Nonprofit Budgeting: Step-by-Step Guide + Free Template

For example, an animal rescue organization could negotiate bulk discounts for pet food or veterinary supplies to stretch its budget further. A nonprofit operating budget is a financial plan that outlines expected income and expenses over a set period, usually one year. This 5 Main Benefits of Accounting Services for Nonprofit Organizations allows you to make accurate decisions about where to allocate your charity’s resources and track its financial performance over time. The most important financial planning tool at your organization’s disposal is its annual operating budget. Jitasa’s nonprofit budgeting guide defines this resource as ‘a planning document used to predict expenses and allocate resources for your organization. It details both the costs that your organization will incur as well as the revenue you expect to receive over a set period of time.’ In the case of an operating budget, that time period is one fiscal year.

What is a Nonprofit Operating Budget?

Once your nonprofit budget is created, it must be reviewed and approved by the organization’s board of directors. An effective nonprofit budget prioritizes important things that push your goals forward. The more resources and funds you dedicate to them, the more likely you will reach your objectives. Consider potential changes in your funding sources, program demands, or economic conditions.

Types of Nonprofit Budgets and How to Create Them

Good budgeting demonstrates accountability and transparency, which are important issues that donors and grant-makers look for before offering funds. Good budgets assure donors that the nonprofit is actively overseeing the budget process. Once the budget has been created, it is important to monitor actual expenses and income on a regular basis. https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ This will allow you to make adjustments as needed to ensure that the organization remains on track to meet its financial goals.

• This helps raise awareness for their mission while ensuring sustainability and success in achieving their goals.
• In determining the income budget, the committee will need to project income based on the current fundraising and revenue activities.
• Having a detailed plan, such as a nonprofit budget sample for each program or fundraising activity, helps you maintain transparency and meet donor expectations.
• Plus, nonprofits rely on donations from community members—along with local, state, federal, and foundation grants—to stay operative.
• A well-formulated operating budget allows for best use of limited nonprofit resources and sets the course for the organization.

What are the different types of nonprofit budgets (Operating, Cash Flow, and Capital)

• Your capital budget includes projects that have an ongoing impact on your operations.
• One of the most valuable results of understanding the true cost of programs is the ability to make wise choices about how to support mission critical work.
• The Nonprofit Annual Budget Template is designed specifically for nonprofits looking to streamline their yearly financial planning.
• Ideally, salary allocations will be based on regular, reliable tracking of time.
• An operating budget is not just a financial document; it’s a reflection of a nonprofit’s commitment to achieving its mission.

Transparency fosters trust and ensures everyone is working toward the same financial goals. For example, WWF (World Wildlife Fund) frequently reviews its budgets to optimize spending for conservation projects, making data-driven decisions for global campaigns. In FY23, WWF increased spending on conservation programs by 16% compared to FY22. Creating a nonprofit budget can feel overwhelming, but breaking it into manageable steps can simplify the process and ensure accuracy. Consider staff costs, professional services, technology investments, insurance, and office expenses.

Set financial goals for your organization

Having a detailed plan, such as a nonprofit budget sample for each program or fundraising activity, helps you maintain transparency and meet donor expectations. Below is a basic nonprofit operating budget example to show how these components typically come together. Most nonprofit budgets have columns indicating the period covered, budgeted amounts, actual spending, and the percentage difference from the previous period or year. To keep everything organized, your budget categorizes funds into clear nonprofit budget categories, helping you allocate resources efficiently and maintain financial stability. The ultimate guide to selecting the best accounting and financial management software for your nonprofit. Are you responsible for managing a nonprofit’s budget, or are you looking to support an organization and want to understand how its finances work?

Ways Nonprofits Can Improve Data Quality and Insights

• However, revenue diversification is not merely about having multiple income streams; it is an essential strategy for long-term sustainability and growth.
• Above all, a budget for non-profit organizations must remain flexible enough to adapt to changing circumstances while maintaining fiscal responsibility.
• Below, we give you our list of steps to take that will guide you in keeping your document standard-based.
• That way, the funder has a clear understanding that your nonprofit has the means and manpower to complete the proposed project.
• 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.
• It can also help to identify areas where the organization may have been overspending or under-earning, which can then be addressed in the budget.
• Many nonprofit budget templates also come with built-in formulas and functions to automatically calculate percentages, variances, and totals.

You may have heard of the 65/35 ‘rule’ of nonprofit expense allocation, which states that nonprofits should spend at least 65% of their funding on programming and no more than 35% on overhead. In reality, this breakdown will look different for every nonprofit treat the ‘rule’ as more of a guideline to help you reduce overhead costs and maximize program spending. You also want to pay close attention to different budgets within your nonprofit’s plan. To help you through the budgeting process we’ll walk you through every line item you might need to include and show you how to create your own nonprofit organization budget template.