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. A budget is a guide that can help a nonprofit plan for the future as well as assess its current financial health. It is good practice to periodically review the budget as well as compare it to the actual cash flow and expenses, to determine whether they are playing out as expected during the course of the year. This category includes all the costs of hiring and retaining staff—including salaries, payroll taxes, health insurance, retirement contributions, and other benefits. Nonprofit organizations need to budget enough for these expenses to ensure they can attract and retain qualified staff while remaining financially sustainable. Salaries make a significant part of a nonprofit’s program expenses as no organization can run without staff.
Develop Income Projections
This can be challenging because, unlike for-profit businesses, nonprofits rely on a wide variety of funding sources. You may want to create both types of budgets to help your team stay on track and avoid overspending. For even more detailed planning, you can also create a capital budget (used for long-term projects) and various grant budgets (for defining how you’ll use funds if your grant proposal is accepted). Even profitable programs can face challenges when expected revenue arrives months after expenses occur or when donation patterns don’t align with regular operational costs.
- Throughout the year, you’ll be able to track which avenues are working best for you.
- Their insights and perspectives can be invaluable in creating a budget that is both realistic and focused on achieving the organization’s goals.
- Clearly defining these will help you allocate resources effectively and guide decision-making throughout the budgeting process.
- Simplify your nonprofit budgeting process with Zeffy, the only 100% free fundraising platform.
- But if you’ve never created a budget or thoroughly reviewed your finances, it can feel overwhelming.
- Beyond mapping out your expenses and revenues, this financial plan also helps you monitor your organization’s activities and ensure you use your funds wisely to support your mission.
Sample budget for nonprofit organizations
We recommend setting aside at least 5-10% of your annual budget for emergencies. Nonprofits are https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ recommended to have general liability (premise), commercial automobile (non-owned/hired), and directors and officers (D&O) liability coverages. Historical budgeting simply means using the previous year’s budget as a starting point for the coming year’s budget.
Calculate your nonprofit’s expenses 📊
Remember that effective financial management looks different for accounting services for nonprofit organizations every organization. Start with the tips that address your most pressing needs, then gradually incorporate others as your systems mature. Regular performance reviews and cost-benefit analyses help optimize resource allocation and ensure each program advances your mission effectively. A budget for non-profit organizations must prioritize reserve building through intentional planning and disciplined execution. As mentioned at the outset, industry data shows that most nonprofits operate with dangerously low reserves, making this aspect of budgeting crucial. Creating a budget for non-profit organizations often involves following historical patterns—budgeting based on last year’s numbers with minor adjustments.
Compile Your Expected Income and Funding
Our integrated approach empowers organizations to connect deeply with their audiences, expand their reach, and achieve measurable results—all without stretching their resources. Direct Relief is a great example of how contingency funds can help tackle unforeseen emergencies. It uses its reserve fund to manage unexpected costs during disaster relief efforts. In 2023, it allocated 46% of its program budget ($58.2M) for emergency disaster response.
- Feeling inundated with too many spreadsheets, repetitive data entry, and version-control issues?
- To ensure that all expenses are accounted for, it is helpful to create a budget template that can be used on an annual or monthly basis.
- Program-based financial information will be most useful for planning, management, and communications if it is comprehensive, accurate, and used consistently.
- Ensure that all stakeholders understand the budget and are committed to adhering to it throughout the fiscal year.
- Assign an average value for flights ($600), hotel stays per night ($250), per diem rates for food ($50), transportation ($50) and more to make it easier to calculate trip costs.
- We strive to provide nonprofit leaders with useful resources, tips, and tools that you can use at your organization.
Once all expenses have been accounted for, you can then begin to allocate funds to each category. A capital budget is a long-term financial plan that covers major investments and projects needed to strengthen your organization over time to sustain its growth. A capital budget typically includes things like building new facilities or acquiring new equipment needed to meet the demands of increased demand for services provided by the nonprofit organization. For example, if the organization’s major sources of income are donations and grants, then the budget may need to include funds for fundraising activities and grant writing.
- Even profitable programs can face challenges when expected revenue arrives months after expenses occur or when donation patterns don’t align with regular operational costs.
- In this blog post, we will walk you through the steps to create a robust budget for your nonprofit organization and explore how nonprofit accounting software can be a valuable ally in this endeavor.
- It may also be budgeted for outreach efforts, site visits, or other programs that require travel.
- This can provide a baseline for future budgeting, allowing you to tweak as needed for your goals rather than starting from scratch.
- From fluctuating income streams to increasing demand for programs, organizations must plan carefully to navigate financial complexities while maximizing impact.
What Is A Nonprofit Budget and Why Is It Important?
The budget should include realistic revenue projections based on historical data and current fundraising capacity. Many nonprofits strategically select their fiscal year to align with their operational rhythm. WildApricot is an affordable cloud-based software for small associations, non-profits, state and local chapter organizations. Manage membership, donations, accept payments, host your website, and run events. For more on start-up and small business budget templates, see Free Startup Budget Templates and Free Small Business Budget Templates.
