I think there are three basic types of budgets. I’m not talking about whether you use a zero-based budget approach or some other academic method to build your annual budget – all of which are completely legitimate tools. I’m talking about how you position your budget in the life of your organization. What does your budget-type say about you?
- Historical Budget. If you roll forward your budget from last year and maybe tweak a couple of numbers, then you have a historical budget. You are so busy looking in the rearview mirror, you do not see where you are going. This budget has the same line items and the same programs you have always had. Since it is stale from years of re-use, you no longer look to the budget as a helpful part of your management toolbox.
- Operational Budget. This budget looks ahead and includes new goals, but only goals you think are “doable.” In order for an item to make it into your budget, you first have to believe you will secure the funding to pay for it. Your Board – and maybe even you yourself – put a high value on achieving your goals and anything less than 100% of budget is failure. So your budget is true for where you are now and whatever incremental change you think will happen in the year ahead. This is an operational budget you are confident you will achieve.
- Aspirational Budget. This budget tells the story of great vision and hope – the same level of energy and passion the founder first brought to the organization. This budget gives you organizational goals currently beyond your reach. This is not pie-in-the-sky thinking; this is a story of dreams fulfilled, of plans effectively leading to change, this is high-impact and high-growth goals. This is a story of motivation to go as far and as wide as you possibly can.
Your budget is a map to fulfill the mission of your organization. The only difference between your budget and your mission statement is the budget tells the story in numbers.
If you can dream, so can your budget.