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.
He’s been a dedicated board member of many nonprofit organizations – including seven years working for Amnesty International USA – where he was the Director of Development and Chief Financial Officer. His time at Amnesty reinforced Steve’s life-long commitment to giving back to the community through charitable causes. Regarded as one of the accounting industry’s top thought leaders, he’s currently serving as President & CEO of GrowthForce, a heart-centered company with specialized teams providing accounting for nonprofits. Budgeting helps organizations prioritize spending and allocate resources effectively. For example, if your nonprofit is running a fundraising campaign, you need to allocate resources for marketing, staff, and other expenses related to the campaign.
Develop draft income budget
It is impossible to truly plan how your new nonprofit is going to operate if you don’t know how much money it’s going to take to run it. You may also have a situation where you created a budget for your organization in January and budgeted $8,000 for a summer event. Once you factored in all your expenses, the event ended up costing $7,000 instead. You would want to update your budget to reflect the difference and possibly allocate that budget amount to another purpose.
Budgets should not be written in stone, because the financial position of the nonprofit may change during the year. Once the budget has been created, it is important to monitor actual expenses and income on a regular basis. This will allow you to make adjustments as needed to ensure that the organization remains on track to meet its financial goals. 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. Various organizations have already sent in grant proposals and inquiries since the project was first announced in April. Connecting with “everyday donors,” or the individual small donors who give what they can, and expressing gratitude for their gifts can create a group of supporters that donate now and far in the future.
Ten tips for creating an equitable budgeting process
If any of the sources don’t apply to you, you can just delete them—likewise, you can add anything that’s missing. 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. Nonprofits are held accountable for every dollar they receive and how they spend it.
- They should coordinate with the rest of the management team and board members.
- When we discuss budgeting here, we are typically referring to an operating budget, the budget of income and expenses to operate the nonprofit.
- Some nonprofit leaders may even be reluctant to show a surplus in their books, fearing the perception that they are not putting their resources to good use.
- They will be able to help you create a budget that meets your needs and ensures that your nonprofit is financially stable.
- This may involve making adjustments based on changes in the organization’s operations or financial situation.
- It’s important to budget because it helps the organization manage its funds in a more effective way.
Monitoring your revenue and expenses should ideally become a part of your nonprofit’s organizational culture, something everyone is aware of and contributes to. Mark the events in everyone’s calendars, so that it becomes easier to repeat the process each year. The capital budget may include projects which will have ongoing effects on operations. The capital budget can also be used for construction and other big, one-time spending projects that often take more than a fiscal year to pay for.
Understand – and budget for – true program costs
A nonprofit operating budget template can help you make sure you’ve hit all the bases. When choosing budgeting software, nonprofits must consider their specific needs and goals. Some budgeting software is designed specifically for nonprofits and includes features such as grant tracking and donation management. Nonprofits also must consider the cost of the software and make sure it aligns with their budget.
- With this comprehensive annual nonprofit operating budget template, you’ll get quarter-by-quarter and yearly insights into income and expenses.
- For example, if the nonprofit’s cash inflows are insufficient to cover its expenses, it may need to implement cost-saving measures or seek additional funding sources.
- It’s meant to help you manage your cash flow so that you can run smoothly while achieving the goals you have set out for your organization.
- A budget is a guide that can help a nonprofit plan for the future as well as assess its current financial health.
- Once you have your budget, compare the predicted numbers to the actual figures every month in order to look for differences and establish why they occurred.
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. Operating budgets reflects the organization’s planned financial activities for the year ahead, showing how much revenue it expects from which sources and how much it will spend on budgeting for nonprofits operations. It’s a key tool in effectively and efficiently achieving the organization’s stated purpose, and should always align with an organization’s strategic plan. The operating budget must be centered around the primary goals and objectives of the organization. Propel Nonprofits strengthens the community by investing capital and expertise in nonprofits.
The process of building a nonprofit operating budget is fundamentally a planning process. 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. Editable fields enable you to overwrite example figures (including revenue and expenses) with your own. This fully customizable template helps you determine your organization’s monthly, quarterly, and yearly net income so that you can gauge the financial health of your nonprofit’s budgeted operations.
Do what you can to structure your budgets similarly over the years—this will make it easier to compare them side by side as you track your growth. Get an idea of who the granting bodies are, who they typically choose to support, and how much funding they have to offer. Running a nonprofit is a lot like learning to juggle—exciting as the skill is, it’s harder than it looks! If you’re looking for a way to keep all those balls in the air, nothing is more valuable than a foolproof nonprofit budget. For example, do you have a program or department that is really good at doing a particular task? Shifting some workload to that area could free up capacity to support some of your goals.