How to Create a Nonprofit Operating Budget + Free Template

One key reason many nonprofits struggle when it comes to accounting and finances is their failure to treat their organization as a business. While nonprofits and small businesses differ in many ways, managing your nonprofit’s finances similarly to how you’d run a business is essential for success. In summary, monitoring and adjusting the budget is a critical ongoing process for any nonprofit. It’s about being proactive, staying informed, and making necessary changes to ensure that the organization remains financially sound and true to its mission. This approach not only safeguards the nonprofit’s financial stability but also reinforces its commitment to fiscal responsibility.

Projected Expenses

The process of creating a nonprofit budget is similar to the process of creating a budget for any other type of business. Board management software is a valuable tool in assisting nonprofits in budget planning. BoardEffect provides a secure platform for board communications where they can share confidential documents about the budget and other important board matters without concern over hacking. The platform has a feature for granular permissions so that only the people involved in budget planning can access the budget planning details. 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.

Create a Replicable Process

When we discuss budgeting here, we are typically referring to an operating budget, the budget of income and expenses to operate the nonprofit. An operating budget is a budget that is used to cover basic day-to-day costs like materials, supplies, rent, utilities, etc. It’s not designed to cover large expenses such as capital projects, i.e buying a building. A well-formulated nonprofit operating budget allows for the best use of limited nonprofit resources and accounting services for nonprofit organizations focuses on the primary goals and objectives of the organization. In this article, we’ll discuss what is a nonprofit budget, its importance, 12 best practices, a free template, and more. The primary purpose of nonprofit budgeting is to ensure that the organization can meet its goals without running out of money.

How can nonprofits involve stakeholders in budget planning?

• If you’re part of a nonprofit, you already know that every dollar counts.
• Look no further than these nonprofit budget templates, which are designed to help you plan and track your expenses effectively.
• If you’re planning on purchasing a vehicle, renovating a facility, or have some other special project in mind, create a separate budget just for that.
• In order to be successful, there are a few things to keep in mind when establishing a nonprofit budget.

We’d love to hear your feedback about this content and anything else you would like to see more of from NFF. 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. When your organization is not in line with the budget, you should look at “why,” and what factors you can control or change. This is where the budget becomes an effective management and operations tool for your organization.

In fact, some estimates suggest that your payroll will account for 18-52% of your total budget. In recent years, charitable giving from individuals has skyrocketed to a remarkable $500B per year. But even with these staggering numbers, many nonprofits—particularly small- to mid-sized organizations—are still underfunded. It is important the full team has access to both past financial reports and year-end projections as a reference point for planning.

• When it comes to “money,” many nonprofit leaders focus their efforts on fundraising, but financial planning, modeling, and monitoring is just as important to financial health.
• Work to identify potential risks to your operations and create basic contingency plans that can make dealing with problems more straightforward when they occur.
• Contrary to popular belief, overhead isn’t inherently bad—it’s actually necessary to keep your organization running.
• In the dynamic world of nonprofit management, regularly reviewing and adjusting the budget is not just a good practice – it’s essential for staying on track with financial goals and objectives.
• At least once a month, sit down with your nonprofit’s board and leadership to compare your actual revenue and expenses from the past month to the predictions in your budget.
• The template’s operating expenses section allows you to easily determine your rolling cash balance.

I’m sure the foundation didn’t want to give us $5,000 when we had $50,000 sitting in the bank. Whatever you include for fundraising revenue needs to be backed up with a detailed fundraising plan. If your fiscal year starts January 1, start working on your budget in September or October so you have plenty of time to create it and get it approved before you need to implement it. So, here’s a helpful guide to creating a budget for your small nonprofit. We’ve only scratched the surface of all that a nonprofit budget entails. YPTC is not a CPA firm, and provides no attestation services with regard to financial reports.

• A well-planned budgeting process is key to your nonprofit’s success.
• The Better Business Bureau recommends that nonprofits spend under 35% of their funding on fundraising efforts and spend at least 65% on programs.
• These items are often overlooked and can significantly undervalue a nonprofit.
• Your budget allocates your resources so you can maximize your impact while maintaining transparency and accountability to your donors, grantmakers, and the communities you serve.
• Be sure you can actually raise the number you put in for fundraising.
• Such tools centralize data storage and manipulation, eliminating the need to copy or download documents, and adding a layer of security.