He’s been a dedicated board member of many nonprofit organizations – including seven years working for Amnesty International USA – where he was the Director of Development and Chief Financial Officer. His time at Amnesty reinforced Steve’s life-long commitment to giving back to the community through charitable causes. Many nonprofit leaders assume they can’t afford the type of back-office that’s required for effective nonprofit budgeting and comparing budgets vs. actuals. This guide brings together key themes and actionable strategies designed to help nonprofits achieve sustainable fundraising success.

Determine a budgeting approach.

Break down your monthly cash flow estimates to account for any seasonal changes. Invite supporters to create their own fundraising pages on behalf of your organization. Provide toolkits (email scripts, social media copy, and graphics) to help them tell your story effectively. Although nonprofits enjoy tax-exempt status, they still face significant filing requirements. Be sure to understand the impact and timing of restricted contributions and their releases, as the timing might not impact the current year’s budget. We do not recommend including income projection “cushions” simply to balance the budget, as this can set your nonprofit up for a budget deficit if the projected income fails to hit its target.

Managing Restricted Funds: A Practical Guide for Charities

Since different funding sources often come with specific restrictions, your budget should carefully allocate resources to cover each need effectively. Start with setting clear goals and bringing in key stakeholders—such as program managers and department heads—who can provide detailed estimates of expected costs and revenues. Program-specific budgets detail the income and expenses related to a specific initiative, such as a youth mentoring program, a community food bank, or an educational campaign. When creating a nonprofit budget, you’ll typically include key financial details in a structured format. By prioritizing mission-driven spending, Accounting Services for Nonprofits: Benefits and How to Choose the Right Provider you can clearly demonstrate to donors how their contributions directly support your organization’s goals and impact. Unlike standard budgeting, your priority as a nonprofit is to consider project goals from the perspective of donors and stakeholders rather than generating profits.

Aligning Financial Plans with Strategic Plans

To earn their place in the budget for another year, costs typically need to be tied to real results. Budgets may be requested by parties involved in financial transactions with the nonprofits, such as banks, or by donors/grantmakers considering a gift to the nonprofit. Fundraising feasibility studies are the foundation of successful capital campaigns. Each nonprofit needs to determine the appropriate level of cash reserves for its own operations. Reports such as https://holycitysinner.com/top-benefits-of-accounting-services-for-nonprofit-organizati/ the Nonprofit Finance Fund’s State of the Sector reveal year after year that a minority of nonprofits responding have more than 6 months of cash in reserve.

Principles & Practices: «best practices» for nonprofits

• Reviewing your budget every month gives those monthly donations a chance to arrive, and provides a good idea of where you all stand for the upcoming month.
• By making continuous adjustments, you can keep your nonprofit on track to successfully complete another year.
• Be sure to consider inflation, potential cost increases, and one-time expenses.
• 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%).
• Transparency in financial reporting is essential for building trust with stakeholders, including donors, board members, and the community at large.
• Learn the 12 key metrics you need to monitor the financial health of nonprofit organizations.

Mark the events in everyone’s calendars, so that it becomes easier to repeat the process each year. The budget also plays a key role in forcing organizations to prioritize their activities so as to determine those that are most critical for fulfilling their mission. 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 existing donors. Before you start a budget for your nonprofit, you must first understand that there are different types of budgets.