Larry Bomback is the founder of Strategic Nonprofit Finance.
In my work with nonprofits and mission-driven institutions over the past 22 years, I’ve seen three recurring “states,” each with a different budgeting owner and a different cadence.
When organizations use the wrong budgeting posture for their state, they get misaligned leadership behavior, delayed decisions and often a financial crisis that “came out of nowhere” but actually took months to build.
Here’s how to think about budgeting in each state, and how to run a process that matches reality.
1. Distressed State: CFO-Led, Top-Down Budgeting
A distressed organization is not merely “tight.” It’s structurally out of balance. Cash is fragile. Credibility with lenders or vendors may be strained. Payroll is a weekly psychological event. Leadership is exhausted.
In this condition, a bottom-up budget is usually a fantasy generator. Department leaders will propose what they need to do their jobs well (and it will be way too expensive).
So the question is: What does the organization need to survive, and what is the fastest path back to stability?
That’s why in distress, I’ve found the CFO is the best person to lead the budget, and the process must be top-down. Not because the CFO is the “boss,” but because someone has to anchor the conversation in constraints that are non-negotiable. And strong CFOs are usually best equipped to handle this.
In practice, a top-down distress budget starts with four hard lines:
• Cash Reality: How many weeks of cash does the organization actually have
• Fixed Obligations: Payroll, debt service, rent, insurance, key contracts
• Minimum Operating Requirements: What absolutely must be funded to deliver the mission at all
• Recovery Plan Assumptions: Revenue stabilization, cost reductions, asset sales, financing, restructuring
After those lines are clear, leaders can allocate resources downward.
Here’s how to do it: The CFO builds a “survival model” first: I often see organizations start with weekly cash flow for 13 weeks, then monthly for the next 18 to 24 months. Then, the CFO sets budget envelopes for major departments or functions. Leaders propose within those envelopes. And the CFO forces trade-offs when proposals exceed reality.
The final budget is less about aspiration and more about discipline and pacing. The cultural lesson in distress is simple: Organizations don’t budget to get what they want. They budget to stop the bleeding and create runway.
The board’s role here is to support the hard choices, enforce accountability and, if needed, authorize extraordinary actions. Distress budgets fail when boards ask for “one more scenario” instead of making the decision in front of them. Don’t let perfect become the enemy of done.
2. Stable State: ‘Keep The Ship Running’ Budgeting With A Stronger Board Role
There’s a second category of organization that isn’t distressed, but also isn’t in true growth. It’s stable and maybe even quite healthy. But the mandate is continuity: serve the mission, control costs, manage risk, avoid surprises and maintain reserves. This is the zone where budgeting becomes governance-heavy, whether people admit it or not.
In stability mode, the board has a real job to do that goes beyond approving the final budget, establishing:
• Guardrails around risk
• Expectations for reserves and liquidity
• Multi-year sustainability targets
• Investment in infrastructure (technology, HR systems, finance capacity)
• Clear financial performance indicators that leadership will manage to
In other words, for stable organizations, the board helps define what “good” looks like and what can’t be compromised.
This is all done through policy, and it’s where I see many organizations drift. Because sometimes those policies exist, but no one has read them for years. Staff treat the budget as an annual exercise, and the board treats it as a vote. Meanwhile, the organization’s real needs are longer-term: replacing systems, planning for facilities, dealing with deferred maintenance, investing in fundraising capacity, evolving programs as community needs change.
The antidote is a budgeting process that is anchored in policy and planning—not just last year’s expenses plus 3%.
In my experience, a strong “keep the ship running” budget process includes the following policies and documents:
• Three-year forecast that sits behind the annual budget
• Reserve policy with explicit targets
• Capital plan that prevents facilities surprises
• Key performance indicator (KPI) dashboard that the board sees every meeting
Stability budgeting is about stewardship. In this state, the CFO and CEO co-lead the build, but the board’s finance committee asks: Are we funding the fundamentals? Are we protecting the downside? Are we investing enough to avoid stagnation?
3. Growth State: CEO-Led Budgeting Because The Budget Is The Strategy
In growth mode, budgeting is about intentional expansion and prioritization. These organizations have momentum: Demand is increasing; fundraising is improving; or there’s a new strategic opportunity. The risk is not only “running out of cash.” The risk is scaling chaos.
That’s why in growth mode, the CEO must lead budgeting. The CEO is the only role positioned to integrate mission, market opportunity, capacity, talent and pace. In growth, the budget is simply strategy translated into resource commitments. And if the CEO is not driving it, organizations get a budget that reflects internal politics, not strategic intent.
CEO-led growth budgeting starts with a small set of strategic bets:
• What are we scaling, and why now?
• What must be true for this to succeed?
• What capabilities are we missing today?
• What is the cost of growth, not just the cost of operations?
• What are we willing to stop doing to fund the new thing?
Then finance does what finance does best: quantify, stress-test and design guardrails.
In growth mode, the CFO’s job is not to say “no.” The CFO’s job is to say: “Here’s what this decision implies.”
A growth budget should include explicit triggers and pacing mechanisms. This is how organizations avoid the classic growth trap of hiring ahead of revenue, burning through cash and then “mysteriously” being forced into layoffs 12 months later.
The board’s role in growth is to challenge strategic clarity and risk management, not to micromanage. Push for focus: fewer priorities, clearer sequencing and accountability for outcomes.
Leading Intentionally
Budgeting is a mirror. It reveals whether leadership is aligned with reality or negotiating with it.
So now that you know the three states, who should lead your budget this year?
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
