When we discuss civil society organizations’ (CSOs) missions, we rarely consider the financial resources needed to achieve them. Therefore, CSOs need a strategic budget to fully accomplish their Theory of Change and cover their operating expenses.
What is a strategic budget?
The strategic budget clearly reflects the organization’s financial needs and provides a compass that guides us to the magic number required to achieve our Theory of Change. Time is one of the critical challenges in reaching the goals of CSOs.
It is common to see organizations dealing with everyday issues as they see fit. However, a strategic budget, with its focus not only on the current year but also on the coming years, can set mid and long-term goals like our strategic goals.
How can we make a strategic budget?
First, we must know our Theory of Change well to analyze the financial resources required to meet our goals. This is the starting point for determining how many resources we need.
The next part is to list all the resources required to do the activities that will allow us to attain the goals of our Theory of Change. This list includes financial resources, human resources, material, IT, tax, and all the fixed costs we need to operate.
The process is intense because we often do not know how much it costs to operate the organization or how many resources we need for our activities. Our strategic budgeting process is a team effort. All areas of the organization must be involved, as this inclusivity ensures we identify all needs and costs, even those often overlooked.
How can we use a strategic budget?
The financial resources to achieve the goals of CSOs are involved in various organizational aspects and processes. Therefore, the strategic budget is multifunctional as it allows them to:
Conduct an in-depth analysis of our organization
When working on a strategic budget, we must know our organization perfectly. We will have to answer several questions about performance and operating costs:
- What expenses do we have on a day-to-day basis?
- What profiles must we have for our organization to work correctly?
- Do we have all the specialized profiles we need?
- Do we need to look for any specialists in any subject?
- Where are we running short of money?
- Where is the money going to spare?
Strengthening our strategic thinking capabilities
A strategic budget forces us to match a number (even an estimate) with each activity required to meet our institutional goals. This makes the operation more realistic. It is an exciting starting point, even if we consider only some aspects or fall short initially. As the weeks and months go by, we can adjust the figure until the financial resources are aligned with reality to achieve our goals.
Knowing our needs
Developing a strategic budget not only makes our day-to-day work easier. With this exercise, we will know exactly how much money we need from our donors and identify other potential donors who will allow us to have all the financial resources we need. With these well-defined numbers, we build up trust in our donors because we can fully justify what we are requesting for the success of our Theory of Change.
Improving cost efficiency
A strategic budget helps us be more efficient in our spending. Once we are clear about the activities and their related costs, we can plan better and thus know how much our operations cost. It will also help us review whether it is time to reduce costs, whether we can save up, or whether a surplus will allow us to reinforce other activities.
What´s next?
If your organization still needs to create its strategic budget, now is an excellent time to do it and achieve good financial health.
If you already have one, it is essential to review it periodically to see which goals have been met and in which direction to move forward.
Taking a pause to think about and define strategic issues such as this is an essential part of your organization’s vision for social change.
Identifying the resources you have and the resources you need will allow you to operate more realistically. It also facilitates the planning of all the activities that will lead you to achieve the goals established initially and give clarity to all the actors involved with your organization so that together, you can leave the footprint you are looking for.
If you have any questions, remember we can help you at COMETA anytime. Contact us.
Note: This article is based on the Financial Innovation and Resilience (FIRE) methodology developed by Spring Strategies.
