So be sure to account for these dramatic increases (or decreases) in your income. When it comes to making a budget for your nonprofit, it can seem like there is little to guide you. This can be especially true for new nonprofits whose budget is more budgeting for nonprofits like a best guess than a best estimate. If you are in this position, don’t panic… making a budget is often more art than science. To be even smarter and make your life and the budgeting process easier next year, there are two things you can do.
- This is a standard accounting report that shows how much was budgeted year to date compared to how much has actually been spent.
- Seems obvious, I know, but I have on more than one occasion received a budget typed up in a Word document.
- According to the 2023 M+R Benchmarks Study, nonprofits spent an average of $0.11 on digital advertising for every dollar of online revenue in 2022.
- Use last year’s numbers as a starting place and include any quotes from vendors or partners.
- Keep in mind that there’s no one-size-fits-all budget for grant proposals.
Having extra cash can help stabilize your nonprofit and absorb an unexpected delay in receiving funds, a shortfall in revenue for a special event, or unbudgeted expenses. You need to know how your nonprofit’s cash flows and what to do if the cash doesn’t flow. It’s also very important to the success of your programs that your revenue and expenses estimates are realistic. While there is generally space for hope and dreams in the nonprofit world, when it comes to budgeting – there isn’t. When putting in the numbers for your revenue, make sure you know exactly where your funds will come from.
Important Considerations in Evaluating a Nonprofit Budget
The budget paints a clear picture of how much cash is coming in and how much is going out. Budgets form the basis for boards to make better decisions and to avoid making mistakes. 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.
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). What’s most important is that you establish a detailed marketing and communications budget prior to the start of each fiscal year. Track costs and revenue to analyze your return on investment (ROI) for each fundraiser and campaign. In the for-profit world, it’s fairly standard to determine a marketing budget by allocating 10-20% of projected gross revenue to marketing and communications.
Draft the budget
Whether you hold these meetings monthly, quarterly, or annually, ensure that your entire team is involved. This will improve communications and management between departments. Of course, exact totals will vary from organization to organization.
- However, if your financial goal is to invest in infrastructure or specific programs, it may be acceptable to have a deficit budget for the upcoming year in order to do that.
- That means diligently tracking and recording expenses and revenue, plus program numbers (like number of people helped, number of dogs adopted, etc.).
- During this process, you will also benefit your organization by deciding what operations best advance your organization’s mission.
- Budget-to-actual performance should be reviewed monthly by both management and the Board.
- A nonprofit budget is a financial document used to plan how an organization will spend its money.
Most small nonprofits don’t have the benefit of an on-staff CPA or CFO, and, without formal training in finance, financial management might seem scary. But it doesn’t have to be – in part because you don’t have to do it alone. Discover the five stages of moves management for nonprofits, including practical tips and free tools to turn potential supporters into passionate ones. Learn how to write annual reports for nonprofits, including the key sections to include and creative annual report templates and examples. This template breaks down your annual or monthly budget incrementally, giving a fair picture of your cash flow.