Budgeting for nonprofit organizations: The board’s guide

Usually, nonprofit organizations review their budget monthly with more in-depth quarterly reviews to see if they’re on track. If you’re spending more than you planned or aren’t making your expected revenue, you can plan another fundraiser or scale back on spending. Allocating funds and prioritizing spending are both part of accounting services for nonprofits. Even the best nonprofit budgets aren’t worth much if you don’t have a good way to stay on top of your spending. For better budgetary management, many nonprofits use tools like BILL Spend & Expense that let them set budgets ahead of time and keep departments within spending limits automatically. Budgeting for nonprofit organizations should always be in alignment with your strategic plan, and it should help to further your nonprofit’s goals and objectives.

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• By monitoring cash flow closely, your team can anticipate and plan for periods of lower cash availability.
• In both cases, a sound budget is important for financial sustainability and provides a guide for financial health and sustainability.
• Learn the key differences in writing successful government vs. foundation grant proposals.
• Plus, you can use any funding you don’t spend to build your organization’s reserve funds, which contribute to long-term sustainability.
• Some confusion occurs when differentiating short-term and long-term objectives.
• Nonprofits can keep tabs on their annual program revenue vs. expenses with this easy-to-use nonprofit program-based budget template.
• Your expenses will include the costs of running your nonprofit organization; such as salaries, rent, office supplies, and marketing.

As mentioned above, each nonprofit is unique and operates within a specific industry, whether it be education, the arts, environmental sustainability, or food, housing and energy assistance. Your budget will undoubtedly look different from the other organizations working in the Colorado Springs area. However, there are certain nonprofit expense categories that remain consistent, regardless of industry or individual mission. Careful budgeting is the precursor to generating effective development strategies that sustain your nonprofit, as well as mindfully spending money in order to support and further your mission. This guide for nonprofit professionals covers proven strategies to set starting bids, calculate fair market value, and engage donors—so you can raise more money and run more successful fundraising events. With all of the technology available to non-profits today, not taking advantage of their power is seriously putting your charity at risk of falling behind or worse, completely failing.

Expected Expenses

The closer to accurate you can get documenting your expenses, the easier it’ll be to stick to your budget. Put simply, revenue is the money you bring in from normal business operations. Because nonprofit funding is often very flexible, it’s absolutely necessary to have many diverse revenue streams. You can keep all the information in one sheet, or break it up into different pages. A nonprofit budget template Excel creates is pretty similar to a nonprofit budget template Google Sheets does.

How to Create an Operating Budget for Your Nonprofit

• In this sense it is the primary source for making informed decisions, assessing funding needs, and communicating financial expectations to your board and stakeholders.
• They do not purport to reflect or imply the opinions or views of Blue Avocado, its publisher, or affiliated organizations.
• During this process, you will also benefit your organization by deciding what operations best advance your organization’s mission.
• When including travel in your nonprofit operating budget, think about plane tickets, lodgings, car rentals, Uber fees, and/or driving mileage.
• Within the context of a budget, proactivity means incorporating a contingency line item.
• Your budget is full of a lot of information, but it doesn’t have to be overwhelming.

To keep everything organized, your budget categorizes funds into clear nonprofit budget categories, helping you allocate resources efficiently and maintain financial stability. The ultimate guide to selecting https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ the best accounting and financial management software for your nonprofit. Are you responsible for managing a nonprofit’s budget, or are you looking to support an organization and want to understand how its finances work?

Features of an Effective Nonprofit Budget

Forming new connections you can trust takes time and effort – so work on keeping the ones you have as this will help you in the long-term. If the structure or mission of your organization seems to share some things with them, that’s a good sign that you should apply. Creating lasting relationships with your suppliers and partners will save you time, energy, and even money! The better relationships you build early on, the easier things will be in coming years. Take our 2-minute survey to find out if outsourced accounting and bookkeeping is a good fit for your organization. Looking over your budget with new hard data will allow you to make any tweaks as necessary and head off serious potential problems.

• For example, capital investments typically take more than one fiscal year to pay off, which must be conveyed when budgeting.
• Administrative oversight, financial management, IT support, insurance, facility maintenance, volunteer coordination, and grant compliance all contribute to program success.
• For instance, the costs of program materials and necessary transportation will likely shift over time.
• It allows you to track various income sources, categorize expenses, and compare current figures with previous years.
• However, if you find it difficult to keep track of your organization’s finances or if you feel that a historical budget is more reflective of your organization’s needs, you may want to stick with that method.

best practices for nonprofit budgeting

Good budgeting for nonprofit organizations is critically important to success, as nonprofits typically have stretched resources, fluctuating funding, and/or heavy reliance on specific funding sources. For example, Network for Good is a nonprofit that provides nonprofit fundraising software, often receives donations on behalf of their partner nonprofits, and then passes the donations on to these partners. If we look at their 2018 Form 990, they had $475,384,887 in grants to US nonprofits and 69,269 in grants to foreign nonprofits, for an operating budget of $12,927,177. This shows the importance of operating budgets, because a $13 million organization is very different than a $475 million organization.

• By now, you’ve created a solid foundation for a super-effective nonprofit budget.
• These projects probably won’t be delivered every year, so separating your operational budget from your capital budget is the best way to go forward.
• To prepare this financial document, you’ll need to think about the timing of key fundraisers, appeals, and corporate or philanthropic donations, and any time-based factors that influence spending.
• Finally, it is important to review the budget periodically to ensure that it remains accurate and relevant.
• It’s not uncommon for this to be one of the biggest expense categories for nonprofits.

Remember that underfunding these areas often leads to inefficiency and reduced impact over time. Including these costs in your calculations provides a more accurate picture of program sustainability. While familiar, this approach might keep you from spotting opportunities for significant improvements. A fresh perspective comes from starting each fiscal year with a new comprehensive budget. Consider donor retention rates, grant renewal probabilities, program participation trends, and seasonal fluctuations. Transform funder connections with our 10 expert-crafted cold email templates.

Step 2: Outline Expenses for the Year

You should also create an initial timeline for the project so you can check in on your spending and fundraising as it progresses. The term “capital budget” might make you think of capital campaigns—the largest fundraising initiatives nonprofits typically run. A well-planned budget is the backbone of a successful nonprofit, guiding your financial decisions and helping you achieve your mission. Throughout this article, we’ve explored the importance of budgeting, different types of nonprofit budgets, and a step-by-step process to create one. A nonprofit strategic plan outlines your organization’s goals and activities for the year, while the budget ensures you have the resources to achieve them.