While variations in funding may be beyond your control, make sure to monitor your expenses. For example, your programs may have multiple goals, such as improving the quality of aid while also reaching more beneficiaries. This is the most common type of budget, typically covering an entire fiscal year (usually 12 months). I received a bachelor of business administration (BBA) degree from London Business School.
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You probably think about your fundraising software, strategic plan, materials for delivering services, or even your staff’s energy and passion for your cause. What you might not think of right away are your organization’s financial management resources, although they’re just as critical for furthering your mission as any of the other tools we’ve mentioned. 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 also helps in identifying potential financial challenges and opportunities, enabling proactive management of the organization’s finances. This process is most valuable when a nonprofit can understand both the full cost of delivering programs and the amount and type of income that relates to those programs.
Annual Nonprofit Budget
The accompanying spreadsheet template may be used for a one-time analysis project or to implement ongoing program-based budgeting and financial management practices. While a calculation can be completed for a single program or activity, we highly recommend that these concepts and practices be used throughout a nonprofit. Program-based financial information will be most useful for planning, management, and communications if it is comprehensive, accurate, and used consistently. Finally, budgeting software programs like Xero or QuickBooks are excellent tools for creating nonprofit budgets due to their ease of use and robust features.
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Every one of these activities is vital to your organization’s impact—and every one needs its own budget to ensure funds are used effectively to accomplish it. Once adopted, nonprofit operating budgets become an essential financial management tool to plan and monitor operations and organizational activities through the year. Nonprofit organizations face an ever-evolving landscape, where goals, priorities, and external factors can shift.
- Does your nonprofit use small equipment, software subscriptions, or office supplies?
- These calculations may be automated through the accounting system or completed manually.
- At this point you will have a subtotal of the direct costs of each program, administration, and fundraising.
- After the organization’s income and expenses have been estimated, the next step is to create a budget that allocates the organization’s resources in a way that supports its financial goals and objectives.
- Because, a non-profit organization, literally as its name, does not receive any finances, or monetary gain through their services.
Once adopted, the operating budget also becomes an essential financial management tool helpful in monitoring ongoing operations and organizational activities throughout the year. With each reporting period, the organization compares actual performance against its plan. One essential process for managing your nonprofit’s finances is budgeting. The cost of administration, categorized as indirect costs, adds value to every program at a nonprofit. Programs are more effective, better managed, and more responsive to the community when an organization has good accounting and technology, high quality leadership, planning, and governance. In order to have a true picture of what our programs really cost, we must allocate these indirect or administrative costs as well.
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If the details aren’t clear or don’t add up, https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ a funder will see through your numbers. General Services Administration, which is a simple budget in Google Sheets that can be tailored to your specific budget line items. Capital grants are usually for large-scale items like construction, renovations, or equipment. In both cases, the standard advice is to start by reviewing past performance to isolate patterns, such as cyclical trends. Creativity is key to keeping your fundraising campaigns fresh and engaging. An assessment of your readiness should therefore also consider the external factors and trends shaping the current context, as well as past performance of your programs.
Basics of Nonprofit Budgeting: A Beginners Guide
By only looking at expenses that are core to the actual daily operations of the nonprofit — and ignoring the rest — you can get a good idea of the actual size of a nonprofit. Propel Nonprofits is an intermediary organization and federally certified community development financial institution (CDFI). This overview and guide to using the Program Budget and Allocation Template is not intended to be a definitive or comprehensive document for such a complex financial management practice. We hope that you will be able to use this resource to understand the concepts and steps and to implement this valuable process at your nonprofit.
This becomes particularly important when balancing mission-driven goals with fiscal responsibility, whether you’re running a local charity or a growing foundation. 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. Evaluate what funding your nonprofit already has on hand, and make strategic decisions about how to fundraise effectively during the event. A nonprofit operating budget reflects the organization’s planned financial activities, showing how much it will spend on operations. Executive directors should plan and make sure the budget plan is centered around the primary goals and objectives of your organization.