Also included in this section might be rent, utilities, and technology for office space, and legal and other miscellaneous expenses. Categorize your organization’s expenses into fixed and variable costs. Fixed costs are expenses that remain constant, such as rent or salaries, while variable costs fluctuate based on activity levels or other factors, such as utilities or event expenses. You need to know how much is coming in, where it’s going, and whether you’re staying on track.

• However, many foundations recommend keeping these costs between 10% and 15% of your revenue.
• You can use cost-benefit analysis to determine if the event would be more valuable than some other methods of fundraising.
• 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.
• Striking the right balance is crucial for maintaining both operational efficiency and donor trust.
• Every nonprofit approaches program budgeting differently, depending on the services offered.
• Nonprofit budgeting is a strategic process, creating a financial roadmap for organizations.

Accounting & Finance

Use a format that lets you budget your activity per month rather than on an annual basis so you can track your monthly progress. You’ll be able to make adjustments earlier, like reallocating funds or planning to raise more revenue. Focusing on shorter time periods helps break down your monthly activities and account for special events or one-time costs. The budgeting process begins by gathering input from the right people. Involve board members, department heads, program managers, and financial officers.

• Grant tracking helps monitor restricted funding compliance, while cash flow projections ensure adequate liquidity.
• Revenue can be one of the more difficult parts of developing a budget – simply because it’s harder to forecast than expenses.
• QuickBooks Online is a small business accounting software and app that allows you to manage your business anywhere, anytime.
• 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, some nonprofits list corporate grants with their other grant funding, while others consider them a type of corporate philanthropy.
• Remember, every dollar spent should help connect with more donors and amplify your message.

Create a clear budgeting process

Program expenses cover everything tied directly to the services you provide—whether that’s offering housing, healthcare, or meals in your community. On average, nonprofits spend 15% to 40% of their revenue on administrative costs. However, many foundations recommend keeping these costs between 10% and 15% of your revenue. Creating an organizational budget takes time and lots of thought, but these strategies can contribute to a more successful process. Involve key leadership to contribute guidance and details from the start.

Facilities Costs

Whether you’re planning for the year or managing a specific project, a budget helps you organize your income and expenses. The right nonprofit organization budget template offers clear insights into what’s working and where adjustments are needed. Budgeting is the groundwork of any successful nonprofit organization. It’s not just about balancing the books; it’s about creating a clear financial roadmap, a basis that aligns resources with mission-driven goals. A well-crafted nonprofit budget ensures The Key Benefits of Accounting Services for Nonprofit Organizations financial sustainability, supports strategic decision-making, and fosters transparency with donors, stakeholders, and the communities you serve.

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. It’s also important to track restricted and unrestricted funds, and how you are spending them. When you are running a fundraising campaign and say that all donations will go directly to program expenses, those are restricted funds that you need to use to support programs. It’s important to differentiate between the program and other expenses because many donors like to understand the difference between administrative and program costs. It shows donors and partners how many dollars are spent on the nonprofit’s mission versus executing the mission.

Ensure your process includes appropriate approval steps for different types of changes while maintaining enough flexibility to respond quickly when needed. Remember that underfunding these areas often leads to inefficiency and reduced impact over time. Clear policies about when and how to use reserves help prevent impulsive spending while ensuring funds remain available for genuine needs. While familiar, this approach might keep you from spotting opportunities for significant improvements.

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. The two primary components of a budget are income and revenue, and many https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ subcategories fall under the umbrella of each. Every expense should also be evaluated to avoid unpleasant situations in the future.

Review the budget periodically to ensure that it remains accurate and relevant

This sometimes happens to small organizations seeking grants from large agencies. This should be taken into consideration when applying for grants as a source of revenue. For ticket sales, auction proceeds, and fees for goods and services, you should also be realistic when assessing the amount of money, you expect. Every source of revenue should be evaluated before being considered.

How to create a nonprofit budget template

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 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. 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.