The Ultimate Guide to Nonprofit Budgets + 3 FREE Templates

It is especially useful for organizations looking to streamline their grant reporting process and enhance transparency with funders. A budget is a guide that can help a nonprofit plan for the future as well as assess its current financial health. It is good practice to periodically review the budget as well as compare it to the actual cash flow and expenses, to determine whether they are playing out as expected during the course of the year. In fact, Forbes reports that the top 100 nonprofit organizations in the United States receive around 11% of all charitable giving. Grassroots nonprofits, by stark contrast,  often scrape by to fit within their annual nonprofit budget plan. This course covers budgets and how they are used in non- profit organizational settings.

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From fluctuating income streams to increasing demand for programs, organizations must plan carefully to navigate financial complexities while maximizing impact. Whether you’re managing general operations, launching a https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ new program, or amplifying your marketing efforts, a thoughtful budget can be the difference between a successful year and a strained one. Here’s your step-by-step guide to creating an effective and sustainable budget to fulfill your organization’s mission.

key elements of an effective nonprofit budget

• As a result, they need to evaluate their budget and make cuts while continuing to grow.
• These numbers will often be estimates based on your goals or what you earned and spent last year.
• This gives you a bit of wiggle room if your cost estimates came in low or your revenue estimates turned out to be too optimistic.
• Equally important are the indirect support costs that keep your programs running smoothly.
• When creating a budget for non-profit organizations, understanding these core elements is essential.

This template should include line items for all of the above expense categories, as well as others that may be specific to your organization. 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. For example, if the organization’s major sources of income are donations and grants, then the budget may need to include funds for fundraising activities and grant writing.

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The benefit is that you now have better information for discussions about priorities and how resources are used. Creating a budget for a nonprofit organization like a 501(c)(6) involves careful planning and collaboration. To get your budget started, you want to collaborate with key staff to align the budget with the organization’s strategic goals. Remember to base your budget on your nonprofit’s specific needs and history.

After reading over the complete draft of your nonprofit operating budget and revising any inconsistencies or unclear information, send it to your board of directors for approval. Make sure this happens well before the new fiscal year begins, so you have time to make any last-minute edits that the board recommends. Next, turn to the revenue side of your budget to figure out exactly how and when you’ll raise the funds you need to cover all the costs you outlined. Budgeting your revenue based on its source allows you to make the most accurate projections.

• Unlike companies, however, most of your income will be in the form of donations.
• Below, we explore the major challenges of a nonprofit budget proposal and provide real-world examples of how organizations have successfully addressed them.
• If you are interested in working for a nonprofit, it’s helpful to understand the differences between nonprofits and find ways to translate your experience into a job with one.
• It details the costs your organization will incur and the revenue you expect to receive over a set period of time.
• Use this information to inform future budgeting efforts and improve your organization’s financial management practices.
• 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.

A nonprofit project budget shows you what you have to gain without accidentally dipping into your operational expenses. If you have a special project accounting services for nonprofit organizations in mind, create a separate budget for it. For example, 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. Make sure that you clearly determine the roles and decision-making processes that will yield the most effective information gathering, analysis, and decision making. Additionally, determine a timeline that ensures approval prior to the fiscal year-end. Use this budget for nonprofit project template to determine where you have room to grow and where you might need to cut back.

Create Your Nonprofit Budget: 9 Simple Steps + Free Template

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. Monitoring the budget also provides an opportunity for board directors to move money around to allocate it efficiently as their cash flow changes. Good budgeting demonstrates accountability and transparency, which are important issues that donors and grant-makers look for before offering funds. Good budgets assure donors that the nonprofit is actively overseeing the budget process. Revenue may not stream in as expected and large, unexpected expenses can creep up.

Instead, your budget should guide your organization’s spending, fundraising, and reporting throughout the year, so check in with it frequently. For the purposes of this article, we’ll focus primarily on operating budgets because of their central role in nonprofit finance. However, you can adapt some of our tips to create other types of budgets. 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.

Creating and making the most of a nonprofit budget isn’t a one-and-done job. You should revisit your budget every month and compare it to your actual numbers. This allows you to keep a close eye on your strategic plan for the year and where how your nonprofit is actually performing. Although it’s never too late to make a budget, the process should ideally start two or three months before the beginning of your next fiscal year. This allows you enough time to gather all the information you need and to present the budget to your nonprofit board for approval. A zero-based budget starts from scratch with a blank slate every year.