The Canadian Charity Law Podcast

This episode emphasizes a structured approach to Charity Budgeting, beginning with establishing a timeline and identifying key personnel, and progresses through data collection, establishing an account structure, and prioritizing certain information.

The podcast concludes by highlighting the importance of aligning the budget with the charity's goals and striving for a balanced budget.

This episode is sponsored by B.I.G. Charity Law Group Professional Corporation, a Charity Law Firm serving charity and not-for-profit clients across Canada with registration and governance, and B.I.G. Charity Accounts Group, a bookkeeping firm serving Canadian charities with all their financial and tax filing needs.

https://www.charitylawgroup.ca/
P: 416-488-5888

https://www.charityaccountingfirm.ca/
P: 289-301-8883

Creators & Guests

DJ
Producer
Dov Goldberg, J.D.
Dov Goldberg is a manager partner at B.I.G. Charity Law Group Professional Corporation, a Charity Law Firm Providing Services Exclusively to Charities Across Canada

What is The Canadian Charity Law Podcast ?

Exploring the ins-and-outs of Canadian Charity Law in a way that can be understood by the layperson, including Charity Registration, Not-for-Profit Incorporation, Charity Governance, Charity Fundraising, Tax Receipting, and much more!

David:

Alright. So, we're diving into something that I think pretty much every charity leader knows is important.

Sara:

Yeah.

David:

But maybe not everyone's favorite thing, and that is budgeting.

Sara:

Right.

David:

But, don't worry. We're not gonna bore you with, like, spreadsheets and formulas and stuff like that. No.

Sara:

No. No.

David:

We're going a little deeper today.

Sara:

Exactly.

David:

So, we're looking at a guide called 10 easy steps for charity budgeting from the BIG Charity Law Group.

Sara:

Okay.

David:

Have you ever heard of them?

Sara:

Yes. I have.

David:

Okay. Cool. So they seem to know their stuff.

Sara:

They do.

David:

And, we're gonna extract some real insights from this to kinda make you a budgeting ninja.

Sara:

Okay. Love it.

David:

Yeah. So, hopefully, this will help you see the budget not as, like, a chore. Yeah. You know, like, something you have to do.

Sara:

Right. Right.

David:

The foundation for your charity success.

Sara:

Absolutely. It's the road map.

David:

Yeah. Yeah. I love that.

Sara:

Yeah.

David:

So the guide kicks off with, setting the stage

Sara:

Okay.

David:

Which sounds kinda simple. Right?

Sara:

Right.

David:

But they get into something that I've definitely been guilty of, and that is rushing the process. Yeah. Like, just trying to get it done.

Sara:

It's so tempting to just think, oh, it's just a budget. Let's just crank it out.

David:

Yeah.

Sara:

But their point about starting 3 to 4 months before your fiscal year ends ends is brilliant.

David:

Yeah.

Sara:

I mean, really, having 2 dedicated board meetings Oh, wow. One for a deep dive and then another one for a final thumbs up. Yeah. I mean, that changes the game.

David:

I'm picturing those last minute budget scrambles and, yeah, not ideal.

Sara:

Oh, it's a nightmare.

David:

Have you seen what happens when that time frame gets squeezed?

Sara:

Oh, absolutely. I mean, it becomes a recipe for missed opportunities, frankly.

David:

Yeah.

Sara:

When you're rushing, you're just focused on the numbers. You're not focused on the strategy behind them.

David:

Right.

Sara:

I've seen organizations end up with budgets that are either too conservative

David:

Uh-huh.

Sara:

Which, you know, they're leaving potential on the table Yeah. Or they're overly optimistic, and then that leads to just disappointment down the line. Yeah. Disappointment down the line.

David:

Yeah. Makes sense.

Sara:

Okay.

David:

Okay. Point taken slow and steady wins the budgeting race.

Sara:

Exactly.

David:

It's a time frame check. Check. Step 2 is assembling the dream team, which has gotta be more than just grabbing whoever's available.

Sara:

Oh, absolutely. This is key.

David:

Yeah.

Sara:

They hit on something crucial, I think, and that's diverse perspectives lead to better budgets.

David:

Okay.

Sara:

It's not just about the numbers. It's about tapping into the wisdom of your team.

David:

Yeah.

Sara:

Program managers, they understand the needs on the ground. Mhmm. The treasurer brings the financial expertise.

David:

Right.

Sara:

Board members offer the strategic guidance.

David:

And I bet each person brings their own kind of blind spots too. So having everyone at the table kinda helps mitigate that.

Sara:

Precisely. And when everyone feels like their voice has been heard, you get buy in.

David:

Oh, that's huge.

Sara:

And that translates to a budget everyone's invested in making work.

David:

Yeah. Absolutely. And speaking of diverse perspectives, have you seen a situation where that clash of ideas actually saved an organization from making, like, a bad budgeting decision?

Sara:

Oh, definitely. Yeah. I was working with a small environmental group.

David:

Okay.

Sara:

And they were about to significantly cut their outreach program

David:

Wow.

Sara:

Because of funding concerns. But during their budget meeting, a volunteer

David:

Oh, wow.

Sara:

Who was actually a marketing expert pointed out that a minor shift in their approach

David:

Yeah.

Sara:

Could make their existing funds go much further.

David:

Hold on. A volunteer saved the day. That's awesome.

Sara:

It was great, and they were able to reach a wider audience without increasing their spending.

David:

Wow.

Sara:

It was a win that wouldn't have been possible without that volunteer's perspective.

David:

Yeah.

Sara:

It's a reminder that sometimes the most valuable insights come from unexpected places.

David:

Yeah. I love that story. Okay. So we've got our dream team assembled hopefully with some secret weapon volunteers in the mix.

Sara:

Oh, fully.

David:

What's next in this budgeting adventure?

Sara:

Alright. Step 3 is gathering the intel.

David:

Oh.

Sara:

It's all about laying the groundwork Okay. With solid information.

David:

Now this sounds more like my cell a little detective work.

Sara:

Exactly.

David:

What kind of intel are we talking about here?

Sara:

Think of it as piecing together the financial history of your organization.

David:

Okay.

Sara:

Your previous year's budget, of course.

David:

Yeah.

Sara:

But also current financial statements program reports.

David:

Fundraising data?

Sara:

Fundraising data. Yep. Anything that gives you a clear picture of where you stand financially.

David:

So it's like looking at the blueprints before you start building a house. Right? Yeah. You need to know the foundation you're working with.

Sara:

Exactly. And it's not just about avoiding surprises.

David:

Yeah.

Sara:

Sometimes those historical investigations reveal patterns you wouldn't have noticed otherwise.

David:

Okay.

Sara:

Maybe there's a recurring expense that's been slowly creeping up or a program that consistently outperforms fundraising projections.

David:

Interesting.

Sara:

That kind of intel can be invaluable when you're making strategic budget decisions.

David:

It's like finding hidden treasure in your own archives.

Sara:

Exactly.

David:

So we've gathered our intel. We've got a sense of the financial landscape. What's the next step in building this budget masterpiece?

Sara:

Alright. Step 4 is all about making sure everyone's speaking the same language, consistent accounting.

David:

Okay. I'm also learning new languages, but how does that apply to budgeting?

Sara:

Well, think about it. If your program manager is tracking expenses one way and your finance team is categorizing them differently, trying to compare your budget to your actual spending will be like trying to solve a puzzle with mismatched pieces.

David:

Yeah. That sounds frustrating.

Sara:

It is very frustrating.

David:

So it's not just about being organized. It's about making sure that organization makes sense across the board.

Sara:

Exactly. Imagine trying to figure out why your program expenses are way over budget only to realize that half of them are actually miscategorized administrative costs.

David:

Oh.

Sara:

That's where those accounting software tools come in handy, keeping everyone on the same page from the start.

David:

You know, this is making me realize that a lot of budgeting headaches could be avoided with some simple upfront alignment.

Sara:

Absolutely.

David:

Consistency is key.

Sara:

When you're using a shared language and everyone understands the categories, analyzing variances, making adjustments, even presenting the budget to stakeholders

David:

Right.

Sara:

It all becomes so much smoother.

David:

Right. We're all speaking accounting fluent now.

Sara:

We are.

David:

What's the next step in building this budget?

Sara:

Step 5 is starting with certainty.

David:

Okay.

Sara:

This is surprisingly empowering.

David:

Okay. But wouldn't focusing on the most certain elements first potentially make us overlook risks or opportunities Yeah. In areas that are less predictable?

Sara:

Sure.

David:

Walk me through this a little bit.

Sara:

Yeah. No. That's a great point. It's a valid concern. But think of it this way.

David:

Okay.

Sara:

Starting with your certainties, things like confirmed grants or fixed costs

David:

Uh-huh.

Sara:

Establishes a solid base. It's like building a house on a strong foundation.

David:

So it's not about ignoring the uncertain elements. It's about creating a framework that we can then use to approach those trickier areas with more clarity.

Sara:

Exactly. Once you have those knowns locked in, the remaining gaps feel less daunting. Yeah. You're not starting from scratch. You're building upon something solid, and it also allows you to assess your flexibility more realistically.

David:

I can see how that psychological boost could be helpful, especially if you're new to budgeting or feeling overwhelmed.

Sara:

Absolutely. And it sets the stage for step 6, filling in the gaps, which is where we tackle those less predictable elements.

David:

Alright. Let's talk about those gaps. We all know that crystal balls aren't standard charity equipment.

Sara:

Right.

David:

So how do we approach those budget items that require a bit of guesswork?

Sara:

Well, the guide emphasizes a smart approach. Prioritize the big ticket items first.

David:

Okay.

Sara:

Salaries, facilities, major program expenses. Mhmm. Once those are roughed out, the remaining estimations often become clearer.

David:

So so getting those big pieces of the puzzle in place first, and then the smaller pieces start to fit more easily?

Sara:

Precisely. And when it comes to making those estimations, it's not about pulling numbers out of thin air.

David:

Yeah.

Sara:

There are techniques that can make this process more strategic.

David:

I was just gonna ask about that. What are some resources or strategies organizations can use to make those estimations more accurate?

Sara:

Historical data is always a good starting point.

David:

Okay.

Sara:

Looking at past spending patterns can reveal trends and help you make more informed projections, but it's also important to consider industry benchmarks.

David:

Right. Because what's normal for one type of charity might be completely different for another. Where can organizations find those benchmarks?

Sara:

There are a few great resources out there. GuideStar and Charity Navigator provide financial data for nonprofits Okay. Allowing you to compare your organization's spending to similar organizations.

David:

Gotcha.

Sara:

And don't underestimate the power of networking. Yeah. Reaching out to colleagues in your field can give you valuable insights into typical costs and budgeting practices.

David:

That's a good reminder that we don't have to reinvent the wheel with every budget cycle.

Sara:

Right.

David:

Tapping into collective wisdom can save a lot of time and guesswork.

Sara:

Absolutely. And remember, even with the most rigorous estimations, things can change. That's where step 7 comes in.

David:

Okay.

Sara:

Transparency is key.

David:

Transparency, we hear that word a lot.

Sara:

We do.

David:

But what does it actually look like when it comes to budgeting? Right. Isn't just having a budget enough?

Sara:

It's about making your assumptions and reasoning clear documenting why you chose a particular figure.

David:

Okay.

Sara:

Whether it was based on historical data industry benchmarks or even just an educated guess, adds a layer of accountability and makes it easier to analyze variances down the line.

David:

So it's not just about the numbers themselves. It's about the story behind the numbers.

Sara:

Exactly. Imagine this. You're reviewing your budget midyear.

David:

Okay.

Sara:

And you notice that your travel expenses are significantly higher than projected. Uh-oh. If you have clear documentation, you can quickly see that you had underestimated the number of conferences your team would be attending. Right. Without that context, you're left scratching your head and wondering where you went wrong.

David:

And I imagine that level of transparency is also crucial when you're presenting the budget to your board or funders. Right? Being able to explain your thought process builds trust and confidence.

Sara:

Absolutely. It demonstrates a commitment to responsible stewardship and allows for more meaningful conversations about resource allocation.

David:

Okay. Transparency check. What's the next step in this budgeting journey?

Sara:

Step 8 builds upon that transparency. Okay. Documenting your logic.

David:

So more than just saying, this is what we're budgeting for, it's about explaining the why behind each decision.

Sara:

Think of it as leaving breadcrumbs for your future self. When you're revisiting the budget next year, you'll be grateful for those detailed explanations. Yeah. What seemed obvious in the moment might be completely forgotten a year later.

David:

Oh, I've been there. I've looked back at old budgets and thought, what was I thinking?

Sara:

I know.

David:

Having that documented logic would definitely help me avoid those moments of self doubt.

Sara:

Absolutely. It's about making your decision making process transparent and creating a valuable resource for future budget cycles.

David:

Okay. Breadcrumbs dropped. What's next on our path to budgeting enlightenment?

Sara:

Step 9, aiming for balance. Okay. It's a deceptively simple concept that can be quite nuanced in practice.

David:

They talked about aiming for a breakeven budget

Sara:

Right.

David:

Which makes sense on the surface.

Sara:

Right.

David:

But wouldn't consistently hitting breakeven potentially limit an organization's ability to grow or invest in new opportunities?

Sara:

That's where the nuance comes in. Breakeven is often a good starting point, but it's not a one size fits all solution.

David:

Yeah.

Sara:

There are different budgeting philosophies out there, each with its own pros and cons.

David:

So tell me about these different philosophies. What are some alternatives to the classic breakeven approach?

Sara:

One interesting approach is 0 based budgeting.

David:

Okay.

Sara:

Instead of simply adjusting the previous year's budget

David:

Yeah.

Sara:

You start from scratch and justify every expense. Wow. It can be a time consuming process

David:

I bet.

Sara:

But it forces you to critically examine every aspect of your spending.

David:

That sounds like a good way to shake things up and identify areas where you might be wasting resources.

Sara:

Exactly. It's a great tool for organizations that are looking to streamline their operations or implement significant changes. Mhmm. Then you have incremental budgeting, which is more common Okay. But can lead to inefficiencies if not carefully managed.

David:

Right. Because if you're just tacking on a percentage increase each year without really evaluating your needs, you could end up with a bloated budget that doesn't actually reflect your priorities.

Sara:

Exactly. The key is to find the budgeting philosophy that aligns with your organization's goals and culture.

David:

Yeah.

Sara:

And remember, it's not about choosing one approach and sticking with it forever. You can adapt and adjust as your needs evolve.

David:

So balance isn't just about the numbers on the page. It's about finding the right budgeting approach for your organization's unique circumstances.

Sara:

Precisely. And that brings us to the final step, the one that ties everything together, aligning with purpose.

David:

Okay. I'm sensing this is where it all comes full circle.

Sara:

It does.

David:

Tell me more.

Sara:

They emphasize that your budget should be more than just a spreadsheet.

David:

Okay.

Sara:

It should be a reflection of your charity's core values and priorities.

David:

We've touched on this before, but I'm curious to go deeper. Could you give us an example of a budget that truly embodies an organization's values? What does that look like in practice?

Sara:

Imagine a nonprofit dedicated to promoting literacy in underserved communities.

David:

Okay.

Sara:

They could simply allocate a set percentage of their budget to program expenses. Yeah. Or they could take it a step further and make a conscious decision to invest a significantly higher portion of their resources in training volunteer tutors, sourcing high quality books for children, and creating innovative literacy programs.

David:

So it's about making choices that demonstrate their commitment to their mission, even if it means making trade offs in other areas.

Sara:

Exactly. Maybe they choose to have a smaller administrative staff or forego expensive office space to free up more resources for their core programs.

David:

Okay. Now I'm really seeing the power of this. It's about putting your money where your mission is.

Sara:

Precisely, your budget becomes a statement, a tangible expression of what you value most as an organization.

David:

This has been so insightful. I feel like we've not only demystified charity budgeting

Sara:

Yes.

David:

But also given our listeners a framework for creating budgets that are aligned with their values and set them up for success.

Sara:

I agree. It's all about empowering organizations to use their budgets as a tool for positive change.

David:

Now before we wrap up, part 1, I wanna touch on something that can throw even the most well crafted budget off course Yeah. Unexpected expenses. Of course. How can our listeners plan for the unpredictable?

Sara:

Yeah. Well, I mean, sometimes those things are just completely unavoidable. Right?

David:

Right.

Sara:

But, one thing the guide mentions is building a contingency fund

David:

Right.

Sara:

Into your budget.

David:

Okay. So, like, a rainy day fund.

Sara:

Exactly. Exactly. Set aside a certain percentage

David:

Yeah.

Sara:

For unexpected costs. You know, it could be repairs, equipment failures Yeah. Legal issues.

David:

That's smart because then it's not like you're scrambling to find the money when something unexpected comes up.

Sara:

Exactly. It's already there. It's accounted for. It gives you that peace of mind.

David:

Yeah. I like that. Okay. So contingency fund noted. Any other tips for handling those, curve balls?

Sara:

Well, another thing to consider is insurance.

David:

Oh, yeah. Good point.

Sara:

Make sure you have adequate coverage for your organization's specific needs.

David:

So things like liability insurance, property insurance.

Sara:

Exactly. It can help protect you from major financial setbacks in case of an accident or a disaster.

David:

You know, it's funny how we often think of budgeting as just numbers. Yeah. But it's really about managing risk too.

Sara:

It's about being prepared for the unexpected.

David:

Okay. So we've talked about planning for the unexpected, But what about planning for the expected? The things we know are coming, but maybe not exactly when or how much they'll cost. Like, let's say we know we need to upgrade our technology in the next year or 2.

Sara:

Right.

David:

How do we factor that into our budget?

Sara:

Well, that's a great example of something you can plan for using a sinking fund.

David:

A sinking fund.

Sara:

It's like a special savings account

David:

Okay.

Sara:

Where you set aside money regularly to cover a specific future expense.

David:

So instead of getting hit with a big bill all at once, we can spread it out over time.

Sara:

Exactly. It makes it much more manageable and predictable.

David:

Okay. So we're building contingency funds, sinking funds. What else do we need to know about making this budget work for us?

Sara:

Well, the guide also emphasizes the importance of regular monitoring.

David:

Okay. So we don't just create the budget and then stick it in a drawer?

Sara:

Exactly. You need to track your progress against your projections throughout the year.

David:

So how often should we be checking in with our budget?

Sara:

At least monthly. Okay. But quarterly is even better.

David:

And what are we looking for when we're doing these check ins?

Sara:

They're looking for any significant variances between your actual spending and your budgeted amounts.

David:

So if we're way over budget in one area or way under in another.

Sara:

Exactly. That's a signal that you might need to make some adjustments.

David:

So it's not just about sticking to the plan. It's about being flexible and adapting to changing circumstances.

Sara:

Absolutely. The budget should be a living document.

David:

Okay. I like that.

Sara:

Something that you can adjust and refine as needed.

David:

So what are some things we can do if we notice that we're off track?

Sara:

Well, it depends on the situation.

David:

Okay.

Sara:

If you're overspending in one area, you might need to look for ways to costs. Right. Maybe you can negotiate better rates with vendors or reduce unnecessary expenses.

David:

Mhmm.

Sara:

If you're underspending, you might have an opportunity to reallocate those funds to other priorities

David:

Interesting.

Sara:

Or even invest in new initiatives.

David:

That's a good point. Sometimes being under budget can actually be an opportunity.

Sara:

Exactly. It's all about being strategic and making the most of your resources.

David:

So it sounds like regular monitoring and adjustments are key to keeping our budget on track and making sure it's actually working for us.

Sara:

Absolutely. It's an ongoing process.

David:

Okay. So we've covered a lot of ground in this deep dive. We've talked about setting the stage, assembling the dream team, gathering the intel, ensuring consistency, starting with certainty, filling in those gaps, transparency, documenting our logic, aiming for balance, and aligning with purpose.

Sara:

That's a lot.

David:

It is. But I feel like we've just scratched the surface.

Sara:

Yeah. We have. There's so much more we could talk about.

David:

So for our listeners who are ready to take their budgeting skills to the next level, what resources would you recommend?

Sara:

Well, the B. I. G. Charity Law Group has a wealth of information on their website

David:

Right.

Sara:

Including articles, webinars, and even sample budgets.

David:

That's great.

Sara:

And, of course, there are many other excellent resources available online and through professional organizations.

David:

I would also add that reaching out to other nonprofits in your area

Sara:

Yes.

David:

And learning from their experiences can be incredibly valuable.

Sara:

Absolutely. Networking and sharing best practices is so important in this field.

David:

This has been such an insightful conversation.

Sara:

It has.

David:

I feel like I've learned so much, and I hope our listeners have too.

Sara:

Me too.

David:

So as we wrap up this deep dive into charity budgeting, what's one final piece of advice you would leave our listeners with?

Sara:

Remember that budgeting is not just a financial exercise. It's a strategic tool that can help you achieve your mission and make a real difference in the world. So embrace it, don't fear it, and use it to create a brighter future for your organization and the communities you serve.

David:

Beautifully said. Thank you so much for joining us on the deep dive.

Sara:

It was my pleasure. Yeah. I mean, think about it. If you're setting aside money each month for a new van or something

David:

Right.

Sara:

Then when the time comes to actually make that purchase, you're not scrambling.

David:

You're not having to cut programs or dip into reserves.

Sara:

Right. Exactly. It just makes the whole process so much smoother.

David:

Okay. So we've talked about planning for the unexpected and using sinking funds for those bigger purchases down the line.

Sara:

Right.

David:

Is there anything else we should keep in mind when it comes to actually managing our budget throughout the year?

Sara:

Yeah. One thing I always emphasize is the importance of communication. Keep your team informed about the budget, how you're tracking against your goals, and any announcements that need to be made.

David:

So it's not just the finance team's responsibility. It's a shared understanding.

Sara:

Exactly. Everyone should be on the same page.

David:

So regular meetings updates. Maybe even like a visual dashboard that everyone can see.

Sara:

Exactly. The more transparent you are, the better.

David:

And I imagine that open communication can also help prevent those overspending surprises.

Sara:

Absolutely. When everyone is aware of the budget constraints, they're more likely to be mindful of their spending.

David:

Makes sense. So communication is key. What else can we do to make sure our budget is actually working for us, not against us?

Sara:

Well, another important aspect is flexibility. Don't be afraid to adjust your budget as needed throughout the year.

David:

So it's not set in stone.

Sara:

Right. Things change. Yeah. Priorities shift. You need to be able to adapt.

David:

So if we see that a program is exceeding expectations and really making a difference

Sara:

Yeah.

David:

We might wanna consider allocating more resources to it even if it means pulling back in other areas.

Sara:

Exactly. Or if unexpected expenses come up, you might need to make some cuts elsewhere to accommodate them.

David:

It's all about making strategic decisions based on the current reality.

Sara:

Exactly. The budget should be a tool that helps you achieve your goals, not a rigid set of rules that holds you back.

David:

This has been so helpful. I feel like we've covered every angle of charity budgeting from the initial planning stages all the way through to managing and adjusting throughout the year. We've

Sara:

covered a lot of ground.

David:

We have, but I have a feeling our listeners are gonna want even more.

Sara:

No. I'm sure.

David:

So before we wrap up, what resources would you recommend for those who are ready to dive even deeper?

Sara:

Well, the B. I. G. Charity Law Group's website is a great place to start, as I mentioned earlier.

David:

Right.

Sara:

They have tons of free resources, including sample budgets, checklists, and even templates you can use.

David:

And I would also add that there are some great online courses and workshops available

Sara:

Oh, absolutely.

David:

That can provide more in-depth training on specific budgeting topics.

Sara:

Yeah. And don't forget about professional organizations

David:

Oh, yeah. Good point.

Sara:

Like the Association of Fundraising Professionals or the Nonprofit Technology Network.

David:

They often have resources and events specifically for nonprofits finance professionals.

Sara:

Right. And networking with your peers can be so valuable.

David:

Absolutely. It's amazing how much you can learn from sharing experiences and best practices.

Sara:

It is.

David:

Alright. So we've given our listeners a ton of resources to explore.

Sara:

We

David:

have. As we wrap up this deep dive into charity budgeting Mhmm. What's one final thought you would leave them with?

Sara:

I would say remember that budgeting is not just about numbers. It's about people. It's about impact. It's about making a difference in the world. So approach it with passion, purpose, and a commitment to using your resources wisely to create a better future for everyone.

David:

That's beautiful and so true. Thank you so much for joining us on the deep dive.

Sara:

My pleasure. Thanks for having me.

David:

And to our listeners, thanks for tuning in. We'll see you next time for another deep dive into the world of nonprofits.