Budgets that span across several years are called multi-year budgets. A multi-year budget is an excellent tool for managing through a period of growth or change. It can be used alongside a strategic plan for the same period to help an organization map out its long-term goals and the actions needed to achieve those goals. It is typically done in three-year increments, but can be done for any period of time. To create a multi-year budget, start with the first tab and put in your budget numbers by program area. If you don’t budget by program, put your budget numbers into the Total column. Use the Assumptions column to document your notes about how each number is calculated.
Once the tabs for all three years are filled out, the totals will roll up into the Summary tab and show year-over-year variances for easy comparison. Areas with high variances (over 10%) should be examined more closely. They may represent unrealistic growth in fundraising goals, a significant year-over-year drop in program income, or unexpected growth in fixed costs that may not be sustainable, for example. Identifying these types of issues early leaves plenty of time for problem-solving. And if an overall surplus trend emerges, the organization can begin planning how best to leverage these resources toward its mission and vision.
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