Bookkeeping

10 Steps to Creating a Nonprofit Budget

nonprofit budgeting

It’s important in the nonprofit world for organizations to develop and follow financial budgets. Below is a list of best practices that nonprofits should consider before starting the budget process. Another step in creating a nonprofit budget is to identify the organization’s major sources of income and expenses. This information can be used to estimate income and expenses for the upcoming budget period. Budgeting is the process of planning, organizing, and controlling financial resources and how they are allocated to achieve organizational goals. It’s important to budget because it helps the organization manage its funds in a more effective way.

Types of Budgets for Nonprofit Organizations

To truly stick to your budget—and ensure you have enough money to fulfill your nonprofit’s mission—you need an efficient way to manage cash flow and organize spending. Relay is an online banking and money management platform that can help you (and your team members) avoid overspending, get clear on income, and simplify financial management. Without an annual nonprofit budget, you’re essentially operating in the dark.

Ten tips for creating an equitable budgeting process

Here are four of the most common types of budgets used by nonprofit organizations. Historic data is the most reliable information you can use for creating https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ a budget. Just be sure that you’re using timely and accurate historic numbers when forecasting future expenses and revenue. A zero-based budget starts from scratch with a blank slate every year.

The Importance of Budgeting for Nonprofits

nonprofit budgeting

However, your organization can still acknowledge the impact of volunteers in your audit or in a short narrative included in your budget. Break down your annual budget by class, month, or both—with one click. Things like utility, bills, office supplies, and software subscriptions may seem minor on their own, but when combined they can create significant overhead costs that eat into your budget. It helps prevent your organization from focusing only on total budgeted amounts without considering when the cash will actually be available. While variations in funding may be beyond your control, make sure to monitor your expenses. Clarify who will oversee different aspects of the budget as your project takes shape and outline the processes that will guide them.

Stop Leaking Profit: 7 Signs Your Business Needs a Cash Flow Clean-Up

Before putting the numbers down, talk to all foundation and corporate donors to determine the likelihood of their repeat gifts. These are only some of the many benefits a good budget brings to an organization.

nonprofit budgeting

  • To earn their place in the budget for another year, costs typically need to be tied to real results.
  • Set up your budget so it’s as simple as filling in the blanks come next year.
  • Early in my career when I was really getting the hang of fundraising, we ended a year with a $50,000 surplus.
  • This will require examining your past budgets, current assets and liabilities, cash flow, and fundraising performance.
  • This will help ensure that your estimates are accurate and that you’re on track to reach your financial goals.

It encompasses both your expenses and expected revenue for a set period of time. A nonprofit budget is an important financial document that helps organizations allocate expenses and predict revenue. Your budget is crucial in helping your nonprofit plan for the future, stay fiscally responsible, and reach its campaign goals. Use this template to step into the financial stability and strategic planning that will enable your organization to make a lasting impact on the communities you partner with. Moreover, you can easily edit this budget template according to your preferences and convenience.

Make Sure To Review Your Budget Often

nonprofit budgeting

To help you avoid these pitfalls, here are some essential budgeting best practices to keep your nonprofit financially stable and mission-focused. A popular rule of thumb is to ensure that at least 65% of total resources go to program costs, such as materials, rentals, and operations, while overheads never account for more than 35% of resources. This will also show you which funding sources are most reliable, especially true of recurring donations and multi-year grants. By involving staff from various departments in the budgeting process, you get a more accurate and realistic picture of your financial needs.

  • If you’re looking for additional ways to streamline operations and fundraising, take a look at Sumac’s donation management software.
  • They also have a plan in place to monitor their financial performance and make adjustments as needed.
  • Discover the power of budgeting with our free Printable Monthly Budget.
  • Historic data is the most reliable information you can use for creating a budget.
  • Running a nonprofit is a lot like learning to juggle—exciting as the skill is, it’s harder than it looks!

Free Nonprofit Budget Template

Ananda Valenzuela (any pronouns) provides interim executive director leadership, facilitates organizational transformation, and coaches values-aligned leaders. He is passionate about nourishing joyful organizational cultures, supporting equitable self-management, and building liberatory practices. Ananda grew up in Puerto Rico and slowly made her way across the United States, holding a variety of consulting, governance, and activist roles along the way. Creating a cash flow forecast that tracks expected income and expenses on a monthly or quarterly basis can make a big difference. Your nonprofit’s budget will be different, depending on the size, income and expenses of your organization. This includes estimating the amount of money you expect to receive from donations, grants, fundraising events, and investments.

nonprofit budgeting

Remember to include, record, and track non-monetary contributions with you budget. This might include volunteer hours or non-monetary contributions such as vehicles or other equipment. List them so that the value zeroes out while still being accounted for. Keep your expenses sorted into categories (fixed and variable), and maintain a budget for capital expenditures that is separate from your operational budget. But it’s essential that you be realistic, especially when it comes to estimating the upcoming year’s revenue.

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