Budgeting for Nonprofits

Given your recent experiences, you can often estimate an amount per person per year. Or else, pull out a catalog and jot down a list of needed supplies and their costs–from files to pens and paper. Even if you delegate the budget creation, reviewing this list will help you https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ make informed decisions about resource allocation and funding.

How to determine nonprofit income for a 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. For example, accounting services for nonprofit organizations if you have it in your plan to buy new computers for your staff or to build a new website, create a separate budget for those projects. Your board members should have a direct role in developing cash flow projections, agreeing on the assumptions to use, and reviewing the projections carefully.

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Evaluate current financial health by analyzing the current year-end forecast, current budget variances, and balance sheet strength. Then, take some time to reflect on and learn from programmatic and financial successes and failures. Give yourself enough time to gather the necessary information and data, to think through and discuss the various elements of the budget, and to put it down on paper (or in Excel). The budget is then presented to the nonprofit board of directors for comment, feedback, and, eventually, approval. At this point, it becomes an adopted budget and goes into implementation at the start of the new fiscal year—or designated timeframe, if you’re operating on a multi-year budget.

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However, you’ll also have variable expenses that change each year and may be more difficult to forecast. For instance, the costs of program materials and necessary transportation will likely shift over time. By following these five steps, you can create a nonprofit operating budget that sets you up for financial stability and growth. As you walk through your event list, add the amounts you’ll need to make each one happen. Miscellaneous costs may include small expenditures that do not fit neatly into other budget categories but are nonetheless necessary for day-to-day operations.

• It is recommended to read Dan Pallotta’s Uncharitable, which provides an insightful look at the long-time argument about overhead expenses.
• Every nonprofit is unique, so feel free to adjust the categories and templates to fit your needs.
• Nonprofit organizations need to identify all expenses in order to maintain financial health.
• Nonprofit organizations need physical space to conduct their work, including office space and employee parking.
• From Executive Director to Program Manager, find out what you are a great fit for.
• Nonprofit operating budgets typically include expected revenue as well as various expense categories that reflect the organization’s day-to-day activities and operational needs.

• It’s important to create a budget for each event you host—not only to account for these expenses, but also to allocate the revenue you’ll need to cover these costs.
• There are several types of grant budgets you might use in a grant proposal.
• Budgeting allows boards to put limits on certain expenses as necessary and work to increase income sources early when it looks like there may be a shortfall.
• Board members should have a direct role in developing cash flow projections, and the projections should be reviewed carefully to ensure accuracy.
• Use known values to budget for other related estimates, such as personnel costs.
• First, the budget must clearly align with the organization’s mission and strategic objectives.

Once all expenses have been accounted for, you can then begin to allocate funds to each category. A capital budget is a long-term financial plan that covers major investments and projects needed to strengthen your organization over time to sustain its growth. A capital budget typically includes things like building new facilities or acquiring new equipment needed to meet the demands of increased demand for services provided by the nonprofit organization. Another step in creating a nonprofit budget is to identify the organization’s major sources of income and expenses. This information can be used to estimate income and expenses for the upcoming budget period.

The Ultimate Guide to Nonprofit Budgeting (+ Free Template)

Direct Relief is a great example of how contingency funds can help tackle unforeseen emergencies. It uses its reserve fund to manage unexpected costs during disaster relief efforts. In 2023, it allocated 46% of its program budget ($58.2M) for emergency disaster response.

How can budgeting software help nonprofits?

• A budget is a planning tool that reflects an organization’s programs, mission, and strategic plan.
• Begin your planning process by asking, “What financial outcome do we want this year?
• Note funding restrictions, timing considerations, and progress toward goals.
• Yes, most budgeting software allows for adjustments and modifications as needed throughout the year.

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. It details the costs your organization will incur and the revenue you expect to receive over a set period of time.

Can Nonprofits Write Off Expenses?

Most financial experts recommend nonprofits maintain cash reserves equal to 3-6 months of operating expenses. However, your optimal reserve level depends on factors like funding predictability, program commitments, and growth plans. Start by building toward three months of reserves, then adjust based on your organization’s specific needs and risk factors. A budget for non-profit organizations often faces scrutiny over administrative expenses. While many funders and donors focus on program expenses, sustainable nonprofit organizations need appropriate investment in core operations.

Financial Ratios

You can include costs for such expenditures as newsletters, print ads, and developing a web page or posts to promote your activities. This category consists of money for copies made at print shops, letterhead, stationery, and annual reports. List expenses for books, magazines, newspapers, and Internet and software subscriptions, such as Zoom and Dropbox. Articulate the main purpose of your budget and think about a structure that will best support that purpose. For example, if the main purpose of your budget is compliance – there might be some elements that you need to include in your budget that you otherwise wouldn’t. Here are some tips and tools to help ease the pain of building your next budget.