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. Yes, profit in a charity is perfectly acceptable as long as those profits are used for the nonprofit’s charitable purposes and not for the benefit of the Board or key staff. In fact, healthy nonprofits will do this to help fund 3-6 months of operating reserves.

Reviewing and Adjusting the Nonprofit Operating Budget

Beyond basic income and expense tracking, build in space for context and analysis. Note funding restrictions, timing considerations, and progress toward goals. Equally important are the indirect support costs that keep your programs running smoothly.

Strategic Budgeting for Nonprofit Organizations in Colorado

Let’s look at some of the best practices for managing your organization’s budget effectively. It should be clear by now that your grant budget can make or break your chances of winning funding. The examples, insights, and expert advice in this guide should provide you with the resources you need to craft an effective and compelling budget in your next proposal. Project budgets should outline your overall spending plan for your entire project, from successfully executing it to evaluating its impact and sustainability. Not-for-profit organizations should aim to have an operating reserve ratio of no less than 25 percent, or enough to cover at least three months of their annual expenses.

• For most nonprofits, some programs may be financially self-sustaining or even generate a surplus.
• This allows for a better overview, more speedy addressing of any potential issues, more nimble management of the staff and volunteers, and a more informed everyday decision-making process.
• Nonprofit organization expenses in this area include efforts to attract and retain donors through social media campaigns, digital advertising, and community events.
• Together, administrative expenses and fundraising expenses make up a nonprofit’s “overhead,” or “operating expenses.”
• The accounting treatment is different for unrestricted grants, for temporarily restricted grants, for special events revenue, and for contract revenue.
• Once the budget has been created, it is important to monitor actual expenses and income on a regular basis.

Examples of Grant Budgets That Will Win Over Funders With Template

• But, the commonly accepted rule most of them follow is the less spent on overhead, the better a nonprofit looks to donors.
• It’s important to analyze industry standards when determining the pay rate for specific positions and what benefits to offer.
• Effective financial management is the backbone of a thriving nonprofit, ensuring stability, transparency, and informed decision-making.
• Ask the tough questions, know where the gaps lie and what’s being done to fund them, and have a plan for the next step if funding doesn’t come through.
• This might include volunteer hours or non-monetary contributions such as vehicles or other equipment.

For example, if the main purpose of your budget is compliance – there might be some elements that you need to include https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ in your budget that you otherwise wouldn’t. What this practice says to your stakeholders, both internal and external, is that you know your mission will still be relevant after the fiscal year. However — and I can’t caution this enough — avoid the temptation to over-project gifts, especially from new or newer donors. In this article, restricted funds refer only to temporarily restricted funds.

You will then use the operating budget as a financial management tool to ensure that your revenue and expenses are on track. Then, plan how you’re going to raise the funds you’ll need on the revenue side of the budget. This includes determining how much revenue will come from small, mid-level, and major gifts, as well as whether you’ll use any 5 Main Benefits of Accounting Services for Nonprofit Organizations existing funding toward the initiative.