To learn more about annual business budget templates, that can be used across different organizations, see Free Annual Business Budget Templates. Ultimately, remember that your budget should categorize revenue by different funding sources and your expenses by program vs. overhead costs. Here’s a very basic example—but remember that your organization’s budget might be more complicated than this (or maybe even simpler!). 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. Before starting with what is, essentially, a future-oriented process – clarify the present context.
Conclusion: Nonprofit Budgeting Is a Process
We leave this step until last because some funders, including many government funders, will not allow fundraising expenses to be charged to their grants or contracts. 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. A nonprofit budget is a planning document used to predict expenses and allocate resources for your organization.
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It allows you to track various income sources, categorize expenses, and compare current figures with previous years. Nonprofits rely on a combination of funding sources such as donations, grants, fundraising events, and more. These income streams are unpredictable and fluctuate throughout the year. You can easily find pre-built templates for operating budgets, program-based budgets, and grant proposals. You can also check out customizable templates to fit the unique needs of your nonprofit.
Budgeting: A 10-Step Checklist
Editable fields enable you to overwrite example figures (including revenue and expenses) with your own. This fully customizable template helps you determine your organization’s monthly, quarterly, and yearly net income so that you can gauge the financial health of your nonprofit’s budgeted operations. With so many different revenue sources and expenses, it can be tough to manage your nonprofit budgets. That’s why Relay (that’s us! 👋) helps nonprofits organize cash across multiple checking accounts. Our online business banking and money management platform allows nonprofits to open 20 individual checking accounts for program budgets, operating expenses, and beyond.
- There are a few things to consider when budgeting for expenses in a nonprofit.
- Since you’ll detail the source of each line item, you can pinpoint which areas need more resources and where you can cut back on spending.
- Large human services organizations have used NFF templates to manage complex budgets and ensure consistent financial reporting across multiple programs.
- Known as the overhead myth, the principle that nonprofits must stick to a certain percentage (typically estimated between 15 and 35%) is false.
- Small community nonprofits often rely on them when applying for their first grants.
- It’s not just about balancing the books; it’s about creating a clear financial roadmap, a basis that aligns resources with mission-driven goals.
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- Cash flow refers to the monthly movement of money coming in and out of your organization.
- Creating a budget is a cornerstone in establishing the financial health and sustainability of your nonprofit organization.
- I know that not everyone is comfortable with numbers and that budgets can be overwhelming.
- A grant budget is one of the most important parts of your grant proposal.
- Elizabeth Morgan Burrows, JD, principal of Burrows Consulting, stresses that you should have a detailed budget that lists each of your expected expenditures for the entirety of your project.
Within each category, list specific costs such as rent, staff salaries, supplies, https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ and transportation. Decide how much to allocate to each area, always keeping your nonprofit’s goals in mind. A well-crafted budget offers a benchmark for evaluating your organization’s financial performance over a specific period. By comparing actual progress against your budget, you can assess your programs, optimize operations, and make better decisions. Always allocate a portion of your budget to contingency funds, which can be a lifesaver when unexpected costs or emergencies arise. As your nonprofit grows and evolves, be prepared to shift resources to more critical areas of your mission.
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This helps you plan better and avoid financial surprises down the road. This guide will cover the five important sections that every nonprofit budget should include. These sections will provide a solid foundation for managing your funds wisely so you can stay focused on what really matters—your cause.
- Mid-size nonprofits with dedicated finance staff often leverage QuickBooks templates to centralize their budgeting and reporting.
- Feeling inundated with too many spreadsheets, repetitive data entry, and version-control issues?
- You may also receive income from grants, fundraising events, or investment earnings.
- Regular monitoring and adjustment of these strategies helps ensure consistent program delivery and organizational stability.
- Industry research shows that most nonprofit organizations operate with less than six months of cash reserves, highlighting the critical need for smart financial management.
For example, Doctors Without Borders allocates a significant portion of its budget (over 80%) to direct program expenses, ensuring most donations fund medical care in crisis zones. Apart from budgeting, the module also supports forecasting, helping you to anticipate future financial trends and make informed decisions. Remember that effective financial management looks different for 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 The Key Benefits of Accounting Services for Nonprofit Organizations optimize resource allocation and ensure each program advances your mission effectively.
It will serve you well as you run your programs, grow your organization, and make a difference in the world. It’s easy when you’re just starting out – and you’re super excited about the future – to operate on a lot of hope. The two primary components of a budget are income and revenue, and many subcategories fall under the umbrella of each. For example, if you have a strong fundraising track record and anticipate an 80% chance of achieving the predicted $100,000 revenue goal, the forecasted amount would be $80,000. With this approach, you determine the anticipated funding from each fundraising source by multiplying the expected amount with the corresponding probability percentage. “Our nonprofit will increase overall contributions by 20% by the end of 2024 through partnerships with local businesses and corporate sponsors.”
