A Better Budget Management

630 Words3 Pages
Budget Memo To: Budget Managers It is common for managers to overspend at the end of the budget cycle for fear of the next budget being reduced because of amounts not being spent, even if spending is unnecessary. This process can be harmful to the organization because of unexpected expenses, drops in revenue, increased business needing additional payroll hours, etc. Encouragement is being given to consider contingency planning for unexpected expenses and events that turn out better than expected. "Not having cash available to cover expenses at the right time can be as detrimental to an organization's health as not having access to cash at all" (Best Practices for Nonprofit Budgeting and Cash Forecasting, 2008). The budget should be realistic, well-reasoned and reflect current conditions. It should be consistent with the short-term and long-term strategic plans and in line with the organization's mission. Flexibility based on facts and assumptions is important, as well as opportunity to amend the budget, if events and conditions vary from the assumptions, to address revenue shortfalls and windfalls, as well as unexpected expenses. Budget measurement should be created on the same basis as the accounting procedures are maintained. Revenue and expenses are not set in stone and should factor in slack for unexpected items (Six Steps To A Better Budget, 2008). Because revenues and expenses can and will fluctuate with market conditions, contingency planning is important for
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