10 Steps To Creating A Nonprofit Budget

Here are 5 steps that will help you create your first budget for your new nonprofit. Trust me, it will make your life easier and it shows you’re serious about your nonprofit and its future. Excel or a similar spreadsheet-software system that allows you to organize, format and calculate data with formulas.

An organization’s financial plans should include budgets for both operating and for capital as discussed in previous section, on Budgeting. The budgeting process and good practices were also discussed in the previous sections, The Budgeting Process, and Budgeting Practices. In this section we will discuss the terms and concepts involved in creating the annual operating budget. Use this nonprofit budget template if you’re looking to raise funds through grants.

Approval of the annual budget is one of the fundamental building blocks of sound financial management. Fixed costs are expenses that cannot be avoided without significant changes to the organization such as payroll, rent, utilities, etc. The organization should determine how long they want to cover such costs with reserve funds while it works to make up for funding short falls.

Strongnonprofits Budgeting Toolkit

Say you’re running a vocational course for low-income young adults. Use this budget planner to track all the costs of the course. It’s time to ask yourself some questions about the programs and services your new nonprofit will provide this year. What supplies, equipment, facilities, and staff will you need to operate the program? 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 . This is not a fast activity, so commit to taking the time to do it and do it right.

This is the best accounting tool that is used to get the best online accounting tools at a single place. Whether you’re creating your budget with pen and paper or using an Excel document, double-check the math.

A Nonprofit Budget Template For Every Need

At meetings, recognize and encourage cost-cutting ideas and efficiencies, especially during a budget crisis. When staff feel powerless to protect their jobs, they are much more likely to disconnect. Involvement increases accountability and engagement. Staff may also have ideas that neither your executive director nor your board members have considered. It is important the full team has access to both past financial reports and year-end projections as a reference point for planning.

Consider seasonality and timing of when revenue and expenses will come in and out, such as for events, annual appeal revenue drives, large gifts, etc. Make sure to understand the months that may have more revenue coming in or more expenses going out so you can plan to pay certain expenses when you have the cash or reserve enough cash to cover those expenses later. For line items that are easy to estimate on an annual basis and are relatively consistent, divide the annual amount by the number of months left in your fiscal year to arrive at your monthly amount. Consistently including depreciation in a balanced operating budget will provide the cash needed to replenish depleted assets by bringing in cash income to cover a non-cash expense. Not adequately budgeting for depreciation could eventually have the effect of eroding the organization’s net assets.

Steps To Creating A Nonprofit Budget

Advocacy is essential to advance and achieve nonprofits’ missions. The organization should not record an in-kind donation unless it would otherwise have had to, or be willing to, pay for it in cash. In the case of donated professional services, the donor must possess the specialized professional skills being donated in addition to the previous requirement.

I am interested in starting a nonprofit, but I am pretty bad with finances. I could see how that would be a good way to make things a lot easier though, so if I do start one, I’ll have to get someone to help me set something like that up. As vice president of finance and administration for StriveTogether, Brittany Speed provides leadership, financial acumen and strategic insight to ensure the financial health, integrity and growth of the organization. Use prior year results as an estimate to begin from.

If you have full-time employees who qualify for health insurance and part-time employees who don’t, detail these items in the budget but do not assign rates to individuals. This approach will come in handy when you are applying for grants. Review the IRS guidelines for determining whether a worker is an employee or a contractor based on the individual’s degree of independence. This template breaks down your annual or monthly budget incrementally, giving a fair picture of your cash flow. You can enter your estimated receivables and expenditure as well as the date you expect to receive both.

Now That I Have The Right People And Materials Gathered, What Are Best Practices For Putting An Actual Budget Together?

Direct costs are straightforward and can be calculated upfront. They include unique program-related expenses such as the cost of hired vocational coaches, rented books or learning materials on different vocational skills, and the salary of program-specific recruiters. Indirect costs are the costs of shared resources such as office utilities, telephone, or bookkeeping services that are used by all. A budget is aguidethat can help a nonprofit plan for the future as well as assess its current financial health.

• Add high-level estimates initially, but revisit your budget throughout the year.
• Under income, include only the bare minimum amount you’re certain of.
• Consider seasonality and timing of when revenue and expenses will come in and out, such as for events, annual appeal revenue drives, large gifts, etc.
• Include the true cost of items—use real numbers, not percentages or hypothetical figures—and make sure the amount you include in the budget sheet adds up to the total grant money you’re requesting.
• The Year-End Forecast/Projection is usually a better reference than the original in building the following year’s budget.
• When you are developing your draft budget, use a spreadsheet program such as Excel that includes a notes function.

As covered in the Budgeting Practices section, the most reliable budgets yielding the best fiscal results for the organization are conservative and income based. If spreadsheets and manual budgeting are too much for you, use budgeting software to automate expense tracking.

Capital Budgets.Used for construction and other big, one-time spending projects that often take more than a fiscal year to pay for. Keep in mind that there’s no one-size-fits-all budget for grant proposals. In fact, some grantmakers have their own budget format. Help us promote nonprofits and make an even greater impact in communities.

Be sure to also leave enough time for questions, concerns, and feedback from your Board members. Nonprofit success is heavily tied to two things – mission, and money. Quickbooks tool hub makes you feel helped in this case.

See IRS Publication 1771 “Charitable Contributions-Substantiation and Disclosure Requirements” for further information. Volunteer hours do not qualify to be reported as revenue under GAAP . Your organization may be fortunate enough to attract in-kind contributions comprising donations of professional services or other goods and services. It is wise to budget for and report these contributions, when they can be adequately documented, since it gives a truer picture of what it takes to do what your organization does. While buying more will throw you off your personal budget, not buying enough will mean extra trips to the supermarket.

A budget is a planning tool that reflects an organization’s programs, mission, and strategic plan. A key component of financial sustainability is the commitment of board and staff to financial management that includes timely review of financial reports and advance planning. One way that board and staff plan for income and expenses in the future is by creating a budget.

Create Contingency Plans

Chances are you’ll either overbuy or forget something you need. It is important to be thorough and transparent in your presentation, including all assumptions, risks, and opportunities behind the budget.

Because the last year’s information may be a little dated, it may be helpful to use 6-month results , as it gives us an accurate picture of where we were midway in the current year. Incremental budgets are a percentage increase or decrease of an existing budget. Candid Learning offers information and resources that are specifically designed to meet the needs of grantseekers. The National Council of Nonprofits is a proud 501 charitable nonprofit. Share the story of your nonprofit’s impact and help us tell the story of the nonprofit sector.