Budget and forecasting process
A budget is the basis for management reporting to your board and funders, and a way to think ahead about what the organization wants to achieve. This works best as a cycle: one board-approved yearly budget, updated each quarter as reality unfolds. In this page you will find how to set the yearly budget, what budget holders may change on their own, and how expansions, overspend and underspend are handled.
The budget cycle at a glance
Yearly Baseline
The board-approved annual budget. The basis for all financial reporting.
Quarterly budget update
Quarterly in-year updates presented to the board for soft approval, reflecting actuals and revised forecasts. Also the working document for day-to-day budget management.
Every budget line carries a best estimate of when the costs will occur, split per month. An organization with multiple legal entities splits lines that span entities into one line per entity.
Who does what (even when "who" is one person)
Three roles keep the cycle honest:
- The budget coordinator maintains the templates, aggregates the organizational budget, and monitors overspend.
- The strategic lead decides on priorities: allocation in the yearly round, and approval of expansions, based on strategic fit, urgency and committed funding.
- The board approves the Yearly Baseline and receives the quarterly budget updates.
In a small organization, one person often wears the first two hats, and that is fine: the process below stays the same, just with fewer handovers. The separation that matters even then is preparer versus approver: whoever builds the budget should not also be the one who approves it, so keep the board's approval role independent.
Set the yearly baseline
Start about three months before year-end, so the board can approve the budget before the new year starts.
Template out - The budget coordinator shares a budget template with every budget holder for the coming year.
Draft - Budget holders prepare their budgets, with monthly timing per line.
One feedback round - The coordinator checks figures, consistency and methodology; the strategic lead checks fit with the organization's priorities and has the final say on the allocation of funds.
Revise - Budget holders get one final opportunity to adjust their submission.
Aggregate and approve - The coordinator combines everything into one organizational budget; the board reviews and approves before the year starts. Material board feedback is resolved via the coordinator and the relevant budget holder.
Expanding the budget: the quarterly cycle
Budget expansions follow the quarterly budget update cycle. Submissions are due two weeks after each quarter-end.
The budget holder submits an expansion request using the budget update template, with both a quantitative and a qualitative rationale.
When an expansion includes staff costs: get salary guidance from the salary framework before submitting.
The budget coordinator processes all changes into one aggregated organizational budget.
The strategic lead prioritizes the budget (funding allocation) requests based on strategic fit, urgency, and committed funding.
The decision (approval or rejection) reaches the budget holder before the end of the update process.
Urgent expansions outside the cycle
When waiting for the next budget update round is genuinely not feasible: tell the strategic lead before starting anything. If the urgency and strategic fit are confirmed, the request follows the same steps as the quarterly process (budget update template, rationale, prioritization).
Do not spend or commit costs before the expansion is cleared.
Overspend and underspend
Overspend: flag early. Agree a flag threshold that fits the size and maturity of your organization (€500, €5,000, it really depends on your size and financial buffer) and alert the budget coordinator as soon as expected overspend for the year exceeds it. Do not wait for the quarterly cycle. The coordinator assesses the situation, escalates to the strategic lead for preventive measures, and adds confirmed overspend to the budget. If total overspend pushes the cash runway below the minimum the board has set (12 months is a common choice), the board should be informed. The timing for this communication should be defined as part of an internal policy.
Underspend: no pressure to spend. Unspent amounts roll back into the central pool for the next cycle. There is no expectation or incentive to spend everything; responsible underspending demonstrates good financial stewardship, and the runway principle applies here too. Additional considerations should be in place for earmarked funding and conditional grants.
Quick reference
Reallocate within your existing budget
No
Nobody
No action needed
Replace or hire staff
Yes
Strategic lead
Pre-approval before acting; compensation follows the salary framework
Expand the total budget (quarterly)
Yes
Budget coordinator
Budget update template, due two weeks after quarter-end
Urgent expansion outside the cycle
Yes
Strategic lead
Contact before committing anything; same budget update process if cleared
Expected overspend above the flag threshold
Yes
Budget coordinator
Flag immediately; do not wait for the quarterly cycle
Good to know
- Keep one living budget document as the single source of truth: the version the board approved plus every processed change. Every other view (dashboards, team sheets) derives from it.
- Give budget holders a budget-versus-actuals view they can check themselves; self-service tracking prevents most overspend surprises.
- Tracking spending against the budget directly or through dashboards linked to your accounting system is its own topic:
Budget tracking: see actuals against your budget all year