The Better Business Bureau’s Charity Accountability Standards mention that nonprofits should spend around 65% of their operating budget on program expenses. They should divide about 75% to 90% of this budget into paying employees. You can also check out customizable templates to fit the unique needs of your nonprofit. Many nonprofit budget templates also come with built-in formulas and functions to automatically calculate percentages, variances, and totals. Improve your financial stability with this handy guide to nonprofit accounting and bookkeeping, including the basics of seven key money management practices. But if you’ve never created a budget or thoroughly reviewed your finances, it can feel overwhelming.
Annual Nonprofit Operating Budget Template
If you’re creating a budget for the first time, create as reasonable a list as possible of expenses. Then, assess your best and worst-case scenarios for generating funding. Give yourself enough time to gather the necessary information and data, to think through and discuss the various elements of the budget, and to put it down on paper (or in Excel).
Organize your expenses by function
- The capital budget can also be used for construction and other big, one-time spending projects that often take more than a fiscal year to pay for.
- Involve board members, department heads, program managers, and financial officers.
- Before you begin budgeting, establish your organization’s goals and objectives for the upcoming fiscal year.
- At this point you will have a subtotal of the direct costs of each program, administration, and fundraising.
- Since you’ll detail the source of each line item, you can pinpoint which areas need more resources and where you can cut back on spending.
- These reports offer insights into the organization’s financial health by showing how actual income and expenses line up with budgeted figures.
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. This allows for a better overview, more speedy addressing of any potential issues, more nimble management of the staff and volunteers, and a more informed everyday decision-making process.
Miscellaneous Income
This unpredictability can make it difficult to maintain a consistent income flow, leading to challenges in long-term planning and resource allocation. For example, a small nonprofit focused on youth development should regularly accounting services for nonprofit organizations include volunteers in their budget planning meetings. Their on-the-ground perspective will help forecast realistic program costs and identify cost-saving opportunities.
- Transparency fosters trust and ensures everyone is working toward the same financial goals.
- Use this budget for nonprofit project template to determine where you have room to grow and where you might need to cut back.
- As you track your finances, make the necessary adjustments to your nonprofit budget.
- It’s ideal for nonprofits looking to maintain transparency and accuracy in their financial records, helping ensure that funds are allocated efficiently and appropriately towards their mission goals.
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. Plus, you can use any funding you don’t spend to build your organization’s reserve funds, which contribute to long-term sustainability. You can build out the line items in greater detail as you develop your budget, but beginning with these will give you a good start. The first step in creating a nonprofit budget is to determine the organization’s financial goals and objectives. This will help to ensure that the budget is aligned with the organization’s overall strategy and that resources are being allocated in a way that supports the achievement of these goals. A well-structured nonprofit budget serves as your organization’s financial planning roadmap, guiding decisions about program investments, staffing needs, and growth opportunities.
- The budgeting and forecasting module support scenario planning, allowing you to create different budget scenarios based on various assumptions and projections.
- Nonprofit budgeting formalizes the process of allocating resources to different areas of your organization.
- For example, WWF (World Wildlife Fund) frequently reviews its budgets to optimize spending for conservation projects, making data-driven decisions for global campaigns.
- Regularly monitor how aligned your projected budget is with what you’re actually experiencing, and make tweaks as you need to.
- If you need assistance, reach out to a nonprofit accounting firm that can take care of this forecasting and reporting for you.
Nonprofit Cash Flow Projection
Take time on the income estimation step, as it informs your entire budget. Also factor in new income initiatives your development team has planned. While estimating income for nonprofits involves some uncertainty, make projections in good faith based on evidence and experience.
Nonprofit operating budget
Make sure that you clearly determine the roles and decision-making processes that will yield the most effective information gathering, analysis, and decision making. Additionally, determine a timeline that ensures approval prior to the fiscal year-end. Overall, good budget planning requires knowledgeable board directors, a solid planning process and the tools to complete the job successfully. 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.
In this step you will identify which income items are connected to specific program areas and what income can be directed at the organization’s discretion. Examples of income that is assigned directly to a program include contract or fee income for a preschool program or a grant that is received for a tutoring program. For this step we recommend that contributed income that is unrestricted or general operating support be assigned to the fundraising category for the https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ analysis. The final analysis will clearly show what program areas require these sources of support and enable leaders to make the all-important decision about how to best attract and direct flexible funds.
