Mastering cash flow management helps prevent these timing mismatches from disrupting your mission-critical work. Excel is another popular tool for creating nonprofit budgets due to its ease of use and plethora of useful features. Using Excel, you can create tables that display the organization’s finances over time. A capital budget is a long-term financial plan that covers major investments and projects needed to strengthen your organization over time to sustain its growth. A capital budget typically includes things like building new facilities or acquiring new equipment needed to meet the demands of increased demand for services provided by the nonprofit organization.

How to create a nonprofit budget in 5 steps

• For example, if you have it in your plan to buy new computers for your staff or to build a new website, create a separate budget for those projects.
• An operating budget is not just a financial document; it’s a reflection of a nonprofit’s commitment to achieving its mission.
• For detailed guidance on streamlining expenses and planning the optimal resource allocation, explore more insights at How to Start a Charity Nonprofit Business in 9 Steps?.
• A capital budget covers one-time expenses that will take years to fully fund, like major construction projects.

Your capital budget includes projects that have an ongoing impact on your operations. A capital budget is also used to plan for major expenses like construction costs and other big, one-time expenses that take more than a fiscal year to fund. Relay is an online banking and money management platform that can help you (and your team members) avoid overspending, get clear on income, and simplify financial management. This example shows the estimated expenses and revenues of a nonprofit organization that runs community programs. The organization has planned to spend $102,500 on operations and projects (expenses) and expects to raise $135,500 through donations, fundraising events, and program fees (revenues).

Effective Expense Management

• An operating budget is essential for your organization because it helps organize short-term goals.
• Some expenses are assigned to the indirect category specifically, such as the audit.
• In contrast, the budget-to-surplus practice is about looking to the future to ensure your organization’s long-term sustainability.
• Allocating around 5-10% of the budget towards these collaborations helps foster sustainable impact while supporting nonprofit cost-saving strategies.
• Many charities allocate roughly 20-40% of their budget to covering office rent, utilities, and staff salaries.

Our template offers a comprehensive financial overview, covering both revenue and expenses in detail. It allows you to track various income sources, categorize expenses, and compare current figures with previous years. Nonprofits rely on a combination of funding sources such as donations, grants, fundraising events, and more. In other words, it’s an estimate of how much money you’ll make and spend over a certain period of time, such as a month or year. While it’s not a bad thing to spend money, you don’t want to be inefficient with https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ your spending or spend too quickly.

What Is A Nonprofit Budget?

They say business is all about accounting services for nonprofit organizations learning from the past; building a nonprofit operations budget is no exception. If your organization is resting right around zero for this ratio, it means you may not have the financial capacity to expand at this moment. However, the higher the ratio, the more your organization can invest back into itself by expanding programming, hiring additional staff, or funding a capacity campaign. Choosing the right nonprofit accounting software will streamline how your organization understands itself.

• Since you’ve already identified many of your organization’s expenses, start by outlining and categorizing those costs.
• A key component of financial sustainability is the commitment of board and staff to financial management that includes timely review of financial reports and advance planning.
• Looking over your budget with new hard data will allow you to make any tweaks as necessary and head off serious potential problems.
• Boards should analyze variances and consider if there will be any impact on the upcoming budget.
• By organizing your budget and allocations this way, you’re also setting up the accounting system to track and report the three functional expense categories required on audits and the IRS Form 990.

Investing in dedicated staff leads to improved nonprofit cost analysis and efficient program delivery. You can easily find pre-built templates for operating budgets, program-based budgets, and grant proposals. Once your nonprofit budget is created, it must be reviewed and approved by the organization’s board of directors. Then, detail your expenses across program, administrative, and fundraising categories.

• All operating budgets can be broadly split into two categories – revenue and expenses.
• Zero-based budgeting requires examining every expense anew, regardless of its history in your organization.
• Additionally, significant funds are dedicated to cybersecurity and data protection.
• If you’ve created a budget for your household before, you probably averaged your expenses, calculated your income, and determined how much you could save for the future.
• If the program operates with similar goals, measures, costs, and staff, we’d suggest that these be grouped as a single program.
• The nonprofit operating budget categorizes revenue by different funding sources.