Nonprofit Budgeting: How to Get Started + Template

Indirect costs, which are also called overhead, include things like utility bills, internet fees and postage. For more productive program planning, we recommend our Special Purpose Worksheets. These worksheets allow you to create budgets that fit specific objectives or situations, such as conference budgets, grant allocations, and team event budgets. You may have an overall operating budget, but you’ll also need specific program budgets.

• It outlines expected income and planned expenses for a specific period, typically a fiscal year, ensuring that resources are allocated efficiently and transparently.
• This information can provide insights into trends in the organization’s income and expenses, which can be helpful in estimating future income and expenses.
• Here’s a breakdown of the key types of budgets that nonprofits should be familiar with and how they differ.
• At the first budget planning meeting, the board or budget committee should agree on their financial goals.
• The process of building a nonprofit operating budget is fundamentally a planning process.

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• It can be tricky to accurately predict how much you’ll raise from each source and categorize these funds appropriately.
• Include revenue you expect to generate from fundraising events, grant proposals, individual donations, corporate sponsorships, and other sources of funding.
• Understanding and managing both fixed and variable costs helps you make smarter spending decisions and maintain financial flexibility.
• The following “other expense” type accounts can be set up for tracking capital expenses for operations (equipment purchases over the capitalization threshold) or for a large capital campaign project.

Having your program directors carefully create budgets for each of their programs will knock out a big portion of the data you https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ need to produce an overall nonprofit budget. Nonprofit operating budgets typically include expected revenue as well as various expense categories that reflect the organization’s day-to-day activities and operational needs. Here are some common categories found in an annual budget for a nonprofit organization. Volunteers can play a strategic role in the budget planning process by enhancing volunteer engagement and promoting budget transparency.

Step 4: Track your financials carefully

Most financial experts recommend nonprofits maintain cash reserves equal to 3-6 months of operating expenses. However, your optimal reserve level depends on factors like funding predictability, program commitments, and growth plans. Start by building toward three months of reserves, then adjust based on your organization’s specific needs and risk factors. A good budget for non-profit organizations balances program delivery with operational sustainability. Rather than focusing on specific dollar amounts, aim to maintain program spending at 65-75% of your budget, with adequate allocation for administrative costs (15-20%) and fundraising (10-15%). Your exact ratios should align with your organization’s size, mission, and growth stage.

Follow this nonprofit budget format to stay on track

These individual budgets can have many nuances, as you may have to fund them internally or rely on donations. Budgeting for a surplus allows you to support future innovations and invest in your staff. The goal is to avoid the “nonprofit starvation cycle” of never having enough to invest resources in infrastructure, or having an overhead that is “too lean” to effectively run the organization. Every accounting system has a chart of accounts which classifies the sources of revenue and the types of expenses you incur. Use the same categories in your budget to easily generate financial reports to funders and others.

What is an operating budget for a nonprofit?

The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed. Use this budget for nonprofit project template to determine where you have room to grow and where you might need to cut back. Propel Nonprofits video about cash flow to help you better understand the ebbs and flows of your organization’s cash. We are a virtual outsourced accounting and consulting firm based out of Tucson, Arizona.

How do I keep my overhead cost list low when managing a charity?

When it comes to budgeting, context is essential when considering every item. Think about where your organization is right now, the current donor climate, and your current expense climate. Or perhaps you have other unusual expenses, fund shortages, or fundraising windfalls that you need to make special plans for. While you can (and should) use the previous year’s numbers to estimate upcoming expenses and income, you should carefully evaluate each one. Assess whether the expense is worthwhile, whether the program is generating an acceptable ROI, and whether you can expect to receive similar donations from your accounting services for nonprofit organizations existing donors.

You might not be able to predict what your donors give, but you can control a lot when it comes to spending. 💸 If you’re feeling overwhelmed, try using your goals to prioritize expenses—and remember, you can always increase spending if you’re able to raise more revenue later in the year. If you’re managing a multiple six- or seven-figure budget, asking a financial expert for help is always a good idea. Discover seven powerful collaboration tools that transform chaotic nonprofit teamwork into streamlined fundraising success—helping you raise more while stressing less. Marketing and fundraising encompasses all tools, supplies, and technology used to drive donations (i.e., the main revenue source for your organization).