10 Steps to Creating a Nonprofit Budget

Having your program directors carefully create budgets for each of their programs will knock out a big portion of the data you need to produce an overall nonprofit budget. You can then focus on the rest of the organization’s expenses and funds. When we discuss budgeting here, we are typically referring to an operating budget, the budget of income and expenses to operate the nonprofit. An operating budget is a budget that is used to cover basic day-to-day costs like materials, supplies, rent, utilities, etc.

Can nonprofit arts organizations survive inflation and revenue woes?

Customize your template based on your organization’s specific needs and reporting requirements. Consider board expectations, grant requirements, and program manager input. Equally important are the indirect support costs that keep your programs running smoothly. Administrative oversight, financial management, IT support, insurance, facility maintenance, volunteer coordination, and grant compliance all contribute to program success. This alignment should be evident in both resource allocation and program funding decisions.

Equitable Budgeting for Nonprofits

Regular monitoring and adjustment of these strategies helps ensure consistent program delivery and organizational stability. These visible expenses and non-monetary contributions, including volunteer hours, form the foundation of your program budget, but they’re only part of the equation. This granular approach reveals insights that traditional budgets often miss, such as hidden costs that could affect program sustainability.

Marketing Budget

• Some nonprofit leaders may even be reluctant to show a surplus in their books, fearing the perception that they are not putting their resources to good use.
• The primary purpose of nonprofit budgeting is to ensure that the organization can meet its goals without running out of money.
• They also offer detailed categories for typical nonprofit revenue streams and expenses, allowing for a granular view of your organization’s finances.
• The two primary components of a budget are income and revenue, and many subcategories fall under the umbrella of each.
• This accountability—which is at the heart of all nonprofit accounting activities—is essential for instilling trust in all of these individuals and being able to fund your mission for years to come.
• For a wider selection of non profit budget templates, check out more options here.

The goal is to prioritize investments that can make the biggest difference while striving to address others as more resources become available. Warren Averett is a top accounting firm providing audit, tax, accounting and consulting services to companies across the Southeast. Our firm has expertise in industries including manufacturing, construction, real estate, financial services, healthcare, government, education and retail. That’s why most nonprofits implement a combination of these strategies. Budget checking on every data entry screen to protect from overspending. Your budget is full of a lot of information, but it doesn’t have to be overwhelming.

Set Clear Goals and Objectives

• This can be done by reviewing past financial performance and trends, as well as by considering any changes that may be coming up in the organization’s operations.
• Your budget will be unique to your organization, but we’ll give you a broad idea of what to include under each section.
• If your numbers don’t add up or pieces of the project are missing, that can suggest you may not fully understand how the project really works.
• Mark the events in everyone’s calendars, so that it becomes easier to repeat the process each year.
• Now that we’ve covered why you need a budget and what one looks like let’s unpack a few best practices for optimizing your budget as a nonprofit leader.
• These templates are specially designed to cater to the unique needs of nonprofits, allowing for detailed income and expenditure projections.
• In both cases, a sound budget is important for financial sustainability and provides a guide for financial health and sustainability.

Let’s look at some of the best practices for managing your organization’s budget effectively. Your annual unrestricted surplus should be sufficient to meet debt obligations, fund depreciation, and add to operating reserves. AAFCPAs recommends a 3-5% surplus operating budget each year, and four to six months of expenses in your operating reserves. When budgeting, nonprofits sometimes make the mistake of forgetting to account for in-kind donations or accounting services for nonprofit organizations volunteer hours. Donors and partners like to see how many dollars are spent on the nonprofit’s mission versus executing the mission.

Thus, it is essential to take note of the incoming and outgoing of the organization’s acquired https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ funds to achieve the objectives as set by the organization. Before you start planning your budget, you must calculate all the expenses first. This means that you have to keep a note of all the expenses your organization spends to continue operating successfully.

Sort Your Expenses

Marketing and fundraising encompasses all tools, supplies, and technology used to drive donations (i.e., the main revenue source for your organization). Investing in some nonprofit budget software will make keeping up with your budget a breeze. You’ll need a program budget every year, so get your docs in order for the years ahead and plan a clear budgeting process.

Note funding restrictions, timing considerations, and progress toward goals. This rigorous approach ensures each dollar actively contributes to your nonprofit’s mission and helps eliminate legacy costs that no longer serve your current goals. Every successful budget for non-profit organizations balances mission impact with financial stability. Understanding and managing both fixed and variable costs helps you make smarter spending decisions and maintain financial flexibility. His growth-hacking abilities have helped Donorbox boost fundraising efforts for thousands of nonprofit organizations.