Budgets are very important to understanding and implementing a project. However, there are many myths about budgets that even very experienced NGO professionals get wrong. In this article, we are going to bust 6 common budget myths.
MYTH: “Budgets all have the same format”
FACT: Different budgets are developed for different purposes, and even similar budgets may be packaged differently for different audiences. Additionally, different donors often have different budget format preferences.
MYTH: “Budgets can be developed overnight”
FACT: Accurate budgets are not developed overnight. Rushing to create a budget ends up in poor planning and even rejection. Always take time to research and build a budget.
MYTH: “Budgets are made up numbers”
FACT: Budgets should always be developed on a solid basis of past experience and future projections. They cannot be developed by just guesswork. Best practice is to find three price quotes for all necessary goods and services.
MYTH: “Budgets can be developed by a single person”
FACT: Budget development is a joint exercise. Involving the entire team is important in producing an effective and realistic budget. Persons to invite include: accountants, program implementers, project planners, fundraisers and, if possible, donors.
MYTH: “Budgets cannot be changed”
FACT: Budgets can be modified to some extent after they are submitted. Of course, changes may require prior permission from the donor. Some donors may be more particular about staying true to the budget than others, but reallocating funding to meet the realities on the ground is common practice. Donors should understand that even the best plans can and do go awry.
MYTH: “Budgets are non-negotiable”
FACT: Once a donor has indicated an interest in funding a project, there is typically a window of opportunity to negotiate details in the budget before final approval. Additionally, some donors may be open to grant extensions after the project had shown some results but before the original grant closes.