One of the most common questions I get when I teach budgeting is:
What IS the right way to do a budget?
Well, if you’ve been waiting for the right answer to that question, let me be the first to tell you: no matter what anyone says, there is NO one “right” way to do a budget. Every funder and financial manager has a favorite format. But there are some important things to always keep in mind that will make your project budget as right as it can be:
- Make ONE budget that is the “master” budget for each project.
That budget should reflect all direct and indirect costs, as well as all income for the project, including all in-kind, and it should balance. You can revise this budget, but this is the budget that you will always refer to. So when a funder wants you to show expenses but not show indirect costs, or a funder wants you to show in-kind on a separate form, you still have one budget that, internally, is RIGHT.
- Get the best numbers for that budget.
Don’t guess. Since funders read lots and lots of proposals, what makes you think they don’t already know what a reasonable cost is for a computer, a transportation service, or a rental space? Get estimates—three is a good idea. And be prepared to back them up.
- Explain. Everything.
Anything that’s unclear at all will be focused on by the board of trustees. Anything that’s unexplained WILL be explained by them, and perhaps not in a way advantageous to you! So always, always, always add budget narrative to explain.