This is also a prime opportunity to clarify the annual goals from the strategic plan. Without an annual nonprofit budget, you’re essentially operating in the dark. You could easily overspend, winding up deep in debt or worse – unable to continue serving your beneficiaries.

• Above all, a budget for non-profit organizations must remain flexible enough to adapt to changing circumstances while maintaining fiscal responsibility.
• For instance, studies show that investing 5-10% of the total budget in volunteer development can improve volunteer retention by up to 20%.
• At least once a quarter (but ideally bi-monthly or monthly), compare actual expenditures against the projected budget to make sure your nonprofit is on track.
• Before starting with what is, essentially, a future-oriented process – clarify the present context.
• However, it can also lead to a lack of transparency and accountability, as well as to a feeling that the budget is not truly reflective of the organization’s needs.

Budgeting for nonprofit organizations: Tips and best practices

Use a program-based approach to understand true costs, include adequate overhead allocation, and build in reserves. Involve key stakeholders in the planning process and create regular review cycles for monitoring and adjustments. For example, let’s say an education-focused nonprofit had an ongoing program that provided free tutoring for high school students. Similarly, their expenses for supplies, classroom space, and marketing might fluctuate year to year, which the program budget should take into account.

Nonprofit Marketing Budget Plan Template

Fundraising is already challenging enough, but keeping your organization financially sustainable adds another layer of responsibility. Like the above answer, every organization will have a different percentage of their budget for salaries. His entrepreneurial journey started as an accountant for two Big Four accounting firms, then to managing rock bands for 10yr. Financial advising called him, and he built one of the first ever outsourced accounting firms. Imagine a small community where every high school graduate is guaranteed the opportunity to attend college or technical school tuition-free. Now, think about how that promise can create new student opportunities while enhancing the entire local economy.

Overhead Costs (Fixed)

• Having a formula, such as budgeting 25% of last year’s new donors’ total gifts, protects against such overconfidence.
• If you are looking for a more transparent and accountable budget, you may want to consider using a zero-based budget.
• Many Executive Directors spend a substantial amount of time working directly in programs.
• The main budget you’ll create is your operating budget, which details the costs you’ll incur and the revenue you’ll generate over the next year.
• In this guide, you’ll walk through the essentials of budgeting for nonprofits, covering different budgeting methods, best practices, and key components.

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). 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. Be sure to include these expenses if the organization needs accounting services for nonprofit organizations to rent or maintain a physical location for its operations. If your nonprofit can operate remotely, you may be able to save a considerable amount of money in this category. Nonprofits have to walk a fine line between funding their fundraising and funding their mission efforts—be sure to think through this balance carefully.

• By starting fresh each year, you ensure your budget remains a dynamic tool for achieving your mission.
• This includes determining how much revenue will come from small, mid-level, and major gifts, as well as whether you’ll use any existing funding toward the initiative.
• Once you’ve finished the budgeting process, you will present your proposed budget to the board.
• You (and many others) might be tempted to put off budgeting until the last minute.
• This is also sometimes called a “broad scope budget” or an “annual budget” because it gives you a full picture of what the coming year should look like.

What is a nonprofit budget?

These professionals focus on your financial strategy and can use specialized tools to forecast your nonprofit’s cash flows for more effective resource allocation. If you’ve created a budget for your household before, you probably averaged your expenses, calculated your income, and determined how much you could save for the future. Nonprofit budgeting follows a similar process, except you’re projecting revenue and expenses for your entire organization. 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.

Regularly update budget estimates based on real-time information and feedback from staff involved in program delivery. This will also show you which funding sources are most reliable, especially true of recurring donations and multi-year grants. Start with setting clear goals and bringing in key stakeholders—such as program https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ managers and department heads—who can provide detailed estimates of expected costs and revenues. You can use a capital budget to ensure such initiatives have minimal impact on daily operations.

This confusion brings us to a point where we need to differentiate between capital budgeting and operating budgeting. Operational revenue and expenses are the critical components of an accurate and helpful operating budget. Instead of doing an overall annual tracking, use a format that allows you to budget your non-profit activities monthly.

This grant proposal budget template caters to nonprofits seeking funding for their organizations. Enter the details of your nonprofit’s year-over-year projected and actual revenue, along with expenses, to compare the former to the latter. List income sources and figures in monthly columns to determine month-by-month total income. Enter project expenses in the same month-by-month columns to compare total expenses to total revenue. This template provides an accurate picture of your nonprofit’s budgeted operating costs and all-around fiscal health. One of the first features to look for in these types of tools is their user friendliness and how easily they integrate into your current work flow.

Why nonprofit budgeting often takes a back seat

• However, there are certain nonprofit expense categories that remain consistent, regardless of industry or individual mission.
• The success of a charity nonprofit, such as Harmony Hearts Initiative, relies heavily on clear identification of the major operating expenses involved in program development and implementation.
• It should include some typical sources of revenue and expenses, which saves you time on listing everything out.
• Develop, analyze and apply your organization’s budgets with expert help from the nonprofit financial professionals at Jitasa.
• Each of these budgets is smaller in scope than your annual operating budget, which covers all of your organization’s activities.

While the annual budget is your broad-scope budget, you’ll need a separate budget for capital expenditures such as land acquisition and construction projects that take more than one year to complete. Your capital budget will inform your operating budget to ensure you have enough cash for both your short-term and long-term goals. When preparing a grant budget, it’s important to comply with the guidelines of the funder. Some funders may cap how much of the grant can be allocated to indirect costs (overhead or administrative expenses), with most placing this cap at around 15%.