Gather past budgets, income sources like donations and grants, and expense records. For a new organization, you should estimate the figures based on similar nonprofits in the industry. This could be program managers, your Treasurer, key board members, key managers, or you may be on your own. Budgeting is a planning process, so the more people involved in the process, the higher the buy-in and accountability.
Nonprofit Budgeting: Types, Strategies, and Tools Included
I’m sure the foundation didn’t want to give us $5,000 when we had $50,000 sitting in the bank. Formula mistakes are easy to make (even in tools like Excel or Google Sheet), so double check the numbers manually to be sure you have an accurate bottom line on your budget. Whatever you include for fundraising revenue needs to be backed up with a detailed fundraising plan. If one line item makes up more than about 10-15% of the total expenses or revenue, break that item down and use sub-categories (especially helpful for items like staff and programs). Start early and give yourself plenty of time to gather data, think, plan, and put everything on paper.
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Document both findings and planned adjustments to maintain accountability and track progress over time. Likewise, factor in training and professional development to maintain team effectiveness. Include costs for board support, strategic planning, and quality assurance.
Ultimately, remember that your budget should categorize revenue by different funding sources and your expenses by program vs. overhead costs. As covered in the Budgeting Practices section, the most reliable budgets yielding the best fiscal results for the organization are conservative and income based. If spreadsheets and manual budgeting are too much for you, use budgeting software to automate expense tracking. Nonprofits often rely on unpredictable funding streams such as donations, grants, and seasonal fundraising campaigns.
Create contingency plans.
Let’s explore some key reasons why budgeting plays such a crucial role in nonprofit success. Aplos is a cloud-based software for accepting donations, tracking your mission, and managing bookkeeping. Now that you know what should go into your non-profit budget, it’s time to start creating one. Early in my career when I was really getting the hang of fundraising, we ended a year with a $50,000 surplus.
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- Knowing what you want to accomplish and how much money is available, you can now create your expense budget.
- So, work backwards from your scheduled board meetings prior to year end and plot a timeline that gives the board at least two board meetings to review, discuss and hopefully approve the budget.
- While the goal is to maximize resources and achieve mission-driven objectives, nonprofits often encounter significant challenges in their financial planning.
- Note funding restrictions, timing considerations, and progress toward goals.
Make necessary adjustments to ensure the budget is both realistic and aligned with organizational priorities. Think of your budget as a somewhat accurate, rough outline of the year’s spending and earnings. It’s a plan for your anticipated financial activities, and doing your best to stick to it will keep you on track to achieve your goals and avoid financial pitfalls.
- However, most nonprofits are community-based and work with smaller budgets of less than $500,000 annually.
- Whether you’re managing general operations, launching a new program, or amplifying your marketing efforts, a thoughtful budget can be the difference between a successful year and a strained one.
- You’ll also find downloadable templates to streamline the process and empower your team to hit the ground running.
- Even organizations working with a shoestring budget must think carefully about costs.
- Budgets often need to be adjusted throughout the year due to unforeseen changes, but they still are a great way to measure how successful a year is, and to highlight areas of need.
- Pay special attention to periods when multiple large expenses coincide or when income traditionally slows.
Like most nonprofit organizations, you’ve had to deal with time-consuming manual reporting, version control issues in your worksheets, and limited… Our platform is specially designed to be intuitive and easy to use, helping you create, manage, and analyze budgets. It also allows for collaboration with your team and provides real-time reporting capabilities. Budgeting software for nonprofits can help you track finances and provide accurate, real-time insights to make informed decisions. You should subtract your expenses from your income to understand your net income.
Grant tracking helps monitor restricted funding compliance, while cash flow projections ensure adequate liquidity. Regular comparison of budget versus actual figures highlights areas needing attention before they become problems. Also, creating an effective program-based budget requires clear definitions, consistent cost allocation methods, and regular impact assessment. Involve stakeholders in the process, maintain flexible adjustment processes, and establish strong documentation standards.
However, this approach to budgeting presents a great opportunity to bring in and unite various perspectives. Nonprofit organizations continually grapple with maintaining and improving their operations, especially in today’s volatile economy and a rapidly changing world. They must constantly strive for sustainability, and an essential part of that quest is proper budgeting. Propel Nonprofits video about cash flow to help you better understand the ebbs and flows 10 steps to creating a nonprofit budget of your organization’s cash. Imagine you’re preparing for a long road trip across unfamiliar terrain.
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Nonprofits must create program budgets to showcase the direct impact of donations and grants. Are you looking to expand a program, hire additional staff, or purchase new technology? For example, a small nonprofit focused on youth development should regularly include volunteers in their budget planning meetings. Their on-the-ground perspective will help forecast realistic program costs and identify cost-saving opportunities. Here’s a comprehensive, step-by-step guide to building a budget that supports your nonprofit’s mission effectively. Consider outsourcing your back office to a bookkeeping, accounting, and CFO services provider with extensive experience in the nonprofit sector.