Budgeting for nonprofit organizations: The board’s guide

A budget for non-profit organizations needs structure without unnecessary complexity. Well-designed budget templates streamline financial management while ensuring you capture accounting services for nonprofit organizations all essential information for decision-making and reporting. A budget for non-profit organizations becomes more effective when broken down by program expenses. Program-based budgeting helps you understand the true cost of each initiative, measure actual performance, and make informed decisions about resource allocation. Even organizations working with a shoestring budget must think carefully about costs.

• By the end of this guide, you’ll have a clear roadmap for creating a nonprofit budget that supports your organization’s vision and ensures long-term success.
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• For most nonprofits, some programs may be financially self-sustaining or even generate a surplus.
• With so many different revenue sources and expenses, it can be tough to manage your nonprofit budgets.
• With this type of budget, unspent funds are either deleted or reallocated.

Are there different types of nonprofit budgets?

While you might https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ have a comprehensive nonprofit business plan – situations can change, and so will your budget. The template includes a revenue summary section that calculates your total grant income and a net section to help you quickly determine your program’s financial sustainability. Be sure to include these expenses if the organization needs to rent or maintain a physical location for its operations.

• All operating budgets can be broadly split into two categories – revenue and expenses.
• You’ll also want to get a clear idea of your revenue streams to understand where your money is coming from.
• General Services Administration, which is a simple budget in Google Sheets that can be tailored to your specific budget line items.
• If you’re managing a multiple six- or seven-figure budget, asking a financial expert for help is always a good idea.
• However, most nonprofits are community-based and work with smaller budgets of less than $500,000 annually.
• You can use cost-benefit analysis to determine if the event would be more valuable than some other methods of fundraising.

Administrative Expenses

Nonprofits fund employee salaries through diverse revenue streams, including grants, donations, program fees, and earned income. Many organizations include salary costs in grant proposals and build appropriate overhead into their program budgets. Successful nonprofits prioritize competitive compensation to attract and retain talented staff while maintaining transparent communication with donors about staffing costs.

• Once adopted, nonprofit operating budgets become an essential financial management tool to plan and monitor operations and organizational activities through the year.
• This budget includes expected income, expenses, and funding for a small nonprofit organization.
• Your administrative and fundraising expenses put together make up your nonprofit’s overhead.
• An operating budget is a budget that is used to cover basic day-to-day costs like materials, supplies, rent, utilities, etc.
• Reframing overhead costs as stepping stones to making an impact can help donors understand why not all their funds go directly to programming.
• It includes major purchases like buildings, vehicles, technology systems, or equipment that will serve your organization for several years.

Which budgeting method should I use?

• For most brand-new nonprofits, creating your first budget means starting with a blank piece of paper (or a blank screen).
• Articulate the main purpose of your budget and think about a structure that will best support that purpose.
• For organizations in the nonprofit sector, try to allocate between 5-15% of your budget to marketing.
• Since we’re in the business of helping nonprofits, and creating the tools they need to do more good, we wanted to help by creating a sample nonprofit budget template that is free to download and use.

That’s why we’ve put together the ultimate guide to making your own nonprofit program budget — complete with THREE free nonprofit budget templates. 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. Your operating budget, also known as a broad scope budget, gives you a financial picture of the activities your organization has planned for the coming year. Boards also use the operating budget to show projections of various amounts of revenue and their sources. Just as it sounds, an operating budget shows how much you intend to spend on operations for the next year. Under the heading of expenses, boards need to focus expenditures on their programs and activities.

Executive directors should plan and make sure the budget plan is centered around the primary goals and objectives of your organization. During your last budget review meeting of each quarter, review your financial data more closely and take more time to visualize the current and future state of your organization’s activities. But each budget will include direct costs, those expenses related to the project or program you’re funding, as well as indirect costs that go along with running an organization. Depending on the type of grant you win, the award will cover only direct costs, or, if a general operating grant, it may cover much more.

Projected Expenses

Some of your organization’s expenses remain steady month after month, while others change based on your activities. A budget for non-profit organizations must balance multiple priorities while maintaining clarity and usability. Several key features distinguish effective nonprofit budgets from basic financial plans. Managing a budget for non-profit organizations effectively can make the difference between thriving and barely surviving. Industry research shows that most nonprofit organizations operate with less than six months of cash reserves, highlighting the critical need for smart financial management.

QuickBooks Online is a small business accounting software and app that allows you to manage your business anywhere, anytime. Your budget is full of a lot of information, but it doesn’t have to be overwhelming. Go one category at a time, and don’t panic about getting overly detailed.