Understanding Nonprofit Budgets: Organizational vs Program vs. Capital

Create a list of “nice to haves” you can add into your budget if you have projected funds left over after your necessary expenses are covered. According to the 2023 M+R Benchmarks Study, nonprofits spent an average of $0.11 on digital advertising for every dollar of online revenue in 2022. Nonprofit investment in digital advertising increased by 28%, with 56% devoted to digital fundraising, 26% to brand awareness, and 15% to lead generation. This includes estimating the costs of running your organization; such as salaries, rent, office supplies, and marketing.

Understand current financial status

It can be tricky to accurately predict how much you’ll raise from each source and categorize these funds appropriately. If you need assistance, reach out to a nonprofit accounting firm that can take care of this forecasting and reporting for you. We empower those who champion the collective good to scale their impact online through branding, web design & development, integrated marketing, and technology.

• This means that they have more income than they do expenses, which is a good position financially.
• Your board members should have a direct role in developing cash flow projections, agreeing on the assumptions to use, and reviewing the projections carefully.
• While the tips above will help your nonprofit create better budgets, you should also know that effective budgeting isn’t a set-it-and-forget-it activity.
• Evaluate current financial health by analyzing the current year-end forecast, current budget variances, and balance sheet strength.
• This detailed guide helps you allocate resources efficiently, presenting a holistic view of operating costs and expenses.

Master Your Nonprofit’s Budget with Nonprofit Budget Templates from Smartsheet

Good communication between the program, finance, and development departments and the board is key to monitoring the budget during the year. These projects probably won’t be delivered every year, so separating your operational budget from your capital budget is the best way to go forward. Revenue can be one of the more difficult parts of developing a budget – simply because it’s harder to forecast than expenses. An inclusive budgeting process can certainly be challenging and messy and with a great deal of debate. However, this approach to budgeting presents a great opportunity to bring in and unite various perspectives. It’s also useful to look at the financial trends for your programs over the past few years, and assess if each program is covering its direct costs, or contributing to overhead.

What Should Be Included in a Nonprofit Budget?

• You will also learn about the organization-wide budget and different budget systems.
• If you’re looking for additional ways to streamline operations and fundraising, take a look at Sumac’s donation management software.
• No one wants to give money to a nonprofit in a precarious financial situation.
• Since we’re in the business of helping nonprofits, and creating the tools they need to do more good, we wanted to help by creating a sample nonprofit budget template that is free to download and use.
• It shows that your “and organization has thoroughly considered the financial aspects of the project.”

This template should include line items for all of the above expense categories, as well as others that may be accounting services for nonprofit organizations specific to your organization. Once all expenses have been accounted for, you can then begin to allocate funds to each category. Another step in creating a nonprofit budget is to identify the organization’s major sources of income and expenses. This information can be used to estimate income and expenses for the upcoming budget period.

A budget is a guide that can help a nonprofit plan for the future as well as assess its current financial health. It is good practice to periodically review the budget as well as compare it to the actual cash flow and expenses, to determine whether they are playing out as expected during the course of the year. When you take the time to organize a clear and consistent financial plan that aligns with your timely goals, there are clear benefits. These are just a few of the most obvious reasons to create a budget for your nonprofit organization. Without the hard work of determining cash flow and capital allocation, charitable missions are only ideas. Then, plan how you’re going to raise the funds you’ll need on the revenue side of the budget.

Once you enter expenses, you can quickly view your marketing plan’s projected subtotal to date. This template also includes a separate budget plan tab for related nonprofit marketing budget plans. Relay is an online business banking and money https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ management platform that offers no-fee business checking and savings accounts.

• This can be a daunting task for a new nonprofit because you do not have history to review, but there are some tips that can help make it easier.
• Propel Nonprofits video about cash flow to help you better understand the ebbs and flows of your organization’s cash.
• The term “capital budget” might make you think of capital campaigns—the largest fundraising initiatives nonprofits typically run.
• For example, the rent for your office is likely a fixed expense due to your contract with the building’s management company.
• Once the budget has been reviewed and adjusted, present it to your organization’s board of directors for final approval.
• Board directors should be careful to consider the state of the economy and any unusual or unforeseen financial situations of their contributors.

StriveTogether offers online training to help community leaders strengthen their work. Creating an organizational budget takes time and lots of thought, but these strategies can contribute to a more successful process. Involve key leadership to contribute guidance and details from the start. Start with your known fixed costs like rent, utilities, salaries and insurance.

Finally, update your template periodically to reflect changing organizational needs and industry best practices. A well-designed template transforms nonprofit budgeting from a yearly burden into an ongoing strategic tool. A budget for non-profit organizations becomes more effective when broken down by program expenses. Program-based budgeting helps you understand the true cost of each initiative, measure actual performance, and make informed decisions about resource allocation. You can simplify the process—incorporating best practices, adapting to your organization’s needs, and making budgeting easier to manage—with Sage cloud-based financial planning and budgeting software. This is also sometimes called a “broad scope budget” or an “annual budget” because it gives you a full picture of what the coming year should look like.

Nonprofit budgeting is a crucial aspect of managing a nonprofit organization’s finances. It helps ensure that resources are allocated effectively to achieve the organization’s mission and goals. This step-by-step guide with practical details will help you create a well-structured and efficient nonprofit budget.