Your nonprofit’s first budget is a critical tool for both planning purposes and managing finances as the organization grows. Carefully track your numbers this year, and next year’s budget will be easier to create. That means diligently tracking and recording expenses and revenue, plus program numbers (like number of people helped, number of dogs adopted, etc.). Those details will come in super handy when you start projecting expenses for next year. By simply gathering your data, making revenue and expense projections, and regularly reviewing and updating your budget, you’ve conquered a key part of the business of running a nonprofit. All operating budgets can be broadly split into two categories – revenue and expenses.
Business Membership
Looking over your budget with new hard data will allow you to make any tweaks as necessary and head off serious potential problems. 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 https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ even money!
Pay Attention to All Your Budgets (eg. Marketing vs. Operating vs. Project budgets)
The first is to make sure that all of the expenses are covered by the income of the organization. The second is to make sure that the expenses are in line with the goals of the organization. The third is to make sure that the expenses are affordable and realistic.
Don’t fall into the overhead myth.
Including insurance in a nonprofit operating budget helps protect your organization from unexpected financial risks. This can include covering liability for employees or volunteers, property insurance accounting services for nonprofit organizations for buildings and equipment, and insurance for events or activities that your nonprofit hosts. Travel may be necessary if staff members or volunteers attend conferences, meetings, or events related to your mission.
- Equally important are the indirect support costs that keep your programs running smoothly.
- A zero-based budget starts from scratch with a blank slate every year.
- It’s also useful to look at the financial trends for your programs over the past few years, and assess if each program is covering its direct costs, or contributing to overhead.
- Regardless of whether a funder will pay for fundraising expense, it remains part of the total cost of running each program and we need this information to be truly informed.
- Without a budget, you can find yourself in deep water, fast, with more money going out than coming in.
List program expenses (staff salary, insurance, supplies, fundraising fees, etc.) to see your total nonprofit program expenses vs. your actual revenue. Budgeting for a surplus allows you to support future innovations and invest in your staff. The goal is to avoid the “nonprofit starvation cycle” of never having enough to invest resources in infrastructure, or having an overhead that is “too lean” to effectively run the organization.
Want to build an effective fundraising campaign?
For example, if you have it in your plan to buy new computers for your staff or to build a new website, create a separate budget for those projects. Consider segregating staff expenses as it usually comprises anywhere from 60% to 90% of an organization’s budget. Budgets may be requested by parties involved in financial transactions with the nonprofits, such as banks, or by donors/grantmakers considering a gift to the nonprofit. If your fiscal year starts January 1, start working on your budget in September or October so you have plenty of time to create it and get it approved before you need to implement it.
- Regular comparison of budget versus actual figures highlights areas needing attention before they become problems.
- Apart from budgeting, the module also supports forecasting, helping you to anticipate future financial trends and make informed decisions.
- Although it’s never too late to make a budget, the process should ideally start two or three months before the beginning of your next fiscal year.
- Furthermore, it’s important to remember how each type serves a slightly different purpose.
- Making a budget is a whole lot easier when you’re not relying on guesswork.
Nonprofit Budgeting: How to Get Started + Template
Once adopted, the operating budget also becomes an essential financial management tool helpful in monitoring ongoing operations and organizational activities throughout the year. With each reporting period, the organization compares actual performance against its plan. Facilities costs are the day-to-day expenses that keep your nonprofit running.
Focus on Cash Flow
It will cover all the expenses required to keep the organization running, from salaries and utilities to technology and insurance. The budgeting process begins by gathering input from the right people. Involve board members, department heads, program managers, and financial officers. Each stakeholder provides unique insights into the organization’s priorities and operational needs. For example, program managers can offer details about anticipated costs, while financial officers can provide an overview of past income trends. Even if your nonprofit is just getting started, it’s not too soon to get into Quickbooks or another accounting software that can help you track and analyze all your income and spending.