Ideal Nonprofit Budget: Example and Tips Sage Advice US

Investing in cost-effective technology solutions, such as cloud-based management systems, can cut technology expenses in nonprofits by an estimated 30%. A nonprofit budget is a financial plan that details how a nonprofit organization will raise and spend money. The goal of creating a nonprofit budget is to ensure that the organization has enough money to cover its expenses and reach its financial goals. Generally speaking, there are two ways to organize expenses in your nonprofit’s operating budget.

• Guard against these variances negatively affecting your bottom line by including a contingency line to capture those variances.
• Keep monthly and quarterly tabs on your nonprofit’s cash flow with this all-inclusive, customizable template.
• They should make any final adjustments based on the organization’s goals and its capacity to match income and expenses as closely as possible.
• Revenue may not stream in as expected and large, unexpected expenses can creep up.
• Take time to collect financial data from previous years as best as possible.
• Another unique aspect of nonprofit budgeting has to do with expense allocation methods.

Budgeting for success.

• Using the budgets, you can determine where you’re losing and earning the most.
• Customize your template based on your organization’s specific needs and reporting requirements.
• It lets you track expenses closely, preventing overspending and identifying cost-saving opportunities.
• When creating your budget, you will need to estimate the income you expect to receive.
• For example, an animal rescue organization could negotiate bulk discounts for pet food or veterinary supplies to stretch its budget further.

For nonprofits, effective budgeting is the foundation of financial health. A well-crafted budget not only keeps an organization on track but also demonstrates to donors and funders that funds are being used responsibly. Different types of budgets serve unique purposes, and understanding each one is critical. Here’s a breakdown of the key types of budgets that nonprofits should be familiar with and how they differ. Note the months and the sources that bring in more revenue and those that offer less funding.

How Much Does It Cost To Operate A Charity Nonprofit?

The cost of administration, categorized as indirect costs, adds value to every program at a nonprofit. Programs are more effective, better managed, and more responsive to the community when an organization has good accounting and technology, high quality leadership, planning, and governance. In order to have a true picture of what our programs really cost, we must allocate these indirect or administrative costs as well. If we ignore this step, we will be underrepresenting the expense involved in supporting each program area. As explained above, indirect expenses are generally all of our administrative expenses – those expenses that support the overall management of the organization.

• In communicating with your board members, nonprofit leaders, and supporters about how donations are being used, transparency is key.
• This can be done by reviewing past financial performance and trends, as well as by considering any changes that may be coming up in the organization’s operations.
• Bookkeeping, donor management systems, and communication tools can represent 5-10% of the overall budget.
• Nonprofits fund employee salaries through diverse revenue streams, including grants, donations, program fees, and earned income.
• In fact, a survey conducted by Sage found that nonprofits rank budgeting and financial planning as one of their top five internal challenges.
• Understanding and managing both fixed and variable costs helps you make smarter spending decisions and maintain financial flexibility.

Marketing Budget

Then you can advise your grant writers what areas need more (or less) funding so that grant prospecting is more efficient. Customize your template based on your organization’s specific needs and reporting requirements. Consider board expectations, grant requirements, and program manager input. Grant tracking helps monitor restricted funding compliance, while cash flow projections ensure adequate liquidity.

You don’t want to go to twenty different sites to do your accounting, nor spend days training staff on how to use the software. The whole idea is to automate and makes everything as easy and painless as possible with these tools. Look for expense tracking features that provide clear insights into your spending patterns so they can https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ be adjusted accordingly.

Create Your Nonprofit Budget: 9 Simple Steps + Free Template

• Financial advising called him, and he built one of the first ever outsourced accounting firms.
• Running a nonprofit is a lot like learning to juggle—exciting as the skill is, it’s harder than it looks!
• A fresh perspective comes from starting each fiscal year with a new comprehensive budget.
• By focusing on core administrative and overhead costs, nonprofits can achieve sustainable growth while maintaining robust nonprofit financial transparency as a cornerstone of their mission.
• It’s important to create a budget for each event you host—not only to account for these expenses, but also to allocate the revenue you’ll need to cover these costs.

Simply multiply the decimal by 100 to get a clean percentage that represents your operating margin. The spending baseline is typically calculated during the auditing phase of the budget cycle, which we will discuss below. Fund your mission and transform your impact by reading The Ultimate Guide to Nonprofit Fundraising. Still, be careful — don’t allow yourself or your managers to think you have an extra 1% to spend on this event or that project. The contingency line is there to offset against the truly unknowable expenses, not to be lumped into another pre-existing project or expense. Whoever does the grant writing will inevitably need some form of the budget to accompany most applications.

Many nonprofit leaders assume they can’t afford the type of back-office that’s required for effective nonprofit budgeting and comparing budgets vs. actuals. No nonprofit executive director is an island, and this is especially true when it comes to making a budget. Delegate as much of the process as you can to your development employees, program directors, and finance committee members. Having your program directors carefully create budgets for each of their programs will knock out a big portion of the data you need to produce The Key Benefits of Accounting Services for Nonprofit Organizations an overall nonprofit budget. Nonprofits can keep tabs on their annual program revenue vs. expenses with this easy-to-use nonprofit program-based budget template. Enter fundraising, grant, and other income figures to compare your nonprofit’s current budget to your year-to-date actual revenue.