Agile Budgeting Strategies and Approaches

How nimble is your association’s budget?

Your budget is “arguably the most important strategic tool,” says Danielle McLean, vice president and chief financial officer at the American Financial Services Association (AFSA), so creating an accurate budget that forecasts your organization’s revenue and expenses is critical. Now, many organizations are taking an “agile” approach, which allows for periodic updates and a more realistic way to budget given the rapid pace of change spurred by shifting economic and environmental considerations and new technologies.

“Having a budget that can be reported in real time—that’s the key and secret sauce,” says McLean. “We live and operate in a poly-crisis environment, and we have to plan—and plan early—as things will happen and change.”

Practicing agile budgeting means moving away from fixed, annual budget allocations to a more fluid strategy that can respond quickly to performance data and market shifts. “The goal is to continuously optimize spending across channels and campaigns,” says McLean, “rather than relying on set-it-and-forget-it budget plans.” An association’s budget should be “viewed as a project, treated as a formal planning process, and reported out monthly.”

John Heberlein, MBA, CMA, CFM, CSCA, CAE, says that a monthly reevaluation of a budget is an effective strategy for the current climate. Heberlein is chief financial officer and senior vice president at ASHP, an association of health-system pharmacy professionals.

“We’re only [budgeting] one year at a time because the environment is changing so fast,” says Heberlein. However, staff monitor the budget throughout the year. “We update our projections monthly and make adjustments,” he adds, noting that your budget should be a “roadmap.”

According to Heberlein, “You need to be flexible to adapt—to dial up resources to increase revenue if an opportunity arises, or to be able to pause activities” to avoid losing money if products, events, or services are not selling as projected.

Consider the Impact of New Products and Services

Forecasting expenses and revenues for newly developed products and services is one of the most challenging aspects of budgeting—but an agile approach allows for adjustments along the way.

When projecting numbers for new offerings, Heberlein suggests drawing parallels with similar products in your current or past inventory and examining comparable products from competitors. “Research ahead of time; conduct an environmental scan; and be realistic about initial investments needed, expected revenue, and cost of marketing,” he says. Then, once actual numbers come in, you can make changes during monthly budget reviews.

Some new offerings may underperform, so be ready to adjust budget expectations accordingly. But it could also go the other way: You may see a revenue bump if a new product, meeting, or sponsorship opportunity exceeds expectations. Seeing that additional revenue in real time could impact your immediate spending decisions, notes Heberlein.

Be Inclusive

One of the keys to agile budgeting is including stakeholders from within the staff who are responsible for various line items in the budgeting process. “The budget team may not fully understand the nature of each business segment,” says McLean. “Instead of assuming or guessing, make the budgeting process inclusive.”

She suggests requesting feedback from all areas of the business and gauging staff expectations for the upcoming year. “Not only will it help create a more accurate budget but it will also help increase adoption because each department feels that they’ve had a say in what is happening.”

Of course, the association’s board of directors must buy in to the concept of agile budgeting. “You need to do a lot of foundational work and lead sessions at board orientation for new members to explain revenue sources and areas where the association sees high potential,” says ASHP’s Heberlein. He recommends explaining the overall budgeting process clearly, and then sharing financial statements with board members each month so they view expense and revenue numbers in real time. “That way, when we’re discussing the new budget, the board members are not surprised by current trends, and we can focus discussions on a strategic level—rather than a micro level.”

Finally, don’t forget about new technologies that may facilitate your budgeting process. “We’re in the early stages of investigating how AI can help with budgeting,” says Heberlein. Predictive budgeting models may rise in popularity in the next 12 to 18 months to assist association professionals with their forecasting, he notes. “But you’ll really have to validate the model and check the actual results against numbers predicted by AI to determine the value of such technologies.”