Nonprofit Budgeting: A Practical Guide

The approved budget then serves as a guide for financial activity in the months ahead. Budgets should not be written in stone, because the financial https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ position of the nonprofit may change during the year. Financial planning is vital to an organization’s success and sustainability. The Better Business Bureau recommends that nonprofits spend under 35% of their funding on fundraising efforts and spend at least 65% on programs.

Nonprofit Budget 2025: Steps, Planning, Examples & Template

Even profitable programs can face challenges when expected revenue arrives months after expenses occur or when donation patterns don’t align The Key Benefits of Accounting Services for Nonprofit Organizations with regular operational costs. Mastering cash flow management helps prevent these timing mismatches from disrupting your mission-critical work. The budgeting process, particularly when it’s transparent and inclusive, can promote a deeper understanding of the organization’s mission among its members. By clearly laying out how each dollar is intended to be used, the budget underscores the link between the organization’s financial choices and its mission. 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.

Create a Replicable Process

Variable costs, like program supplies, event expenses, and part-time staff hours, offer flexibility when funding fluctuates or new opportunities arise. For example, if your year-end campaign consistently brings in 40% of annual donations, factor this timing into your financial planning. First, the budget must clearly align with the organization’s mission and strategic objectives.

Accounting Software

For example, your programs may have multiple goals, such as improving the quality of aid while also reaching more beneficiaries. Your budget is a recipe for financial health over the forthcoming year, but don’t ignore the health status you expect when closing the current year. Finally, a realistic timeline for budget preparation should be established, ensuring enough time for review and adjustments before final approval. Clarify who will oversee different aspects of the budget as your project takes shape and outline the processes that will guide them.

Successfully implementing a budget for non-profit organizations requires systematic effort. Consider staff costs, professional services, technology investments, insurance, and office expenses. Pay special attention to periods when multiple large expenses coincide or when income traditionally slows. This foresight allows you to plan proactively rather than reacting to cash crunches.

Annual Budgeting

We strive to provide nonprofit leaders with useful resources, tips, and tools that you can use at your organization. We’d love to hear your feedback about this content and anything else you would like to see more of from NFF. Creating a nonprofit budget can feel overwhelming, but breaking it into manageable steps can simplify the process and ensure accuracy. Develop, analyze and apply your organization’s budgets with expert help from the nonprofit financial professionals at Jitasa.

• Funds raised may come from ticket sales, membership fees, proceeds of auctions, galas, sales of goods or services, or other fundraising activities.
• Let’s explore some key reasons why budgeting plays such a crucial role in nonprofit success.
• To build an accurate budget, list every potential revenue source and estimate its contribution.
• When creating a multi-year budget, account for inflation on each line item and over each year.
• The decisions you make about revenue and expenses should always align with your organization’s goals and the impact you’re striving to achieve.
• Historic data is the most reliable information you can use for creating a budget.
• Make sure that you clearly determine the roles and decision-making processes that will yield the most effective information gathering, analysis, and decision making.

Understand Your Organization’s Goals

This budget includes expected income, expenses, and funding for a small nonprofit organization. Propel Nonprofits is an intermediary organization and federally certified community development financial institution (CDFI). Determine the amount of funding needed for each of your organization’s programs and services. Keep your goals and objectives in mind when allocating resources, ensuring that they are aligned with your mission and priorities.

Every organization’s budget will look slightly different, so make sure you can customize your chosen template to fit your needs and goals. However, this doesn’t mean that your nonprofit’s overhead spending can go unchecked or should be prioritized over program expenditures. Instead, treat this as a guideline to reduce overhead spending (within reason) before taking funding away from your programs if you need to cut costs.