10 tips for creating budgets at nonprofit organizations

While familiar, this approach might keep you from spotting opportunities for significant improvements. A fresh perspective comes from starting each fiscal year with a new comprehensive budget. The balance sheet is one of the fundamental financial statements used by law firms to summarize their financial position at … Such tools centralize data storage and manipulation, eliminating the need to copy or download documents, and adding a layer of security.

Administrative Costs

Creating a budget that doesn’t rely on grants is important in order to maintain financial stability. Anticipating and accounting for large expenses such as the cost of hiring new staff before tackling smaller expenses is also crucial. Nonprofits fund employee salaries through diverse revenue streams, including grants, donations, program fees, and earned income. Many organizations include salary costs in grant proposals and build appropriate overhead into their program budgets. Successful nonprofits prioritize competitive compensation to attract and retain talented staff while maintaining transparent communication with donors about staffing costs.

The Most Common Types of Budgets Used by Nonprofits

• The basic steps involve setting financial goals, estimating income and expenses, drafting the budget, reviewing and adjusting the draft, and finally, approving and implementing the budget.
• For more on start-up and small business budget templates, see Free Startup Budget Templates and Free Small Business Budget Templates.
• Every accounting system has a chart of accounts which classifies the sources of revenue and the types of expenses you incur.
• Creating a sound budget, and then sticking to it, is the cornerstone of health and sustainability for nonprofit organizations in the Colorado Springs area.
• When preparing your NGO’s grant proposal, it’s crucial to include detailed budget categories to ensure your funding request is comprehensive and transparent.

In communicating with your board members, nonprofit leaders, and supporters about how donations are being used, transparency is key. Generate regular reports that outline your nonprofit’s financials and the impact of your programs. The procurement of these items must be carefully planned to ensure that they meet both current needs and future demands. When budgeting for equipment and supplies, organizations must consider both initial purchase costs and ongoing maintenance or replacement expenses. For example, while purchasing new computers may require a significant upfront investment, organizations must also budget for software updates, repairs, and eventual replacements as technology evolves. This includes defining your budget categories (income, expenses, etc.), time periods (monthly, quarterly, etc.), and any other parameters unique to your organization.

• This information can be used to estimate income and expenses for the upcoming budget period.
• Good budgets assure donors that the nonprofit is actively overseeing the budget process.
• But even with these staggering numbers, many nonprofits—particularly small- to mid-sized organizations—are still underfunded.
• Creating detailed and accurate budgets for grant applications can be a daunting task, but it is essential for securing funding.
• Every one of these activities is vital to your organization’s impact—and every one needs its own budget to ensure funds are used effectively to accomplish it.
• By prioritizing mission-driven spending, you can clearly demonstrate to donors how their contributions directly support your organization’s goals and impact.

How can I convince my board to invest in budgeting software?

Note months that may have more revenue coming in or more expenses going out. Use this calendar to plan to pay certain expenses when you have the cash, or reserve enough cash to cover those expenses later. Each project must always include every expense it incurs, including direct expenses (such as salaries, supplies, and other costs) and indirect overhead allocation. For example, staff salaries are allocated to individual programs from the operating budget, and a single employee might be assigned to multiple programs. In order for nonprofits to determine how much money they require to operate, they need an accurate way to account for all income and costs. This article aims to simplify functional expense allocation methodology and will walk you through the process of categorizing expenses for your operating budget.

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. 3 Please note that funds relating to Currencycloud’s services are not FDIC insured or protected by the Visa Zero liability protection policy. In regards to Currencycloud’s services when funds are posted to your account, e-money is issued in exchange for these funds, by an Electronic Money Institution who we work with, called Currencycloud. In https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ line with regulatory requirements, Currencycloud safeguards your funds. This means that the money behind the balance you see in your account is held at a reputable bank, and most importantly, is protected for you in the event of Currencycloud’s, or our, insolvency.

• The user of this template/sample is responsible for tailoring the contents to meet the specific needs and circumstances of the organization.
• If your organization has a budget in place, you may use that as a starting point each year and adjust income and expenses based on projections.
• They are time-consuming, prone to errors, outdated, unsuitable for collaboration, and hard to scale.
• Some grantors specifically ask how much of the budget is allocated to fundraising, administration, and program costs, which can be found under functional expenses in an audit.
• Your capital budget includes projects that have an ongoing impact on your operations.
• General Services Administration, which is a simple budget in Google Sheets that can be tailored to your specific budget line items.

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Fundsforngos.org, fundsforngos.ai, and fundsforngospremium.com domains and their subdomains are the property of FUNDSFORNGOS, LLC 140 Broadway 46th Floor, New York, NY 10005, United States. Unless otherwise specified, this website is not affiliated with the abovementioned organizations. The material provided here is solely for informational purposes and without any warranty. This structured approach not only enhances internal management but also supports external communication, making it easier to justify expenditures and secure funding. Propel Nonprofits video about depreciation, which can be confusing but is an accounting concept we can all understand.

Fluctuating Income Sources

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. The capital budget may include projects which will have ongoing The Key Benefits of Accounting Services for Nonprofit Organizations effects on operations.