind of nice-to-have-spend versus must have.

So once we go through all that, we get our spend kind of targeted for what we set as our goals for the organization, we're going to really work through our revenue targets to determine how our expenses will be funded. So, again, we're going to do the similar thing of focusing on common size.

So again, if my organization is 90% funded by grants, I'm really going to spend a lot of time on the grant side to make sure I understand what's coming in or what we think will come in. And then we'll also focus on new initiatives. So if I did invest in a search engine optimization marketing person, or something like that, that's going to hopefully drive my online donations, I would expect to see an increase from the prior year in my online giving.

One of the biggest things we see on the revenue side is typically just -- you don't always want to assume that every revenue source is going to be a hundred percent. And one of the ways to kind of work through this is to discount your large revenue sources based on likelihood of securing that funding. And so -- it looks like we have gotten an echo here. Okay. It looks like it's gone. Perfect.

So an example here is so -- in our example, we have a million dollar budget. We have $500,000 coming in from grants. And actually, that's 50% of our budget. So, it's a pretty substantial amount, basically, between donations and grants. That's 90% of our funding. So what we want to do is lay out our grants and say, “Okay, what's the likelihood of all these coming in?” So, we may have various grants in different stages that we've applied for or we know about, we may not know about, we've received a verbal form. And maybe these all total up to two, three, whatever this is, a million or so, maybe a little less.

We don't want to create a budget that says we're going to have a million because these aren’t all guaranteed that they're going to come in. So, one of the great ways to kind of mitigate against creating too much of an aggressive budget is to assign probabilities based on the grants that we know about. So, we may have this $200,000 grant that we have written approval and confirmation that we're going to get. We can put that probability to a hundred percent. We know it's going to come in. We already have that approval. Same with this next grant for 150,000.

We may have this XYZ grant that's 100,000. We've got a verbal on, but we're not a hundred percent it's going to come in. So, we may factor that at 90%. So, we're actually in our budget we're only going to put in that we're going to receive 90,000 of this. We may have a budget here that's $50,000. It's in the proposal stage. So we may have to submit our proposal, maybe it's 50-50. We're going to get it. We're not sure. We're just going to factor that to 50% and say we're only going to put 25,000 of that in our budget. And we may have a couple other grants that are identified budgets or identified grants. We're not sure -- we haven't even submitted a proposal for them. We're not even sure if we're going to get them. So, we'll just factor those in at 10%. And that kind of reaches our $500,000 total here that goes in our budget.

So again, instead of putting in whatever it is, 800 or a million in our budget for these grants that we think are out there, this gives us a nice blend of some probability to make sure that we don't over risk our budget, or have too aggressive of a budget as we go forward in the year.

And then another thing that really helps is to identify to your board members or stakeholders how aggressive or conservative your budget is. So, this would be really a medium balanced -- sorry, I went back here for a second. This is really kind of in-between between aggressive and conservative. So, we have some funding in here that we might get. We have some funding in here that we know we're going to get. A really super conservative budget would be, if we really only included these top two in here that we have written approval for.

So if we only included 350,000 in our budget, we're -- it's a pretty conservative budget because we've only included what we know is guaranteed to come in. Whereas a highly aggressive budget would be if we had included all of these in our budget, and we're not confident we're going to get them all. So, this gives a kind of a good blend between a little bit of a stretch goal but just making sure you're not being overly aggressive from a budgeting standpoint.

So now that we've gone through the process of really setting our timelines, we know what our end in mind is for the year, we've made sure our historical information is up to date and kind of analysed that, we've laid out our spending and our funding. This is really where we're going to lay everything together and iterate to achieve or realign your goals. So, this is the stage that often reality sets in. And that's okay. It's very common to go through your first draft of a budget and you're just not hitting whatever goal that was. Or maybe you're spending way more than you had anticipated. Maybe you want to build a surplus for the year and you just don't see that that funding is going to come in.

That's okay. So, the first step is really to identify funding opportunities to close the gap. So, this is where we would go back to our revenue side things and say, “Okay, maybe I was super conservative on some of these and are there some things where we're confident in being a little bit more aggressive there.

The next is really to identify those areas of spending that really may not be necessary. So remember in a subsequent step, we talked a little bit about identifying discretionary versus non-discretionary items. That's kind of where this comes in. It makes it a little bit easier of a process to have identified those early on because now you can actually kind of take those out or put them to the side. This is also a common -- it's really common to kind of use if then sequencing here as well to say sometimes there's contingent funding. So, maybe you have this large $100,000 grant that you're really, really not sure it's going to come in. You can kind of say, “If I get this grant, I'm going to have all these discretionary items that we're actually going to use for this grant, if it allows it.” Or maybe you have a large donation event.

And if you get $100,000 from that event, you're going to put this discretionary spending aside and say, “We're not going to actually spend on this unless we get this additional funding.” And so, this is where it's really helpful to kind of understand what is discretionary versus non-discretionary.

And lastly, it’s really just to approve and implement the budget. So, that's where we're really going to present to the committees if you have them or your boards and to receive approval. Once the budget is approved, you're going to enter in an accounting system. You're going to re-communicate the approved budget to staff. It's really common for a budget to be iterated through and go through. And then sometimes people forget to actually communicate out back the final budget and what changes there were. So, always making sure that everybody is in the know on the approved budget.

And then another really important one is don't change the budget to make budgets match actuals. So, the goal is not to just get budgets to match actuals. The goal is to use a budget as a yardstick or measuring tool to understand kind of where you're at with your actuals.

Okay? So, next we'll go into forecasting. So we'll open up another poll. Dionna, if you could, for “Are you currently forecasting?” Give it a minute or so. All right. Where are we at, Dionna? Are we getting some answers in there?

Dionna: Yeah, it looks like we're at about 65%. So, we'll give it a --

Don: Nice.

Dionna: Second.

Don: Perfect

Dionna: Okay. It looks like we're reaching a little bit of a lull. So, I’ll go ahead and --

Don: Great. All right. Let's see what we have. All right. Very good. Okay. So, we have about, yes, 32% are forecasting with Excel. Great job. Some folks 3% are using forecasting software. Great. And then 65% are no. So, it's really common. So, I'd say forecasting is one of the things that we don't see a lot of but actually is something that plays a really critical role in guiding your organization to kind of reaching your budget goals. So, now, we've completed the budgeting process.

Again, thinking from a sailing standpoint is we've kind of mapped our destination on the map. We know where we want to go. So now, we're trying to think -- and we know what we want to happen. Now, we're trying to determine what we think is going to happen. So the purpose of the forecast is, really, to measure that progress ongoing. So again, if we were a ship trying to sail to our destination, we want to measure our progress of where we at, where we are at on that path that we set out towards.

And then most importantly if we are off track, we want to try to make any corrective decisions or action that we can take to put us back on the path that we are working towards. So again, we've mapped our destination. Now, we need to kind of monitor our course and then work towards corrective action if needed.

So typically, one of the most important parts of a forecasting cycle are typically around the frequency. You really want to determine two things; the frequency at which you're going to do forecasts, and then the length at which you're going to forecast out. So, I'd say typically, what we see most commonly is quarterly forecasting. And we see that on a quarterly basis. You can do it monthly. And so every month, you could redo a forecast. That can be a little time intensive. And sometimes you don't have enough information to actually make decisions. And then so quarterly seems pretty, pretty close and that you're trying to really forecast out three months ahead. And you're going to always do that every quarter. Okay?

And, really, as you go through the forecasting cycle, if you've chosen to do this quarterly, you're going to go through kind of three main steps here. You're going to work to assess or reassess the situation. So you're working to say, “Where are we at now as an organization? How does our forecast compare to our budget?” And really looking at your trend analysis as how are our actuals in forecast trending versus the budget? And then you're going to look to identify. So, you're going to identify any demand capacity, new initiatives, or risks that may have changed, or that you can see changing in the future. So some examples include, maybe you found out about a $100,000 grant that you did not think you're going to get. And maybe that's on your radar for three months from now. That's where you're looking from kind of a, what I would call a demand perspective. That's something that you did not expect to happen, but it will happen. So, you can include that in your forecast. And then you're going to act on that.

So, you're going to align your resources. You're going to prioritize value-added initiatives that are really helping to support your program or mission. And they really eliminate non value added items. So this is where -- one I use a lot is rent. So, you never want to just spend stuff that's in the budget. You never want to spend stuff just because it's in the budget. You always want to keep evaluating and saying, “Is this where our organization is going? And is this essential for what we need?” And so, I always use rents as examples. So, as COVID happened, you saw a lot of organizations say, “Hey, actually, we figured out we don't need office space. That's actually what this money is better spent somewhere else.”

So instead of saying, “Hey, it's in the budget, so we're just going to spend it.” It's always continually re-evaluating to say, “Is this a necessary item that we need to spend on?” And so, really, every forecasting cycle you're going through these three steps to really assess or reassess, you're going to identify what is changing or what has changed from your original assumptions. And then you're really going to act in kind of align those resources and spend throughout your organization. And then again, if you're doing this on a monthly basis, that's what you'll do monthly. If you're doing it on a quarterly basis, same process, you're going to go through that quarterly. Okay?

And then lastly, so as you do that forecasting, again, the most important part of the forecast is to understand where you're projected to be at the end of the year versus your budget. So, you had your budget. That is what you wanted to do. You now have your forecast of what you think is going to happen, and you have some actuals in here. So on this left side, we have our year-to-date actuals. We have our year-to-date budget. We have our full year forecast where we think we're going to end the year at. So, that's basically your year-to-date actuals, plus, what we forecast through the end of the year. And then we have our kind of full year budget here.

So, this is where it gets pretty interesting to kind of dig into the details to understand how monitoring -- just budget versus actuals can be deceiving sometimes. So, sorry, I clicked ahead here. One second. Here we go. So, for example, if we were just looking at these two items year to date for our donations, we would say, “Our budget-year-to-date is 200,000. Our actual number is 100,000. We may hit the alarm and say, “Oh my gosh, we're $100,000 behind budget. Like, this is not good.” And we may start cutting expenses, or something.

But because we have a forecasting process in place, we might say, “You know what? This was just a timing instance. And we thought we were going to get $100,000 in June. It's actually not coming until September.” And so, it's just not reflected in our actuals or our year-to-date budget. This is where we can kind of have that full year forecast and budget here to say. We're still actually expecting that we're going to come in $50,000 above our target for the year for our budget. And so, there's really not a lot of corrective action that we need to do. So again, if we were just looking at actuals versus year-to-date budgets, this may cause some alarm for some people. But it's important to have that forecast in place to say, “Oh, there's a reason why that was.” Or maybe we have another initiative in the pipeline that's going to replace that. And we're actually on track to be $50,000 ahead of our budget by the year end.

Conversely, for our grants, we may have a similar situation. We may look at our year-to-date actuals versus budget. So, our actuals are 300,000. Our year-to-date budget is 250,000. We may be happy and say, “Oh, great, things are $50,000 ahead of budget. We're going to spend more.” But if we did our forecasts, we may say, “Actually, there are a lot of grants that we know we're not going to get that we thought we were going to. And we're going to come in at 350,000 at the end of the year, and our budget was 500,000. We may have to figure out how we're going to replace this $150,000 of funding here.”

So again, it's really important to use that forecasting as a tool to project out and see kind of where you're going to end up the year. Because if you need to make significant changes, now is the time to do it. You definitely want to know about now versus three, four months from now and be surprised by any of this information.

So, all right. I'm getting close, close to the end here before we'll open up for some Q&A. But one -- a couple of notes of caution when using your budgets and forecasts is -- we talked about this a little bit early on is there's a couple of things you want to eliminate from the budget process. Number one is just the question of, is it in the budget? So instead of asking is it in the budget, I always like to focus on are there better uses of these funds? So, are there -- is there a better need for these funds to spend on your program or mission. Because it's really easy to get in the habit of saying, “Oh, it was in the budget. Maybe nine months ago we thought it was going to be important. And maybe today it's not.” So, don't just keep spending on stuff that's really not adding to your organization's mission or programs.

The next thing to eliminate is really preset allocations of resources because this kind of encourages people at the beginning of the budget process. If you're really rigid on resources in the very beginning, it causes people to want to try to hoard a bunch of resources or kind of their departments. Whereas you want to really be flexible as you allocate resources throughout the year. So again, if something -- if you'd plan to spend $50,000 on rent, and later on, you say it's not really beneficial to us, definitely, I encourage reallocating that somewhere else where it's going to better serve your program and mission. So again, those are kind of just two things that we like to work through and be aware of as we're going through, really, the budget creation process.

Okay? So, really three -- I think the three biggest learning takeaways from today are really that budgeting is what we want to happen. And forecasting is what we think are going to happen. And again, these two are used in a really great way to really understand not only where you're at year-to-date, but where you think you're going to end up and really provide a runway to make accurate decision making in time before a surprise kind of comes your way.

Second takeaway is to always deck documents and communicate your major assumptions and drivers in your budget. So if you have a really aggressive budget, you want to make sure that your board and all stakeholders know, “Hey, this is really ambitious. This is really going to take a lot of work and effort to get towards.” And you never want them to think that your aggressive budget is a slam dunk and you're definitely going to get there. So, I think communication is very, very important to everybody involved in the budget process.

And then lastly, one of the most -- again, one of the most common things we see folks do is really fixate on immaterial items. And when I say immaterial, it's things that really aren't going to change the budget outcome. So if I have a million dollar budget, spending $10 a month on Microsoft Office, it’s not going to really change my budget outcome. And everybody has a fixed amount of time, really, to spend on the budgeting process and forecasting process. So, really focus on those items that really matter. And those items are really going to drive your budget performance for the year.

Okay. And so, coming up towards the end, so if you have any questions about Jitasa, or our budgeting forecasting services, or our bookkeeping accounting services, we'll send this deck out. But you can follow up with Christian Spearow at Jitasa. His information is listed here. You can also hop on our website to find out more about what we offer. And with that, I'll pass it over to you, Dionna.

Dionna: Amazing. Thank you so much, Don.

Let me just get situated with my screen. All right. If you can confirm that you can see my screen?

Don: We got it.

Dionna: Cool. Let me just make sure in the chat.

All right. So since Don gave some really great points on how to master your budgeting and forecasting, I just want to show you quickly some of Instrumentl’s functionality which can help you in this process. So, what you'll see when you go into your Instrumentl account is a dedicated tracker for each of your projects. As you can see here on the left, I have my food security project up and all of the opportunities that are relevant to this project. And you can -- what's really important and what's really relevant to what Don was saying is being able to see an overview of your amount awarded, your overall goal, how much you're waiting to hear from, and how much money has been declined. I think these are some really key metrics to keep track of when it comes to these projects and when it comes to your budget and forecasting.

And then what I want to do is show you when you click into an individual opportunity, you can see all the information about a funder here in the top left. Click in here, and you can see this funder has a 990 report on file. And this is when you can really dig in and see what a funder is all about, funders’ availability, available opportunities and overview of their giving, links to their current 990 forms, contact information, all that really important stuff that's going to be important to research when you're getting to the point of asking yourself like how much should I be asking for with this grant, which then relates to how much your budget is and how much you're forecasting and expecting to raise in that year. So, what I want to do specifically is dig into some of that key information you might be looking at when determining how much to ask for in a grant for a funder.

So when you scroll down here, a really great overview is of the average grant amount. So you can see for this funder, their average grant amount is 13,000. And their median grant amount is 9,000. That can be really helpful for determining what I should be asking for. Perhaps somewhere around 10,000 would be a good number here. But you can really dig in a little bit deeper into grant amounts snapshot and by year. I think what's really, really helpful here is the grant sizes. So, you can see the majority of the grants are falling under that $5,000 mark. But then there are some of those larger grants that are being given. So, you can see how many on average they're giving to there.

And then going down, you can see their past grantees, a funder like who have they been given to before, where are those folks located, are they in the same location as you, how much they were awarded, which is really awesome. And I think, really, a great use case here is being able to click into those other organizations that have been funded and saying, are they really related to your organization? Are they giving, in general, those general areas? So, that is really, really awesome.

And then going down even more, you can see an openness to new grantees. So if this is the first time you're applying to this funder, you can see are they open to funding new grantees? Or are they consistently giving to people that they've given to in the past? So you can kind of ask yourself, is it worth my time to apply to this funder?

And then keep going down. Grant size. Another section that I really, really love is the giving by NTEE code. This really shows you the trends for where the funder has given the most over the last three years. In the example here, you can see they've really prioritized education and health care. And this is just really important for funding history and making sure that you're aligned to this funder as well.

So, that is just an overview of some key ways that you can dig into a funder's profile here in Instrumentl and really determine how much you should be asking for, or are you aligned with this funder, and whatnot. And hopefully, that gives you some fundamentals in terms of how you can use Instrumentl in supporting your budgeting and forecasting process. And if you'd like to do this yourself, I'm going to pop in the chat Don's link to create a profile and get some money off your first month. So, make sure to check that out if you don't already have an Instrumentl account.

And with that, we are reaching the end of our presentation today. I want to thank everyone so much for attending today's live workshop. As promised, we are giving away some -- just one sec. We are giving away some freebies today. There we go. On our end, we're giving away 10 best lessons from 10 grant writing experts guide. And then Jitasa is kindly giving away their nonprofit budget templates. So, I'm also going to pop in the chat how you can access these freebies, if you want to check that out. And if you enjoyed this grant workshop, you're going to love our next one that is coming up on 4/19 called Grant Smith in urban legends. So, you can also check out our upcoming events via the link I'm about to pop in the chat as well.

And with that, we're going to open things up to questions. I'm going to tackle the questions that were asked earlier in the presentation first. And then if you have a question that you would love to ask Don, please feel free to pop that in the chat. And I'll read those aloud for Don as we go through.

So the first question that we had earlier from Erica was what qualifies us in material? Don?

Don: Yeah, great question. So really, really depends on, obviously, size organization. So, I think a good rule of thumb that I’d like to use is typically anything that's less than 5% of whether it’d be your total spend or your total revenue. But again, that does kind of vary per organization if you -- a lot of it comes down to time. And so if you're somebody who has the time to go through every single thing, that's great. Typically, what we come across is your time is better spent serving your mission or programs or raising money, or something like that. So, it's usually impossible to kind of go through every single item.

So, the general rule of thumb is stuff that's 5% or lower. The caveat is if you had like 50 or 10 items that were 5% each. Those lumped together a decent amount. But I think that's probably a good general rule of thumb.

Dionna: Awesome. And moving on to Tristan’s question, “A common problem we run into with weighted budgets is that grant outcomes are usually yes, no, rather than coming in at different percentages than we thought. Are there best practices to budget out with grants that aren't 100% guaranteed?”

Don: Yeah. I think you can use a similar -- so kind of definitely -- usually a similar methodology is the same because even when you project out, you may look at the number of new grants that you got the prior year and kind of factor it on probability percentage. I think a lot of the factoring -- because you definitely have some grants you apply for that you don't get. But then you're going to have some grants that weren't even on your radar that you apply for and you do get. So, I think having any sort of placeholder in there for just brand new grants that you're unaware of and having a probability on that is helpful. And I think it's most helpful in communicating to everybody else how aggressive that funding number is. So, I would still definitely use the same kind of factoring methodology. And it may just be a lump sum of new grants that we have in our budget, that we don't even know about today. And maybe that's -- of 25 to 50% probability, if you have a history of always getting new grants of a certain amount in historical years, I would really start with understanding that and kind of use that as your baseline going forward.

I think that'll help to keep from building some too aggressive budget. But it also puts enough additional funds in there that you can at least kind of plan some expenses when those new grants come in.

Dionna: Fantastic. And next question from Erica is, “If I have a consultant who does the forecasting and we meet biweekly to have these discussions, is that enough? Or should I be doing more? What's the frequency of analysis/pivoting that you would suggest?

Don: Yeah. So I'd say if it's biweekly, you're definitely meeting -- so there are kind of two things here. If it is kind of cash flow forecasting. And if you're somebody that's really concerned from a cash flow perspective, maybe you're managing it weekly, is definitely a great frequency to meet biweekly, or just to make sure that you're going to be able to make things like payroll and stuff. So, that's kind of from a cash flow forecasting side. Definitely recommend at least that frequency.

More from a, how are we doing versus or say, annual budget. To me, typically, a monthly cadence is good to meet on that to just make sure that on the longer term horizon saying, let's say, looking three months ahead, how are we doing? I typically find a monthly cadence is usually enough for that.

Dionna: Fantastic. And it looks like we have a couple more minutes for questions. So if you have a question that you would love Don to address, please feel free to pop that in the chat.

Give it a couple of seconds. If there are no other questions, no worries, you have our contact info if you think of anything after this presentation that you would love to ask us. And with that, thank you so much, Don, for joining. And thank you, everyone, for attending. We'll be sure to send out the replay by the end of day today. And please don't hesitate to reach out if you have any questions. I'm going to pop my email in the chat here so you have access to that if you have any Instrumentl specific questions that you would like answered.

And with that, thank you so much, everyone. And hope you have a great rest of your Tuesday.

Don: Thanks, everybody.

Dionna: Thank you.

Don: Bye.

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