Nonprofit Budgeting: How to Get Started + Template

There are lots of budgeting templates available online or you could create one of your own. Your operating budget, also known as a broad scope budget, gives you a financial picture of the activities your organization has planned for the coming year. Boards also use the operating budget to show projections of various amounts of revenue and their sources. Just as it sounds, an operating budget shows how much you intend to spend on operations for the next year. Under the heading of expenses, boards need to focus expenditures on their programs and activities.

True Program Costs: Program Budget and Allocation Template and Resource

• These usually include a comprehensive set of income and expense categories.
• For some people, the functionalities of a nonprofit organization remain unclear.
• Many foundations and most government agencies will have detailed rules about what can and cannot be included in a proposal budget.
• It offers a user-friendly layout that allows for detailed tracking of both income and expenses, ensuring that organizations can maintain oversight of their financial health.
• Nonprofits can keep tabs on their annual program revenue vs. expenses with this easy-to-use nonprofit program-based budget template.

During your last budget review meeting of each quarter, review your financial data more closely and take more time to visualize the current and future state of your organization’s activities. For the purposes of this article, we’ll focus primarily on operating budgets because of their central role in nonprofit finance. Additionally, remember that any budget that covers a specific aspect of your nonprofit’s spending and fundraising should align with your operating budget. A nonprofit budget is a planning document used to predict expenses and allocate resources for your organization.

Other Administrative Costs

Many nonprofit budget templates also come with built-in formulas and functions to automatically calculate percentages, variances, and totals. To counteract such challenges, you can use these five best practices to make your annual operating budgets more useful to all your stakeholders. In doing so, you can position your organization for success in your next budget year and beyond.

Consider income inconsistencies

• 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.
• Donors and stakeholders demand transparency in how their contributions are utilized.
• With that comes a good faith understanding that funds will be spent prudently, which makes your budget a mechanism for transparency between your organization and various stakeholders.
• This budget serves as a roadmap for the organization’s financial activities and helps in decision-making, resource allocation, and monitoring of financial performance.
• Since it defines your organization’s overarching priorities, you should organize your budget in a way that enables your nonprofit to achieve those goals.
• If you are still unsure of how to develop a budget, you can consult with a financial advisor or accountant.
• Although the concept may seem odd for a small or midsize nonprofit organization to consider, the truth is that all organizations have a capital structure, whether they are actively aware of it or not.

Revenue can be one of the more difficult parts of developing a budget – simply because it’s harder to forecast than expenses. An inclusive budgeting process can certainly be challenging and messy and with a great deal of debate. However, this approach to budgeting presents a great opportunity to bring in and unite various perspectives. Identify opportunities, threats, and emerging trends likely to influence your activities (both internal and external to your organization).

Once the organization’s major sources of income and expenses have been identified, the next step is to estimate the amount of income and expenses for the upcoming budget period. For example, if one of the organization’s goals is to increase its funding from grants, then the budget may need to include funds for research on potential grantors and for writing and submitting grant proposals. There is no one-size-fits-all answer to this question, as the steps involved in creating a nonprofit budget will vary depending on the specific organization and its financial situation. You may see many nonprofits start as grassroots organizations, and at that stage it’s reasonable to use spreadsheets to plan budgets.

The whole point of this document is to know if you have enough funding to cover you for the fiscal year. That means you need to end up with a balanced budget, or better one that shows a surplus. But if you are coming up short, you will need to reassess nonessential costs in order to bring your budget into alignment. Or decide how to increase your revenues in order to cover any shortcomings. This can include holding more events, applying for more grants or contacting major donors for more support. Either way, you need to cover the gaps, and having a solid statement will really help you find those gaps and better strategically plan ahead of time how best to cover them.

• In this guide, you’ll walk through the essentials of budgeting for nonprofits, covering different budgeting methods, best practices, and key components.
• The ultimate guide to selecting the best accounting and financial management software for your nonprofit.
• This shows the importance of operating budgets, because a $13 million organization is very different than a $475 million organization.
• When determining how to allocate funds, it is important to consider the organization’s overall goals and objectives.
• Be sure to consider inflation, potential cost increases, and one-time expenses.
• A budget for non-profit organizations must prioritize reserve building through intentional planning and disciplined execution.

It details the costs your organization will incur accounting services for nonprofit organizations and the revenue you expect to receive over a set period of time. At the first budget planning meeting, the board or budget committee should agree on their financial goals. This will require prioritizing program delivery goals and setting organizational financial goals.

Rely on nonprofit accounting software

In fact, a survey conducted by Sage found that nonprofits rank budgeting and financial planning as one of their top five internal challenges. Nonprofits often rely on unpredictable funding streams such as donations, grants, and seasonal fundraising campaigns. This unpredictability can make it difficult to maintain a consistent income flow, leading to challenges in long-term planning and resource allocation. Are you looking to expand a program, https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ hire additional staff, or purchase new technology? For example, a small nonprofit focused on youth development should regularly include volunteers in their budget planning meetings.

key elements of an effective nonprofit budget

Lastly, it’s rare that nonprofits have unlimited funds, so they need to be realistic and thoughtful about setting restrictions on what they can spend money on. Board directors should be careful to consider the state of the economy and any unusual or unforeseen financial situations of their contributors. 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. If you are still unsure of how to develop a budget, you can consult with a financial advisor or accountant.