This is part 3 of the 3 Keys to Financial Health series. You can read part 1, Don’t Borrow from Your Future here and part 2, Build Reserves in Good Times to Use in Hard Times here.
3) Your budget is your plan for your reserves and your grant spending.
Put into your budget only the amount of grant funds meant for that budget year [i.e. half of a one-year grant that comes in halfway through your fiscal year] and plan a surplus when the funding cycle is moving up and plan deficits when the funding cycle is moving down [only if you actually built the reserves to sustain this!].
Why should your organization do this? To provide more programmatic stability throughout the ups and downs of funding cycles. That allows you to have more political independence so you can do the work that needs doing rather than what’s fashionable at the moment.
You can’t plan your budget if you don’t know what your reserves are. This worksheet will help you calculate your current level of reserves. You can then project your goal level of reserves and how much surplus you need to generate [or deficit you can handle] in your budget.
Members can also view a Screencast video that walks through how to fill out and use the Projecting Reserves Worksheet.