Nonprofit operating budget: 4 steps to get started

Executive directors should plan and make sure the budget plan is centered around the primary goals and objectives of your organization. To ensure that your nonprofit is adequately funded, be sure to set a separate budget for each department within your overall financial plan. By allocating funds to specific programs and initiatives, you can track and manage expenses more effectively and ensure that resources are distributed appropriately.

Identify program specific and general income categories

If you don’t write down your plans, you’re way less likely to reach your goals. If you want to raise enough money to cover your operations, then you have to be clear on what those costs are. Without a budget, you’re shooting in the dark, hoping and wishing that you’ll make enough.

#5 Propose the Nonprofit Budget to the Board of Directors

Revenue may not stream in as expected and large, unexpected expenses can creep up. With proper budget planning, nonprofits can easily reap the benefits of good budgeting. Technology is an important tool for responsible budgeting for nonprofits.

• If we look at their 2018 Form 990, they had $475,384,887 in grants to US nonprofits and 69,269 in grants to foreign nonprofits, for an operating budget of $12,927,177.
• Remember, every nonprofit is unique, and your main sources of income might differ from others.
• We strive to provide nonprofit leaders with useful resources, tips, and tools that you can use at your organization.
• Propel Nonprofits video about cash flow to help you better understand the ebbs and flows of your organization’s cash.
• We’ll explore how to align your budget with mission goals, optimize resource allocation, and navigate the complexities of fundraising and financial reporting.
• Because nonprofit funding is often very flexible, it’s absolutely necessary to have many diverse revenue streams.

Features of an Effective Nonprofit Budget

Create guidelines for when to adjust projections, shift resources between programs, or implement contingency plans. Equally important are the indirect support costs that keep your programs running smoothly. Administrative oversight, financial management, IT support, insurance, facility maintenance, volunteer coordination, and grant compliance all The Key Benefits of Accounting Services for Nonprofit Organizations contribute to program success. Every successful budget for non-profit organizations balances mission impact with financial stability. Understanding and managing both fixed and variable costs helps you make smarter spending decisions and maintain financial flexibility.

• Equally important are the indirect support costs that keep your programs running smoothly.
• For example, you may reach out to the new bus company you plan to use for your organization’s summer camp to estimate how much their services will cost.
• To clear up any confusion surrounding these resources, we’ll begin by answering some common questions about nonprofit budgets.
• Whit Hunter is the co-founder of BetterWorld, the free, easy-to-use online fundraising platform.
• Zero-based budgeting, on the other hand, starts from scratch each year, with all expenses being justified anew.

The process begins with the decision of which activities at your organization comprise a program for the purpose of budgets and financial reports. Often, the definition of programs is evident in how your organization delivers services and functions internally. You may already have clearly defined programs, departments, or projects. Some nonprofits identify every activity or grant as a separate program while others combine many activities under the umbrella term. For budgeting and allocations we suggest that you separate your activities into distinct programs that will provide meaningful insight into the financial model. As an example, an afterschool program https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ may operate in two locations or be funded by three grants.

This is a good time to review the current year’s actual income and expenses against the budget. Boards should analyze variances and consider if there will be any impact on the upcoming budget. This is also a prime opportunity to clarify the annual goals from the strategic plan. This nonprofit startup operating budget template features sections for total one-time startup expenses, monthly expenses, and total funds required to operate. Use this operating budget template to ensure that your nonprofit has accounted for every single cost and expense.

Zero-based budgeting, on the other hand, starts from scratch each year, with all expenses being justified anew. This can be a more time-consuming and difficult process, but it can also lead to a more accurate and transparent budget. Finally, it is important to review the budget periodically to ensure that it remains accurate and relevant. This may involve making adjustments based on changes in the organization’s operations or financial situation. The budget should be maintained using cash flow forecasting, forecasting revenue and expense, and analyzing expenditures’ effectiveness. The budget should also include an analysis of all short-term, medium-term, and long-term financial forecasts.