Whoever does the grant writing will inevitably need some form of the budget to accompany most applications. Many foundations and most government agencies will have detailed rules about what can and cannot be included in a proposal budget. This organizing principle will help to track spending against your budget throughout the year and allow managers to identify what flexibility is available to them for mid-year adjustments. Additionally, think about organizing your budget document to group together expenses and expense areas that are the responsibility of each manager. Sign up for our newsletter to get the latest industry updates, expert insights, and exclusive downloadable resources—all delivered straight to your inbox.
Properly Categorize Expenses
Some organizations might also include admin or facilities expenditures in their program budget allocation. Each nonprofit will have its own optimal overhead allocation, depending on its age, size, geographic location, and specific needs. You may have heard that nonprofits should spend a certain amount on overhead expenses. Known as the overhead myth, the principle that nonprofits must stick to a certain percentage (typically estimated between 15 and 35%) is false.
Identify Expenses
Your nonprofit budget is meant to be a flexible document that changes as your circumstances do. After all, sometimes you have a boost in revenue, or get hit with a pesky unexpected expense. Next, turn to the revenue side of your budget to figure out exactly how and when you’ll raise the funds you need to cover all the costs you outlined.
Get started with a free nonprofit budget template
This alignment helps avoid wasting money on activities that won’t advance your mission. It serves as your financial roadmap, guiding day-to-day financial planning, monitoring cash flow, and evaluating your organization’s overall financial health. Think of it as a roadmap that helps your team manage financial resources effectively, ensuring you have the funds to support your programs and initiatives. In this guide, you’ll walk through the essentials of budgeting for nonprofits, covering different budgeting methods, best practices, and key components. A nonprofit budget template Excel creates is pretty similar to a nonprofit budget template Google Sheets does – so don’t be overly concerned about the platform.
In times of political volatility, clarity becomes a currency, and sustainability is necessary. For nonprofit leaders facing a whirlwind of executive orders, budget freezes, and unpredictable funding streams, today’s environment demands more than passion to help your community. While some of your actual fundraising campaign goals might be ‘reach’ goals to push your team, it’s best to write more conservative estimates in your budget. That way, you’ll know to keep your predicted expenses low enough that you can still cover them if you fall short of your ‘reach’ goal.
This means you’ll want to review your forecasted revenue and expenses against your budget on a regular basis. A forecast simply takes into account what you’ve made and spent to date, so you can adjust your projections accordingly. At least once a month, you should compare your forecast to your budget to ensure you’re on track to fulfill your mission.
Nonprofit Budgeting: How to Get Started + Template
A well-structured nonprofit budget serves as your organization’s financial planning roadmap, guiding decisions about program investments, staffing needs, and growth opportunities. This becomes particularly important when balancing mission-driven goals with fiscal responsibility, whether you’re running a local charity or a growing foundation. Paybee’s automation tools reduce the burden of manual entry by syncing with your fundraising campaigns. For instance, if your nonprofit hosts an event, Paybee automatically tracks ticket sales and The Key Benefits of Accounting Services for Nonprofit Organizations updates your nonprofit budget to reflect any income you derive from your activity.
Do nonprofit budgets have to break even?
- A well-crafted budget not only keeps an organization on track but also demonstrates to donors and funders that funds are being used responsibly.
- While no two nonprofits are exactly alike, there are some best practices that all organizations should use when building their annual operating budgets.
- This can include covering liability for employees or volunteers, property insurance for buildings and equipment, and insurance for events or activities that your nonprofit hosts.
- A budget for non-profit organizations should function as a living document, not a set-and-forget plan.
- It should also include program revenue, demonstrating to potential funders that you have a clear plan for how to obtain funding for the specific project or program.
There are also templates that can be used that offer pre-designed formats tailored to common nonprofit needs. Reporting tools that can generate summaries of your income and expenses are also a necessity for transparency and accurrate planning. Although you’ll finalize a new operating budget at the start of each fiscal year, budgeting shouldn’t be a one-and-done event.
- A budget for non-profit organizations must plan beyond immediate operational needs.
- He’s quick to remind his clients that a realistic budget is a winning budget.
- This is why it’s critical not to put all of your eggs in one basket when outlining the revenue side of your operating budget.
- In this guide, you’ll walk through the essentials of budgeting for nonprofits, covering different budgeting methods, best practices, and key components.
- The budget is then presented to the nonprofit board of directors for comment, feedback, and, eventually, approval.
How to write a nonprofit budget
Instead of predicting revenue by individual grants or line items, the cutoff method looks at revenue as a whole. To use this method, simply calculate the projected fundraising revenue by multiplying the estimated total amount with the probability estimate. In the final section, we’ll explore the importance of leveraging expert financial services, such as Rooled’s outsourced CFO services, to optimize budget management and foster nonprofit success.