Overcoming Common Budgeting Challenges

This article is the third and final in a series on budgeting. In previous articles, we discussed creating a strategic budget and monitoring and modifying the budget.

Strategic budgeting can present unique challenges in all types of organizations large and small. Being aware of these obstacles can help you better prepare to address them when they arise.

Many organizations, especially smaller businesses and nonprofits, suffer from unpredictable cash flows that can make budgeting particularly difficult. This can be mitigated through diversification of your revenue streams, and maintaining a healthy contingency or reserve fund to get your organization through tough times.

Cost overruns are another common pitfall that can throw even the best-laid plans into disarray. Make sure to be realistic about costs to avoid underestimating them. If your organization is expanding or otherwise entering new territory where you don’t have much experience, this is where being conservative in your cost estimates and keeping a healthy contingency fund will be particularly important. Also be sure to keep your budget updated as market and other factors become more clear with the passage of time.

It can be tempting to only budget for expected or “dream” scenarios where your organization is meeting all of its goals in a financially sound way. Organizations who budget this way are unprepared to deal with reality when it doesn’t live up to their prior forecasts. To prepare your own organization, consider running your budget model through various scenarios, including downbeat or “worst case” scenarios. You will of course hope that you never need these plans, but you’ll rest easier knowing your organization is prepared if a difficult situation presents itself.

Schreiber Accounting and Advisory has deep experience helping businesses and nonprofit organizations with their budgeting and other accounting, tax, and consulting needs. If your organization needs the assistance of a qualified CPA firm, contact the firm for more information.

Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.