10 Budget Tips & Tricks for Year-End

For those with a calendar year-end, the fourth quarter can be a stressful time. Not only are you working to meet your current year’s financial goals, but (hopefully) you’re planning for the next year during the busiest season of the year. Deep breaths… you will survive! Here are some tips and insights we’ve curated to help you maximize your current year’s budget and create a strong plan for the next year. 

Split big contract renewals between years

There’s nothing like getting a few five-figure contract renewals over a span of one to two months to get your blood pressure moving. Often, large software or service agreements follow an annual calendar renewal basis. While this can be convenient for planning, it can also be a devastating blow to a tight budget. Most vendors can negotiate terms, and it never hurts to ask for what you need. Ask your largest contract vendors to split their payments between your fiscal years. If you run on a calendar year, you may not even need to ask if the terms are 30 days or longer. Simply time your payments and ensure your bookkeeper knows your intention so the payment isn’t recorded as a pre-payment. 

Spend through key categories 

So, you never did launch that marketing campaign you planned and budgeted for…You’re not alone. Rather than show the budget category deficit, consider spending through money that was allocated for a purpose. The foundation of most budgets is built upon a report from the current year. So, if your board sees you didn’t utilize funds in the current year they may assume you don’t need them in the next year. Now, before you get trigger-happy with the social media ads, consider what investments you could make quickly that will have the best ROI. You can also look at prepaying for the next year (keep reading for details).

Pre-pay when possible, but be cautious

Back to the marketing campaign analogy. Perhaps you know what you want to do, but you ran out of time to execute. Can you prepay your graphic designer or printer for the work that will now happen next year? People rarely decline the opportunity to be paid fast and early. 

How about that conference you know you want to attend next year. Can you buy your tickets this year? If you have the funds remaining in your budget, do it!

A few cautions with this technique…

1. Only prepay vendors you trust and have experience with. 

2. Make sure you document that you’re prepaying expenses. Otherwise, your budgeting will be off the next year.

3. Keep your bookkeeper in the loop!  

Know your gray zones

Every budget has line items that cross over and get blurry. For example, maybe you sent a fundraising appeal that could be logged to marketing or fundraising. Or, perhaps you have separate line items for team activities and professional development, but the conference you attended included both team building and training. Get familiar with these categories and what has traditionally been allocated to them, and where your deficits and surpluses exist. Moving an expense from one category to the next or even pointing out the ability to do so to your board/finance committee can help present a stronger financial picture. 

Remember, a budget is a guide…Focus on where you went this year

It happens to all of us at some point. Despite careful planning and stewardship, we blow a budget line item. Or, maybe you’ve blown an entire budget (no judgment!). The question your board or boss will likely ask themselves is this: Was the expense worth it? 

Big plans often require big risks and the more complex your organization is the harder it can be to nail down the specifics of investments and expenses. It’s critical that you always report the fiscal truth, but it’s also important to help your leadership understand the “why” behind any discrepancies. When you cannot justify the purpose or result of a number that is off, it’s time to evaluate if you need more/different help with your accounting. 

Budget Planning Tips:

Don’t make financial decisions based on hope for the future

Hope has bounced a lot of checks. While you may have great intentions of getting that grant, attracting more sales, or raising more funds next year, there is no certainty it will happen. To make financial plans based on uncertainties is foolish. If your boss said they “hope to give you a raise next year,”  would you go buy a new car? Probably not. The same logic applies to your budget planning. Be certain and be conservative. It’s far better to crush a budget goal than to never achieve it. 

Count on inflation (cite QuestionMark email)

At the time this blog is written (August of 2023) inflation has hovered around 3-8% for nearly a year. That’s significant. You cannot simply export your year-end profit and loss statement and update the dates for your next budget. A closer look is warranted and considerations need to be made for software, services, cost of living adjustments for team members, and how these fluctuations will affect your income and expenses. 

One of the software vendors I work with recently sent their renewal with this snippet at the bottom:

You might notice a modest price adjustment.  Over the last few years we have made numerous efforts to keep our costs and expenses low, continuing to expand the features and functionality while maintaining our existing prices.  However, despite our best efforts and in the face of the current global inflation and post-pandemic labor shortage, like many businesses, we have increased our prices slightly.  The U.S. Bureau of Labor Statistics indicated that the Consumer Price Index rose by 6.5% for 2022.  Through the continued efforts of the entire organization to keep costs contained, our renewal reflects only a 2% increase. 

I have a feeling this is the new normal. While most vendors will point out significant rate increases, others may not. Review contracts carefully and if you’re thinking of shopping around for new services, proactively ask your current vendors if they have rate increases planned for the forthcoming year. 

Evaluate everything

Speaking of vendors…Vendor loyalty can be a double-edged sword. While maintaining relationships can lead to improved service, trust, and intuitive response, it can also backfire in each of those same areas. There’s nothing wrong with challenging your vendors to keep your business. Just as you get a car insurance quote every few years, you should evaluate vendor relationships to ensure you’re getting optimal rates and service. Who knows? You never know…You may save 15% or more like the Geico Gecko suggests.

Build in a review

A lot can happen in six months! When unexpected situations occur (unplanned capital improvements, major staffing changes, lost grant funding) you may need to re-calibrate your budget. If your board is open to it, consider scheduling a budget review meeting for mid-year. If you publish your budget or produce an annual report, you may want to consider doing a budget revision so that your year-end numbers accommodate major changes. 

Look at the right comparisons

Knowing your fiscal ebbs and flows can help you plan and feel better throughout the year. Most organizations, especially those that rely on fundraising, have months with operating deficits, however, they also have seasons of exceptional performance. Comparing your financials to the previous year as well as your budget can help identify any problem areas and keep a realistic perspective. 

What budget tips and tricks do you have? Consider sharing them in the Inform USA Networker to help your peers!