Steps to Creating a Best Practice Nonprofit Budget
A capital budget covers one-time expenses that will take years to fully fund, like major construction projects. Budgeting for non profit organizations is, perhaps, the most important financial document for your organization because it is a financial management and strategic tool. Part of running a nonprofit business is ensuring you have enough funds to accomplish your mission throughout the fiscal year. But as the saying goes, “You need to spend money to make money,” which is where fundraising and marketing expenses come in. 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. 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.
When it comes to planning an event, executing it successfully depends on how prepared you are! As you go along, don’t be afraid to make changes and adjustments to your budget to better fit the year’s actual numbers. By making continuous adjustments, you can keep your nonprofit on track to successfully complete another year.
Marketing and fundraising expenses 🎉
Whether you’re a nonprofit organization or a small business, your people will always be your largest expense. In fact, some estimates state that your payroll will account for 18-52% of your total budget. In fact, Forbes reports that the top 100 nonprofit organizations in the United States receive $54.4 billion in donations—or 11.5% of all charitable giving. Considering there are over 1.5 million nonprofits registered in the U.S., this means that .01% of all charities earn nearly 12% of all charitable donations.
However, if you feel that it is more important to have a budget that is easier to create and that reflects past spending patterns, you may want to use a historical budget. We’ve only scratched the surface of all that a nonprofit budget entails. Finally, the board or budget committee should be ready to present the annual budget to any necessary committees and the board for final approval. This will allow you to quickly identify variances and adjust your course before financial issues become unmanageable.
This is a standard accounting report that shows how much was budgeted year to date compared to how much has actually been spent. 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. Forecasting shouldn’t be a shot in the dark; rather, it should be a methodical process that takes into account all relevant information. Consider what you believe the next year may hold for your nonprofit, including likely external influences, internal activities and how your organization will plan for and respond to them financially.
In order to be successful, there are a few things to keep in mind when establishing a nonprofit budget. Your budget will be unique to your organization, but we’ll give you a broad idea of what to include under each section. Lastly, it’s rare that nonprofits have unlimited funds, so they need to be realistic and thoughtful about setting restrictions on what they can spend money on. Use this budget for nonprofit project template to determine where you have room to grow and where you might need to cut back. Assessing your current financial situation accurately and thoroughly provides the context needed to make informed decisions when mapping out your budget.
Once you have a general idea of how much money you need to bring in, you can start to develop a budget. Zero-based budgeting, on the other hand, starts from scratch each year, with all expenses being justified anew. This can be a more time-consuming and difficult process, but it can also lead to a more accurate and transparent budget. Finally, it is important to review the budget periodically to ensure that it remains accurate and relevant. This may involve making adjustments based on changes in the organization’s operations or financial situation. For this reason, it’s important for nonprofit organizations to be flexible and to revise the budget upon the occurrence of significant unplanned events.
