 Welcome and thank you for being here with us today for another episode of the nonprofit show. We have Justine Townsend with us. Justine is a CPA with your part-time controller. Also one of our presenting sponsors and we are so grateful to have Justine with us for this episode to talk to us about tips to getting that working budget that I know we all need. So before we dive into the conversation, we of course want to say thank you to our presenting sponsors. And thank you to Julia Patrick who is here, CEO of the American Nonprofit Academy. So thankful that you had this wonderful idea almost two years ago now to say let's go on for two weeks and now of course you know well beyond two weeks. And I get to serve alongside you Julia as your co-host. I'm Jarrett Ransom, Julia's nonprofit nerd, but also your nonprofit nerd. There's enough to go around CEO of the Raven Group. And during this week of gratitude, we of course have so much appreciation for our presenting sponsors continue to have these conversations. Thanks to their investment, not only here in these episodes and the nonprofit show but truly the sector at large. I really like to remind everyone that these companies exist for you. They are on your team on your roster. Please do lean into them as they lean into you and your communities to help you serve your community in a greater, bigger, bolder way. So thank you again to our sponsors. And thanks to Justine who has joined us today to talk about budgeting and bravery. Welcome Justine. Thank you so much. I'm so excited to be here. You know, I think you have to be very brave to be a numbers person. Oh, I don't know. I think some of us just think that way. And it's hard to not be a numbers person. You know, I feel like it's the budget process and the people in accounting that know the truth and how we articulate that to clients in our nonprofits and our donors and our philanthropic investors. It's a heavy lift. And those who do it well, really come ahead. And those that don't, I think really suffer and if that's anything anything I've learned over the years, and in the nonprofit sector. That's one of the kind of I would say almost true isms it's fascinating and so you're going to be talking to us about part of this, and that's the budgeting process. Let's get into it because we only have you for 30 minutes, but I think we need you for like 30 days. So how critical is it to have a budget in place for the new year. And I want to ask you this question with the lens of COVID because there's still a lot of uncertainty. Or should there, or should that matter. Well, whether or not you have insert uncertainties, you need to have a detailed budget right because our budget is the plan for how we're going to achieve our mission for the next year or three years or five years depending on how long of a budget you're creating. But I think for this topic we'll stick with, we're just talking about next year's budget right just one year. And that is how are you going to fulfill your mission. How are you going to distribute those resources that we all know every nonprofit struggles with limited resources right and you know we all have like bigger eyes than we have money to achieve all of the things that we want to do in our community right it's like, especially during Thanksgiving week we think about having our eyes are too big for our food. It's a bigger plate than we should I think nonprofits we do this a lot with our mission right we try to take on more than we can. And the budget is a bit of a reality check for that right when we go through that budgeting process we say, how much can we reasonably move in this next year and how are we going to do that, and we make that plan, and having that plan ensures our success and ensures that we can pivot. If we need to it makes us a lot more nimble you wouldn't think that but having a detailed budget actually makes you more nimble. Okay, that Jared you take it away because I have to think about that. I think I think automatically my brain goes to the opposite that it that it hog ties me down. Yeah, and I like what you just said justine because it really does give us those parameters of way, you know, have we allocated these resources and how can we intend to use them over the course of this period of time. And one of the things that I know I have heard and learned throughout these last two years is really you know, we should put x% in professional development x% and cybersecurity x% and this, and that for me already gives us a guideline for this forecasted budget. And so I think that really sets the tone for the parameters, but then also as it comes to allocating those resources, I think that you know that's really where we have to focus our time. And so having this critical need for that detailed budget, as you said earlier you know if we are not, if we don't have a plan, then we're planning to fail. We need this detailed plan. Exactly. And you know, one of the ways that we become more nimble and that we can pivot with that detailed plan is by documenting the details right so it all rolls up as board members, or even as management of a nonprofit. And sometimes all we see is the big number right this is how much we're spending on salaries the big number this is how much we're spending on security this is how much we're spending on this professional services, but what is included in that. We're putting in there to build up that total number. And how has that changed from prior year and how are those changes going to help us achieve that goal, and really thinking through our numbers in that way. So I think that we're justifying our expenditures to ourselves as we're building that budget we're making our justifications because eventually we're going to take this to a board right and say, please approve this. Yeah, right. I think you're right and I love that you're you talk about exploring that. Now I want to ask you with that concept in mind. I can't imagine that there were too many, you know, brain surgeons across our, our sector that had figured out we were going to have a pandemic and that they needed to be flexible so I'm asking you. How do we consider this incredibly change changing time and that we are as accurate as we can, without being punitively damaged, because we couldn't tell that this was going to be fall us. That's a hard question. No, no, it's a great question and when we have those details documented how did we get to those numbers with the pandemic. I was there was actually a lot of budget cuts that you could make pretty quickly because you weren't going to have electricity, you weren't going to have, you could shut down kind of the office and not be paying all of those utilities for a while right. And then there were some kind of automatic increases on expenses we were going to have. I mean I know for us it was technology right that's I'm sure for most organizations we made investments in technology. And so, knowing what you had over here that you're not going to spend because you documented those details gives you the opportunity to be able to pivot and say well I'm not spending this. I can now add this in and still feel pretty safe that I'm going to hit my end goal of whatever my surplus my budgeted surplus was and we always budget surpluses. We never want to budget a loss right, we always want to budget surpluses because that's more that you can do next year, right that just helps your mission more next year. We're going to reinvest that. And then we also want to build in contingencies right so when we know we're heading into a year of, you know, perhaps we could have a third big increase of this virus and have to shut down again, or couldn't you take it again right. Or who knows what could happen right we want to build in some contingencies and document what. What are maybe our lowest hanging fruit to cut should this year turn negative should we not achieve this revenue goal. And this is a lesson we can use every year not just in a post pandemic or a pandemic year. Every year we can build in a little bit of a contingencies if we want to put in a stretch goal for our revenue to incentivize our development team to push themselves. Well then we want to make sure that we have also documented what the contingency is if we don't hit that stretch goal that we built into our budget. What are we going to cut. Right. And so having that documented in a very detailed way gives us that flexibility to cut when we need to. I've never seen that Jared have you seen that. Absolutely you know most of the organizations I work with they have a plan a budget and then they have a plan B and their plan B. You know they always say like it's in the desk drawer. I know exactly where it is and it typically justine is the cut in personnel right it's that. And so I think that those are the you know individuals and or departments that might need to you know be reduced if we need to go into our contingency plan and how will that impact our community and services. I have seen it it's scary and it's scary to know that it exists but I also think again it's that reality you know and it's it's having that detailed budget for the what ifs. And so they're walking into you know the the dark alley without knowing what's what's around the corner. Absolutely well and it gives you an opportunity to kind of and I you know you want to identify the sine qua non what your mission cannot survive without right and so when we go through the budgeting process. What can we not live without and then that tells us should we have a bad year should we not hit our goals. These are the things we will never touch. And these are the things that are a little bit easier for us to play with right and so it's it's not necessarily having a plan B but at least documenting what are the things that hurts your mission the least to cut. Right and sometimes that is personnel and fortunately a lot of times it's it can be admin personnel. But I would say look at that though are those admin actually making it possible for you to achieve your mission is it maybe something else you could cut somewhere else. So this takes us really in dovetails into you know is it okay to revise this budget and I do recall over the last couple of years. Really hearing from a lot of leaders saying, you know what we will forecast our budget and we will visit it quarterly if not monthly. I would love to learn from you justine what you and you know really everyone at your part time controller is sharing by way of revisions and how we should, you know, incorporate this best practice. So what we like to say is your budget once it's approved by the board that's your budget right and unless everything changes which certainly in the first year the pandemic that happened, everything changed and so you might want to go back and do a little bit and have the board approve that, but truly from there will forecast. So we'll take that original budget document, leave it where it is leave that is our, because that's a benchmark that's a point in time that we still want to measure ourselves right because we had a plan that budget was a plan that we express numerically, and so we still want to benchmark against where are we on that plan. But then we'll have forecasts and we might have a first quarter forecast and a second quarter forecast and a third quarter forecast, where we're updating that budget, but we're not calling it the budget, we're calling it a forecast. We give ourselves that wiggle room, but are still always benchmarking ourselves against that original plan. So we're always reminding the board and ourselves, what we gave up, what we're not getting done, so that we don't forget to circle back and get it next year, when we can right when we're planning for next year we want to pick those things back up, especially if it was mission critical right. So, leaving that budget intact that original budget intact gives us that opportunity to make sure that we're constantly going back to what did we plan to do that we didn't do. And where we go from here that's a forecast right and sometimes we need a board approval for those and sometimes we don't. It just depends on the board, but that's one of the things that makes us more nimble with the forecast is a lot of times it doesn't have a board approval and as much of that budget making process. Right. You know, I think one thing that I've loved that I picked up from what you said, and it's a point of bravery because that kind of fits the theme of today's episode is you're using the word plan. I feel like when you use that word with budget, it doesn't just mean oh yeah that's what the bean counters came up with in those cubicles in the dark side of the building. It kind of makes everybody more accountable, more integrated into what the process is and I think overall, it helps you tell the story of where you are I really appreciate how you've reframed this. Absolutely. I mean it is very important to me and to everyone at YPTC. When we come on and we start working with an organization to prepare a budget. We're going to pull folks in. Right. We, we're outsiders. You know what you want and what you should see happen. And how does this work and what are you willing to put into it. And so pulling more folks into the budget creates more ownership of that plan. So you see people following through and caring about it and being proactive, right, saying like it doesn't look like we're going to hit this revenue goal, or I didn't get this grant so how are we going to feed all of these people at the end of this year that we said we were going to feed gives you more time to say, you know, it's kind of like the Titanic right, you can see the iceberg coming so you have plenty of time to turn that giant ship away. But if you don't see it coming you don't know. Right. You're reminding me a lot and I wish I knew the author of this quote so hopefully one of our listeners or viewers will will get on the Google but people support that in which they help create and so just really have the buy in and the leadership and the, you know, the conversation in this very authentic transparent manner. As you were stating, people want to be a part of this and so you know really going back to having the buy in and the support of the team is really I think, advantageous, you know, as, as we all move forward. And I'm curious in that I know we didn't touch on this really earlier but, you know, when it comes to strategies for measuring budgets and tracking. Love for you to talk about that and then also how do we take this from the numeric numbers into a narrative context. Absolutely. So, I'll start with that how do we take it into a narrative context I'll start there and then we'll get into measuring it and tracking it right and saying how are we doing, are we on plan or are we off plan right. But what I love and what we always do is when you're presenting a budget to the board you want to present the narrative that goes with it. This is what's different than last year. This is what's the same as last year. And these are the things that are reaches. So if we don't get this then we're not going to do this, putting in there and making it very clear what your contingencies are, and what those assumptions are so that the board is asking. We didn't hit this revenue goal. So we're cutting this right this isn't happening so the board can hold you accountable and say, we shouldn't be spending that money, because we didn't hit this revenue goal. So why are you telling me that that money is being spent. Where is this new revenue going to come from, giving the board those words will help them hold that story of the budget in their head. This is our original budget, maybe here's our forecast from first quarter and our forecast from second quarter, and here's our actual first and second quarter results. And let's compare them, but we're going to do that not just quarterly but monthly. Monthly we're going to look at that budget so we don't want a budget that is annualized we need a budget that's broken down by month that takes into account seasonality of your business right because nonprofits were all businesses. And some of them are more seasonal than others right and so so you really have meaningful results to track against you want a budget, according to your seasonality as well. Then it makes more sense right and you have something you can really track. And one of the things that I always point out to board members is whether or not it's a timing difference with the budget. We're going to get it later or we're going to spend it later, or if it's a permanent difference. We did not get this grant that we were planning to get or we're not going on this trip that we were planning to go on because travel measures have changed and so now we're not traveling. So there's some savings and here's where it's going, but keeping them up to date on that will help so much when you need to pivot and make an emergency decision. If you're holding in your head what is the story and where are we in that plan and where are we on this tracking, according to this budget forecast sorry go ahead Jared. No, and I think we all know that there's been a lot of we're going to move you know these dollars into this section now. And I think off the top of my head justine you know that really came into play when it fundraising events right like actual fundraising events and I know that many organizations went to the digital space to still, you know, solicit their constituency base but there have been some organizations that are up on their second year of not having or holding or hosting their big fundraising event and that is a huge revision and a really big need for that narrative conversation and I'm thinking not just with the board, but the leadership and and all individuals within the organization. Absolutely well and going to the program people saying we're not having this gala so we're going to have to do less. Where can we make cuts, or are there ideas you have maybe of what we can put online to connect donors to our mission more, you know we we can't throw them a party. So maybe we can get a more in touch with our mission right so maybe we make the connection there instead of making the connection and that touch point a party point, but instead a mission touch point, and we go to our friends and programming to help us make that connection right. And we've seen that Julia it makes me think of the organization animal shelter of course that they were not you know able to bring in volunteers. So they literally turned on like FaceTime or you know streaming and just walked the halls if you will of the kennel. And that was a huge pivot that really you know reap some rewards in a lot of ways, but mainly financially, as well as increase of adoption. Well, and it keeps that touch point going so one of the things that I have noticed and am advising as we're budgeting for next year. Don't budget based on the gala you had in 2018. Right, because not everybody's coming back. Great point. I want to take you some time. So, you might want to look at where has your donor engagement declined and how much and if you can kind of estimate a percentage of your donor engagement decline, then you can estimate a percentage of your gala revenue decline. So you should have expenses that are reduced that offset that because you're not feeding as many people right. So, they're really taking a look at that and thinking very carefully as you're planning about how all of this is going to impact your next year. I mean you're guessing but taking note of those guesses really helps. Well, they. All organizations have seen a decrease. In fact, some organizations have a significant increase in financial support. My question and I'd love to know from you and yptc. What are your best practice when it comes to forecasting that sustainability. What is we look at where is that coming from right where, what is the source of that increase is it from all of this kind of additional government funding we've been able to get. And then are you going to be able to replace that with the ARPA funds right so we have the American recovery plan, we have the infrastructure bill that just came out. And all of these new kind of revenue sources that are going to come down. Like I know in Texas, we just got $10 billion in ARPA funds that is going to trickle down to a lot of our clients, and a lot of our clients are gearing up to spend a lot more money in 2022 than they did in 2021, because of those ARPA funds. So, are there replacements on deck for you and if not, if you're going to see a constriction of revenue, what is that going to look like where is that going to come from what signs are you seeing how have you evaluated the sustainability of your funding. And if you're losing funding when are you replacing it right. And to me when I hear you say that I go back to the very first weeks of the nonprofit show and we had your managing director on Jennifer Oliver and literally had her phone coming she was coming out of the east with your main office. She literally had her phone on during the show, when there were votes going on and say okay okay well you know and I mean it was like literally a day to day thing, and how it changed what I hear you saying she said at the time, the narrative. I'm asking your board who's doing a lot of other things to come in and grasp a major concept and so to your point. I love just seeing the concept of that narrative so that you can be brave you can tell that story. You're supposed to just getting bamboozled by a series of numbers and lines that don't necessarily help you make a decision during that meeting. Absolutely. And having that plan and being able to hold that narrative in your head, really helps board members make those decisions and feel comfortable, both feeling both feeling their fiduciary responsibility to be able to make those decisions responsibly and to ensure the sustainability of the organization from the mission. Well, this has been great and I think that you have helped me to realize that we can be brave and maybe more intelligent. It's not just an emotional okay I'm going to be brave and bite the bullet but that it is. It's an intelligent process because I think and Jared, I'm sure you would agree. Anything that we know is a change is still here and still coming. You know we are not through, you know, all clear I mean there's still so many things that are up in the air and so this is the time for our nonprofits to really be even more strategic. Jared, I mean what do you what do you see one of my biggest takeaways that I hope that I hear around more board tables is what is our contingency plan. I would like to really know, okay, yes this is where we are this is what we're currently working with and we can forecast, you know, and be as detailed as we want. And we need to also consider our contingency plan and as you said justine these very clear benchmarks of, you know, if this than that, and having that outlined so clearly is what probably one of my biggest takeaways from today and I'm just so you know we started by saying you know it's brave to be a numbers person and justine I'm so grateful that you are. And to know that you are here in our corner and in our sector for all of those watching today and our 1.8 million nonprofits that are registered throughout the US we are so very grateful to have your intelligence in this as well as your partners throughout your part time as well as your partners. Thank you so much. Thank you. I'm so grateful to have had this opportunity to chat with you and hopefully give some folks the opportunity to improve their budget process, all braver to go into it. I'm I'm like a lot more empowered, and I also think that you kind of spoke to a lot of things that I've been recognizing but maybe couldn't articulate and I and I love the way you pulled some things together. Again to remind everyone if we haven't met I'm Julia Patrick CEO of the American nonprofit Academy. I've been joined by my nonprofit nerd your nonprofit nerd, the nonprofit nerd Jared ransom. Jared, I love how you said this this morning, the week of gratitude we have a lot of gratitude for our sponsors every day but I think you're right, I mean this is a week of gratitude and certainly are presenting sponsors allow us to be here and have these amazing conversations like we've had today with Justine so please make sure that you reach out to them and let them know that you are as appreciative as well. Wow. Okay, I have a board coaching session in a little bit. I think I'm going to repeat a lot of what you said today. I love when we can use it right away. Yeah, I mean like we're talking 30 minutes so you're going forward with this sister. Hey everybody is we like to end every episode we want to remind you to stay well, so you can do well. We'll see you back here tomorrow.