About three to six months before the end of the fiscal year, an organization starts developing a proposed budget. This work is primarily done by the executive director, using empirical data about expenses and revenue, as well as any new expenditures and funding sources projected for the upcoming year. Like for-profit organizations, nonprofits should develop an operating budget yearly.
Understanding Grant Budgets
In fact, some estimates suggest that your payroll will account for 18-52% of your total budget. Your budget will be unique to your organization, but we’ll give you a broad idea https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ of what to include under each section. This budget comprises pensions, health care, social security, and payroll taxes.
Types of Grant Budgets:
With this comprehensive annual nonprofit operating budget template, you’ll get quarter-by-quarter and yearly insights into income and expenses. To calculate year-end budget totals, contrast income (e.g., sales, contributions, fundraising, etc.) with expenses (e.g., office equipment, transportation, utilities, etc.). Capterra’s Nonprofit Grant Budget Template is designed to aid nonprofits in planning and managing their grant funding effectively. This template allows for precise allocation and tracking of grant funds, ensuring that each dollar is accounted for and spent according to grantor guidelines. It is especially useful for organizations looking to streamline their grant reporting process and enhance transparency with funders.
Collaborate Across Teams
Whether you’re managing general operations, launching a new program, or amplifying your marketing efforts, a thoughtful budget can be the difference between a successful year and a strained one. A well-structured nonprofit budget aligns expected financial resources with your organization’s mission and goals, ensuring financial sustainability while maximizing project impact. To ensure that all expenses are accounted for, it is helpful to create a budget template that can be used on an annual or monthly basis. This template should include line items for all of the above expense categories, as well as others that may be specific to your organization.
Features of an Effective Nonprofit Budget
At a minimum, an annual budget review and budgeting cycle are necessary for a healthy financial picture. The expense side of your operating budget will typically be divided between program costs—i.e., any expenditures that directly further your mission—and overhead. This division, known as functional expense categorization, matches IRS Form 990 to ensure consistency among financial documents. When you consider the tools that help your nonprofit maximize its impact, what comes to mind? You probably think about your fundraising software, strategic plan, materials for delivering services, or even your staff’s energy and passion for your cause. What you might not think of right away are your organization’s financial management resources, although they’re just as critical for furthering your mission as any of the other tools we’ve mentioned.
What Are the Three Categories of Functional Expenses?
If you need assistance, reach out to a nonprofit accounting firm that can take care of this forecasting and reporting for you. To address these concerns, organizations often strive to maintain a balanced ratio of program to administrative expenses, demonstrating their commitment to maximizing the impact of every dollar spent. This balance is crucial not only for maintaining donor trust but also for ensuring long-term sustainability.
- Identify all expenses when creating a nonprofit budget in order to have an accurate financial picture of the organization.
- For new expenses, request quotes from vendors or providers to budget for these costs as accurately as possible.
- Knowing how much money your nonprofit is making can help you better allocate resources.
- It is important not to guess—approved budgets from the finance department or the executive director should be obtained.
- It’s a strategic document that reflects the organization’s priorities, guides its decision-making, and helps it stay accountable to its members, donors, and the public.
- Budgeting for nonprofit organizations takes a bit of time, but planning your budget is too important to make the mistake of rushing through it.
Schedule a free consultation with The Charity CFO today and let’s build a budget that empowers your mission. Cash flow ensures your organization can meet its obligations month-to-month. Budgeting software can streamline the budget creation and accounting services for nonprofit organizations management process. It automates repetitive tasks, reduces manual errors, provides real-time financial insights, and integrates with other financial tools. Direct program costs include staff salaries and benefits, materials and supplies, dedicated facilities, transportation, marketing, participant materials, and essential equipment.
