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Budgeting and Finance
One organization is the ASPCA, which is a registered charity. They are funded primarily through donations and they spend these donations to perform services that are related to animal welfare. The organization has its own shelter and offices but it also serves as a national branch that provides support for local SPCA offices around the country. It has very limited capacity to collect revenue through fees, and those fees typically do not cover even basic costs, so the organization relies fairly heavily on fundraising activities to meet its daily operational needs. Fundraising drives are often required for capital projects.
The ASPCA can apply a number of budgeting concepts and techniques to its organization. For example, there is the process of setting a budget. The incremental process reflects a means of budgeting that builds upon the prior budget, making adjustments to that budget to the next year, with inflation and known changes in priorities (Accounting Tools.com,2015).
An example of this would be looking at the budget for marketing. Marketing is important for fund raising activities. If the organization wants to increase its marketing budget by 10%, then the incremental budget can reflect this easily. The...
In this way, each subsequent years' budget can be created. The incremental budget technique is valuable for an organization like the ASPCA in that it can determine in advance what it thinks its costs will be, and then design its fundraising program around those needs.
Incremental budgeting is a common technique that is used in government an non-profits, but there are other approaches. One approach has budgets created fresh for each year. Such a technique seeks o minimize waste by ensuring that every expense is justified for each period. One of the faults in incremental budgeting is that it does not do that. So incremental budgeting, though common, does have its issues. It is nevertheless a fairly easy technique to implement, an overall is quite common.
Another budgeting/finance technique might be cash flow management. In many cases a budget reflects accounting methods, so is not based on cash transactions. This can create difficulties for charities in particular, because they typically do not have much access to debt financing. Thus, it is important not only to have a basic GAAP budget but also a cash budget.…
One of the most important things in public and non-profit budgeting is making sure that the organization has the ability to meet its cash needs. It is important, therefore to have a sense ahead of time as to how much money it will need for the coming period, but also for it to know if there are any issues with expenditures. For example, at the ASPCA there are peak periods for the number of adoptions, and there are also peak periods for the number of animals that it takes in. Knowing these things can help to target when to fundraise.
Accounting Tools.com (2015). What is incremental budgeting? Accounting Tools.com. Retrieved December 3, 2015 from http://www.accountingtools.com/questions-and-answers/what-is-incremental-budgeting.html
McNamara, C. (2015). All about financial management in nonprofits. Free Management Library. Retrieved December 3, 2015 from http://managementhelp.org/nonprofitfinances/
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