What Your Organization Needs to Know about Nonprofit Budgeting

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.

Government vs Foundation Grants: Key Differences in Writing for Federal vs Private Funders

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. A non-profit operating budget is a financial plan that outlines the organization’s projected revenue and expenses for a specific period, typically a fiscal year. This budget serves as a roadmap for the organization’s financial activities and helps in decision-making, resource allocation, and monitoring of financial performance. It includes various components such as income sources, expenses, cash flow projections, and financial goals.

Top-down budgeting

Create a rough https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ list of these costs and highlight the ones that will apply to the coming fiscal year. Then, add them together with your existing expenses, such as rent, bills, and salaries for your current staff members. Use this estimate to set an overall goal of how much revenue you’ll need to bring in to cover all of your costs for the year. To clear up any confusion surrounding these resources, we’ll begin by answering some common questions about nonprofit budgets. Blackbaud Financial Edge NXT®️ delivers intuitive cloud fund accounting software designed specifically to meet the needs of nonprofits and tax-exempt organizations.

Some other considerations might include:

Step back and assess your fundraising strategies and how potential changes could affect your expected contributions. Consider the impact of any grants or sponsorships, including both new ones you may win and current ones that may shrink or dry 5 Main Benefits of Accounting Services for Nonprofit Organizations up. This can provide a baseline for future budgeting, allowing you to tweak as needed for your goals rather than starting from scratch. Simply collecting this crucial data can go a surprisingly long way toward identifying and solving organizational problems. This category can help your organization cover unexpected repairs, unplanned staff meals, and other odds and ends.

• When estimating fundraising income, don’t forget to look at multi-year trends in your organization’s fundraising.
• Getting an idea of what these streams bring in will help you see how useful each of them are to your organization long-term.
• Creating a non-profit operating budget allows organizations to set clear financial objectives, track progress towards those goals, and make informed decisions to ensure financial sustainability.
• 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.
• A well-structured nonprofit budget serves as your organization’s financial planning roadmap, guiding decisions about program investments, staffing needs, and growth opportunities.
• Regularly compare actual expenditures against the prepared budget to ensure your nonprofit is on track.

Things like utility, bills, office supplies, and software subscriptions may seem minor on their own, but when combined they can create significant overhead costs that eat into your budget. Investing in cash management software is also a great way to gain better visibility and ensure financial stability. It helps prevent your organization from focusing only on total budgeted amounts without considering when the cash will actually be available. This will also show you which funding sources are most reliable, especially true of recurring donations and multi-year grants. Start with setting clear goals and bringing in key stakeholders—such as program managers and department heads—who can provide detailed estimates of expected costs and revenues.

• Fund your mission and transform your impact by reading The Ultimate Guide to Nonprofit Fundraising.
• If a different type of budget overlaps multiple fiscal years, make sure your estimates are recorded in the correct annual operating budget.
• But if you need a hand or are looking for some expert advice, The Charity CFO is here to help.
• It typically requires getting income from multiple sources for nonprofits to thrive.
• With this comprehensive annual nonprofit operating budget template, you’ll get  quarter-by-quarter and yearly insights into income and expenses.

• Good communication between the program, finance, and development departments and the board is key to monitoring the budget during the year.
• Last, up to half a year after the operating budget’s fiscal year, an audit will occur.
• Let’s explore how you can build a stronger financial foundation through effective nonprofit budgeting.
• Your nonprofit may be feeling this stress right now, given the uncertainty in federal…
• They can mean the difference between surviving a rough patch and being forced to close down.

She then elaborated that through the document, nonprofit organizations can set limits on their spending following the availability of financial resources. Needless to say, such a document is very important for this sector of organizations. Nonprofit organizations have events, programs, activities, and operating processes that need to be sustained.

Driver-based budgeting helps your nonprofit align its financial planning with operational activities, making adjusting to changes and improving decision-making easier. 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. Board management software is a valuable tool in assisting nonprofits in budget planning. BoardEffect provides a secure platform for board communications where they can share confidential documents about the budget and other important board matters without concern over hacking. The platform has a feature for granular permissions so that only the people involved in budget planning can access the budget planning details.

Then, take some time to reflect on and learn from programmatic and financial successes and failures. To learn more about annual business budget templates, that can be used across different organizations, see Free Annual Business Budget Templates. Marketing and fundraising encompasses all tools, supplies, and technology used to drive donations (i.e., the main revenue source for your organization).