How to Create a Nonprofit Operating Budget

If you’re managing a multiple six- or seven-figure budget, asking a financial expert for help is always a good idea. Instead of predicting revenue by individual grants or line items, the cutoff method looks at revenue as a whole. To use this method, simply calculate the projected fundraising revenue by multiplying the estimated total amount with the probability estimate. Make your goals SMART—specific, measurable, actionable, relevant, and time-bound. If you want to move into a new office space this year, you can estimate the rent.

What tools should I use to create a nonprofit budget?

Cash flow refers to the monthly movement of money coming in and out of your organization. Tracking this number tells you how much you have in the bank at any given time. This information is hugely important, because it shows you the best (and safest!) times to spend. Write down every possible expense you can think of, and then ask around to see what you’ve missed. Everyone in your nonprofit will have different expertise, so check in on what they might know that you don’t. Once your costs are set, you know precisely what numbers you can expect to work with.

Compile Your Expected Income and Funding

So, here’s a helpful guide to creating a budget for your small nonprofit. Whit Hunter is the co-founder of BetterWorld, the free, easy-to-use online fundraising platform. His passion for empowering nonprofits and tech expertise have shaped BetterWorld’s mission to make fundraising more accessible and efficient. Join 100,000+ amazing nonprofits, organizations, and fundraisers on BetterWorld.

Ways to Decide On Your Annual Nonprofit Fundraising Events

Learn the key differences in writing successful government vs. foundation grant proposals. https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ This guide offers tips on tailoring your approach for each funder type, helping you excel in both areas and increase your chances of securing funding for your nonprofit. Operating budgets are easier to develop because you can estimate the amounts based on the day-to-day costs in your organizational budget from the prior year. Estimate the total amount you want to bring in for each revenue category and add it to your budget. Make sure that your total revenues cover all of your expenses for the year.

Make sure you set aside enough time to gather information and discuss various elements of the budget. It demonstrates your ability to responsibly manage financial resources and provides a roadmap for activities in the upcoming year. To protect your budgets, add BILL Spend & Expense to your nonprofit tech stack. This category may include cell phones, internet, electricity, water, and other utilities for daily operations. If your nonprofit needs TV streaming, cable, or satellite service, include that here too.

Free Resources

• A budget describes your project in numbers just as a proposal describes it in words.
• Here are some questions to start with (a full list of questions to ask yourself can be found in my budgeting masterclass, which you can purchase HERE).
• The next step is to forecast your organization’s revenue for the upcoming year.
• If you plan to use a storage space to store items, price out the monthly costs including fees and add it to your budget.
• Generate real-time reports on budget performance, helping you to monitor the budget closely and make necessary adjustments promptly.

Use a free template to get you started and once you’ve added any unique requirements to it, this can be reused for subsequent budgeting sessions. It also helps to use a standard format for budgets as you can compare them and track growth and changes over the years. You’ll need a program budget every year, so get your docs in order for the years ahead and plan a clear budgeting process. This category can help your organization cover unexpected repairs, unplanned staff meals, and other odds and ends. Having a miscellaneous budget line offers flexibility in your budget, helping you cover unforeseen costs as they arise. Include revenue you expect to generate from fundraising events, grant proposals, individual donations, corporate sponsorships, and other sources of funding.

• By following these steps, you can efficiently manage your nonprofit’s finances and plan effectively for future operations.
• 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.
• I’m sure the foundation didn’t want to give us $5,000 when we had $50,000 sitting in the bank.
• When your predicted income exceeds your projected expenses, you’ll be more prepared to course correct if you incur unexpected costs or some revenue sources fall short of your goals.
• Make sure that your total revenues cover all of your expenses for the year.

Additional Resources and Links

What supplies, equipment, facilities, and staff will you need to operate the program(s)? When your nonprofit is new, it’s easy to bite off more than you can chew initially. Be realistic about what you can successfully operate the first year, especially if you will need to raise the money for the program(s) (fundraising can be a bit slow at first). When you’re just getting started, it’s critical that one of your first steps is to create your nonprofit’s first budget to help you manage both your organization and your finances as it grows. While program expenses are the core of your organization’s mission, fundraising and administrative costs also need to be properly accounted for to keep the lights on. Therefore, it can be helpful to establish these first and figure out what’s left.

• We work exclusively with nonprofits, so we understand the unique complexities of your organization’s financial situation and can use our experience to develop tailored solutions for your needs.
• Effective financial management is the backbone of a thriving nonprofit, ensuring stability, transparency, and informed decision-making.
• QuickBooks Online is a small business accounting software and app that allows you to manage your business anywhere, anytime.
• Every nonprofit approaches program budgeting differently, depending on the services offered.
• Everyone in your nonprofit will have different expertise, so check in on what they might know that you don’t.
• His passion for empowering nonprofits and tech expertise have shaped BetterWorld’s mission to make fundraising more accessible and efficient.

Are you looking to expand a program, hire additional staff, or purchase new technology? Understanding nonprofit budgeting is only one part of the equation; accurate accounting practices are equally essential. It’s time to ask yourself some questions about the programs and services your new nonprofit will provide this year.

But in order to categorize costs and keep track of your activities, you need some sense of organization to describe those activities. If you need to know how much it costs to run your programs for the year, you create a budget to plan out what you think it will cost, and then track your spending along the way. Still, creating a solid nonprofit budget is an essential foundation for being a financially healthy organization and having the basis you need to go about advancing your mission. Keep financial data in a central platform like a nonprofit accounting system to ensure easy access for your team. Teach team members how to interpret this information and take advantage of the software’s reporting features to simplify their analysis. For new expenses, accounting services for nonprofit organizations request quotes from vendors or providers to budget for these costs as accurately as possible.