A CFOs Guide to Managing Your Nonprofit Operating Budget

Finally, get clear on and name the goals, organizational values, and priorities that you want to have reflected in this year’s budget. There also might be items that simply don’t fit neatly into another category, or you want to have extra funds https://nyweekly.com/business/accounting-services-for-nonprofits-benefits-and-how-to-choose-the-right-provider/ to cover the unexpected. It’s a good idea to create a miscellaneous category for those budgeting needs.

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As with involving the people doing the spending, get the people responsible for soliciting and stewarding donations together and identify the pledged gifts, the probable gifts, and the potential gifts. Our newsletter will keep you updated on the latest content we post to help small businesses succeed. Learn all the best practices of CRMs to simplify customer relationship management and elevate your bond with loyal customers. Grab a free copy of this comprehensive guide to developing your business accounting services for nonprofit organizations from scratch. Before you go ahead and opt for a credit card for your small business, make sure you know if it’s worth getting one.

Developing a nonprofit budget: The basics and best practices

Nonprofit organizations exist to make a difference in the world, whether by addressing social issues, supporting the arts, promoting education, or any number of other noble causes. To turn their visions into reality, nonprofits require a clear and comprehensive financial plan, and that’s precisely what an operating budget provides. 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.

FAQs on budgeting for nonprofit organizations

• The opinions and views expressed in this article are solely those of the authors.
• In order to have a true picture of what our programs really cost, we must allocate these indirect or administrative costs as well.
• The best way to calculate your expected income is to review your organization’s financial history and base your estimates on that.
• Look for expense tracking features that provide clear insights into your spending patterns so they can be adjusted accordingly.
• As explained above, indirect expenses are generally all of our administrative expenses – those expenses that support the overall management of the organization.
• When faced with challenging and uncertain times, learn three ways that nonprofits can employ to strengthen their organization’s strategic resilience and remain focused on advancing their mission-driven work.

The key is to allocate funds not just where they are needed, but where they will have the most impact. Studies show that over 90 percent of nonprofits have a predominant source of revenue which dictates their budgeting decisions. It is crucial to not only understand where your funds are coming from but also to anticipate the expenses related to your strategic objectives. Remember to base your budget on your nonprofit’s specific needs and history. A nonprofit budget is a document that enables your team to plan for expenses and allocate resources.

The second meeting of the budget committee should focus on developing a draft of an expense budget and an income budget. The committee will need to determine the costs for the upcoming program goals, organizational goals and strategic goals. In determining the income budget, the committee will need to project income based on the current fundraising and revenue activities. About three to six months before the end of the fiscal year, an organization starts developing a proposed budget. This work is primarily done by the executive director, using empirical data about expenses and revenue, as well as any new expenditures and funding sources projected for the upcoming year.

It allows you to track various income sources, categorize expenses, and compare current figures with previous years. Consider potential changes in your funding sources, program demands, or economic conditions. For each scenario, you should outline specific action plans to maintain financial stability. This proactive strategy enables quick, informed decisions when faced with financial fluctuations, ensuring your nonprofit remains resilient and mission-focused throughout the year. Revenue projections are all about estimating the money your nonprofit will bring in.

• 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.
• Let’s look at some of the best practices for managing your organization’s budget effectively.
• This resource is an overview of the concepts and management decisions needed to calculate the true costs of activities for a nonprofit and also a how-to guide for the accompanying spreadsheet template.
• If you use accounting software to for your budget, there is the benefit of those budget to actual reports we discussed earlier.
• They faced a significant increase in content production, which their old CMS and workflows couldn’t efficiently handle.
• For new expenses, request quotes from vendors or providers to budget for these costs as accurately as possible.

We leave this step until last because some funders, including many government funders, will not allow fundraising expenses to be charged to their grants or contracts. Regardless of whether a funder will pay for fundraising expense, it remains part of the total cost of running each program and we need this information to be truly informed. Remember, aligning your budget with your strategic goals is not a one-time task but an ongoing process.

Types of Nonprofit Budgets and How to Create Them

Step back and assess your fundraising strategies and how potential changes could affect your expected contributions. Consider the impact of any grants or sponsorships, including both new ones you may win and current ones that may shrink or dry up. Remember that your budget is a living document that requires regular review and adjustments.