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Forecasting

Respond to at least two of your classmates’ posts

· Ask at least one question in response to an original peer post that you would like the author to explore further.

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CARMEN’S POST:

Forecasting

This week we are learning about forecasting and it is one of the most difficult part of budgeting. In my understanding to forecast I wanted to make sure I understood the difference of budget and forecasting to help me get a better understand of this concept. I will share what I have found on youtube:  https://www.youtube.com/watch?v=nmcc3rDgBXI (Links to an external site.) Shape, arrow  Description automatically generated

Budgeting                                                                                          Forecasting

Is a financial plan prepared in advance                                   An estimate of future plans /   

                                                                                                outcomes on past or present data.  

Quantitative                                                                             Qualitive and Quantitative

Financial expression of plan or target                                     Prediction of upcoming event

Has a target date                                                                      No target dates

Visited on an Annual basis                                                      By intervals

Variance (budget can go up and down)                                  No Variance

For the purpose of my budget introduction in relation to homelessness and mental health, the source of data I would focus on is unemployment rates. During this pandemic several individuals utilized unemployment. Unemployment rate prediction of a country is a crucial factor for the country’s economic and financial growth planning and a challenging job for policymakers (Saraiva, 2020). We have seen the rate of unemployment increase as COVID cases increase. At CTSHealth which is the organization I am focusing my research, we seen an increase on clients and a need of staff. Staff have reported feeling overwhelmed and with bigger caseloads than usual. My predictions for the next 2+ years is that we will need to hire on new clinical staff as we continue to grow. I would utilize the quantitative method in utilizing for example the Bureau of labor statistics. According to Saraiva (2020) the prediction was that in July 2021 when there is a slight decrease of COVID-19 hiring rates will increase. During that period CTSHealth was able to hire 10 staff. My predictions for the next coming years is an increase on clients and staff. To prepare, my organization would provide monthly job fairs as individuals are seeking for employment and CTSHealth continues to have increase of clientele.

Resources

Dropkin, M., Halpin, J., & LaTouche, B. (2007).  The budget-building book for nonprofits (2nded.). Jossey-Bass. 

Saraiva, C. (2020). Unemployment Likely to Remain High Through 2021, Fed StudySays. Bloomberg.Com, N.PAG.

https://www.youtube.com/watch?v=nmcc3rDgBXI (Links to an external site.) Shape, arrow  Description automatically generated

LESLEY’S POST:

Discuss what sources of data (e.g., cost of living, inflation, housing market changes, unemployment rates, federal loan interest rates, gross domestic product changes, etc.) would you use to help forecast budget changes for year 2+? Provide rationale for your choice(s).

Nonprofits can develop a forecast by utilizing the estimated annual rate of inflation, to allow for blanket coverage of rate increases, though not entirely accurate for sources such as the house markets, cost of living, inflations, etc. (Dropkin, Halpin, and LaTouche, 2007). Forecasting for budget changes is quite the task as each and every line item needs to be estimated for the future based on past and future expenses and costs, as well as only taking into account receivables that are in hand and payables that are paid, out of hand. The direct relation to the idea of one having physical cash in hand, paying for an item with the physical currency. In order to somewhat accurately forecast budget changes, organization historical data should be included in the data analysis as this can point in the direction of likely changes to occur in the future. As discussed by Enkel (2021) most nonprofits will forecast for the next twelve-month period and categorize each by month for analysis. Upon doing so, the historic organization data can aid to provide the timing of when to expect these changes in order to be properly prepared when the time comes.  

In order to forecast changes for year two within my organization, I would begin with the estimated annual rate of inflation, additionally accounting for the geographical location (rural Texas) and applying this blanket increase across the budget in anticipation of changes. Then I would follow the suggestions of Enkel (2021) of breaking this twelve-month projection down into months, review the year one accounts to pinpoint deficits in attempts to proactively prevent or lessen their effects over the upcoming year. I believe that by following this process, the likelihood of positively anticipating changes will have a smaller impact on the organization. For example, if in year one, the organization saw a decline in donations between March and May, in year two, more effort would be placed on fundraising prior to and after this time period, while at the same time, considering any options for less expense if optional.

Reference

A guide to cash flow forecasts for nonprofit organizations. Enkel. (2021). Retrieved from https://www.enkel.ca/blog/not-for-profit/guide-to-cash-flow-forecasts-for-nonprofits/.

Dropkin, M., Halpin, J., & LaTouche, B. (2007).  The budget-building book for nonprofits  (2nd ed.). Jossey-Bass. 

Monitoring Budget Goals

Respond to at least two of your classmates’ posts

· Ask at least one question in response to an original peer post that you would like the author to explore further.

JO’S POST:

If a quarterly budget goal is off (less than 20%) of its’ intended target, modifications and corrective action is generally needed. Discuss what modifications and corrective action you would make if your budget was 20% less than projected for quarter 2 of a fiscal year. 

Monitoring a budget should be maintained regularly to assess any changes that may have occurred. Dragone (2021) refers to this as re-forecasting this is done to ensure that your plans for the organization are resulting in the income and expenses that your original budget has set forth. The continuous monitoring allows for any problems to be identified early enough that it does not cause any major financial setbacks.

If my quarterly budget was off by 20% I would want to look at where this is taken place and assess what needs to be done to modify the change in the budget. In my budget, I have looked at the changes that COVID has brought to the organization and would assess the current program needs and adjust accordingly. The proposed changes are to add meals back to the program to gain more of the lost clients back. If I realize that it is due to low clients then I would look at getting the word out through free sources within the community that we have implemented this service. On the other hand, if the concern is that we have implemented and the concern is with staff then I would look at training aspects and possible. I would look at the expenses and possibly make some cuts on items that could be later implemented or excluded altogether.

References

Dragone, Salvatore, CPM,A.R.M., C.C.I.M. (2021). Invaluable predictions. Journal of Property Management, 86(4), 12-17. Retrieved from  https://www-proquest-com.proxy-library.ashford.edu/trade-journals/invaluable-predictions/docview/2553579019/se-2?accountid=32521 (Links to an external site.)

Dropkin, M., Halpin, J., & LaTouche, B. (2007).  The budget-building book for nonprofits  (2nd ed.). Jossey-Bass. 

TIFFANY’S POST:

Monitoring Budget Goals

As we previously have been learning budgets are utilized by corporations and others and are an important component of making sure that a business runs efficiently. Budgeting help to ensure that you are on track to reach specific goals that you have put into place for your organization. Budgeting will also give you insight into what may or may not be working within your organization.  When a budget is put into place, and it doesn’t do as expected it changes are needed and that’s where budget modification comes into place. Budget modification may be needed if the current budget diverges from what was original expected or the current budget expectation. There are different reasons that may cause for a budget to be revise including increase or decreases of funds that were allocated.

As mentioned in Dropkin and LaTouche (2007), no budget can accurately predict all the circumstances that may affect a nonprofit (p. 128). That is why it is important to develop and document policies and procedures for modifying the approved budget. If a quarterly budget is off (less than 20%) of it’s intended target modification and corrective actions will be needed.  Keeping in line with the fact that budget modifications are not centered on explaining what happened but are instead focused on plans to manage future experiences based on new data or experiences. To begin with I would ensure that may budget and forecasting were flexible. Ridge and constrain budget do not allow for any mishaps and with budgeting unexpected things occur and that wiggle room is needed. It also a good idea to continuously review your budget based on current results. In the case where your budget is off target you would want to communicate this information as soon as possible to your team. It also a suggestion to include them so that you are better able to determine the areas that needs to be changed and the best method for accomplishing this. Goal setting is important if you do not know your overall goals then it makes it hard to determine what is needed and not needed when you must go back and make modification.

You can’t plan for everything, but you can have an idea of some of the obstacles that could affect you when budgeting.

Dropkin, M., Halpin, J., & LaTouche, B. (2007).  The budget-building book for nonprofits  (2nd ed.). Jossey-Bass. 

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