First, the budget must clearly align with the organization’s mission and strategic objectives. With these easy steps, you’re well on your way to creating a workable, up-to-date budget to help your organization thrive. Work to identify potential risks to your operations and create basic contingency plans that can make dealing with problems more straightforward when they occur. Your organization should also determine its policy on reserves, including the ideal long-term level as well as how much and when to contribute or draw them down. This can provide a baseline for future budgeting, allowing you to tweak as needed for your goals rather than starting from scratch. Simply collecting this crucial data can go a https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ surprisingly long way toward identifying and solving organizational problems.
Additional Resources
Each of these budgets is smaller in scope than your annual operating budget, which covers all of your organization’s activities. So, the revenue and expenses listed in your other budgets should line up with the overarching predictions in your operating budget. If a different type of budget overlaps multiple fiscal years, make sure your estimates are recorded in the correct annual operating budget.
Building a nonprofit budget: 4 steps to get started
- Every nonprofit is unique, so feel free to adjust the categories and templates to fit your needs.
- For example, if donations are lower than expected, you might reduce discretionary spending or launch a targeted fundraising campaign.
- But what exactly is an operating budget for nonprofits, and why is it so crucial?
- We recommend setting aside at least 5-10% of your annual budget for emergencies.
- While familiar, this approach might keep you from spotting opportunities for significant improvements.
- The Better Business Bureau’s Charity Accountability Standards mention that nonprofits should spend around 65% of their operating budget on program expenses.
Give yourself enough time to gather the necessary information and data, to think through and discuss the various elements of the budget, and to put it down on paper (or in Excel). The National Center for Charitable Statistics (NCCS) revealed that there accounting services for nonprofit organizations are currently 1.5 million nonprofit organizations registered in the United States. These organizations consist of civic leagues, public charities, fraternal organizations, and private organizations. One important fact about a budget is that it needs to be based on factual records.
Nonprofit Program Budget
You also must allocate funds to cover expenses related to your professional facilities. That could mean paying for monthly rent, the lease on an office space, or the mortgage on a recently acquired building. Additionally, the facilities category covers utilities—such as water, electric, gas, Internet, and trash/recycling—and upkeep for the building, parking and landscaping. You also should plan for occasional repairs and purchases of furniture, equipment and supplies for communal spaces, such as a new microwave or new desks.
A well-structured nonprofit budget serves as your organization’s financial planning roadmap, guiding decisions about program investments, staffing needs, and growth opportunities. This becomes particularly important when balancing mission-driven goals with fiscal responsibility, whether you’re running a local charity or a growing foundation. All funding sources can fluctuate, even government grants can dry up or disappear. This is why it’s so important to diversify your income streams as much as possible so you’re never reliant on one funding source. Some ways to do this can be hosting different or seasonal fundraising events, offering membership programs, or partnering with local businesses for sponsorships.
- They will be able to help you create a budget that meets your needs and ensures that your nonprofit is financially stable.
- This nonprofit budget example caters to nonprofits who need to send cash flow projections and budgets to funding organizations in order to secure grant monies.
- As a result, they need to evaluate their budget and make cuts while continuing to grow.
- By monitoring cash flow closely, your team can anticipate and plan for periods of lower cash availability.
- This information can provide insights into trends in the organization’s income and expenses, which can be helpful in estimating future income and expenses.
Order Your Finances So You Can Focus on Your Mission
Many nonprofits hesitate to reveal how much they spend on overhead costs with donors. Reframing overhead costs as stepping stones to making an impact can help donors understand why not all their funds go directly to programming. Like revenue, you’ll predict expenses based on what you’ve spent in different areas in the past. For example, the rent for your office is likely a fixed expense due to your contract with the building’s management company.
