Nonprofits need a budget just like any other business. A budget helps you track your income and expenses, set financial goals, and make sure you’re using your resources in the most effective way possible, essential for successful nonprofit financial management. In this article, we will discuss what should be included in a nonprofit budget, how to create one, and provide a template and example budget to help guide you through the process.
What Is A Nonprofit Budget?
A nonprofit budget is a financial plan that details how a nonprofit organization will raise and spend money. The budget should include expected income, expenses, and funding. The goal of creating a nonprofit budget is to ensure that the organization has enough money to cover its expenses and reach its financial goals.
What Should Be Included In a Nonprofit Budget
Your budget should consist of the income you expect to make and the expenses you expect to incur. These numbers will often be estimates based on your goals or what you earned and spent last year.
When creating your budget, you will need to estimate the income you expect to receive. Unlike companies, however, most of your income will be in the form of donations. You may also receive income from grants, fundraising events, or investment earnings. The best way to calculate your expected income is to review your organization’s financial history and base your estimates on that.
If your nonprofit is new, you may not have much income to start with. In this case, you can base your estimates on what similar organizations have earned in their first year. Or, you can base it on your funding goals and plans.
Your expenses will include the costs of running your nonprofit organization; such as salaries, rent, office supplies, and marketing. You may also have expenses related to specific programs or projects. To estimate your expenses, review your organization’s financial history and base your estimates on that. If you don’t have a financial history to review, tally up the expenses you expect to incur.
How To Create a Nonprofit Budget
Now that you know what should be included in your nonprofit budget, it’s time to start creating one. The process of creating a nonprofit budget is similar to the process of creating a budget for any other type of business.
Compile Your Expected Income and Funding
The first step is to compile your expected income and funding. This includes estimating the amount of money you expect to receive from donations, grants, fundraising events, and investments.
Compile Your Expected Expenses
The next step is to compile your expected expenses. This includes estimating the costs of running your organization; such as salaries, rent, office supplies, and marketing.
Make Sure To Review Your Budget Often
Once you have created your budget, it’s important to review it often. This will help ensure that your estimates are accurate and that you’re on track to reach your financial goals.
Hire An Accountant or Use Accounting Software to Help
If you’re not sure how to create a nonprofit budget, consider hiring an accountant or accounting service. They can help you estimate your income and expenses, and they can provide guidance on how to best use your resources.
There are also a number of accounting software programs that can help you create and manage your nonprofit budget. These programs often have templates that you can use, which can make the process of creating a budget much easier.
Example of a Nonprofit Budget
Below is an example of a nonprofit budget to give you an idea of what you need to do. This budget includes expected income, expenses, and funding for a small nonprofit organization.
Fundraising Events: $2,500
Investment Earnings: $1,000
Total Income: $18,500
Office Supplies: $500
Program Expenses: $3,000
Total Expenses: $17,000
Net Income: $1,500
As you can see, this nonprofit has a budget surplus of $1,500. This means that they have more income than they do expenses, which is a good position financially.
Keep in mind that this is just an example budget. Your nonprofit’s budget will be different, depending on the size, income and expenses of your organization.
Creating a budget for your nonprofit organization is an important step in ensuring your financial success. By estimating your income and expenses, you can make sure that you’re using your resources in the most efficient way possible. And, by reviewing your budget often, you can make sure that you’re on track to reach your financial goals.