Megan Alba
3 Ways to Make Your Nonprofit Budgeting More Dynamic, Collaborative, and Accurate
Budgeting should power your mission, not slow it down. For many nonprofits, budgeting feels like an uphill battle—outdated spreadsheets, unclear...
The National Council of Nonprofits reports that 92% of organizations manage budgets of less than $1 million annually, with 88% spending less than $500,000 per year.
These statistics show that it is paramount for not-for-profit organizations to have a plan for raising and spending funds.
This guide will walk you through the process of nonprofit budgeting, including what to include in a budget and the steps to create one. We’ll provide an example budget to inspire you to create your own. We’ve also rounded up four budgeting tools to simplify your financial management.
Pro Tip: If you’re looking for a financial partner to help you create an efficient and effective budget for your nonprofit organization, Martus Solutions has all the tools you need.
Our platform is an intuitive, cloud-based budgeting software that makes creating your nonprofit budget effortless. Our tool lets you collaborate seamlessly across departments, syncs with your favorite accounting systems, and provides real-time insights.
Book a demo today and create a budget that reflects your organization's mission.
What Is Nonprofit Budgeting?
Simply, nonprofit budgeting involves tracking funds to identify and outline your organization's expenses and revenue. It ensures your organization meets its goals, identifies areas for raising money, and allocates resources efficiently.
Why Budgeting Is Crucial for Nonprofits
A budget helps you monitor your nonprofit's funds and ensure there are always enough to fulfill your mission.
Check the reasons you need a budget below:
- Allocate Resources Efficiently: A nonprofit budget can guide your spending on activities and help you maximize the impact on your goals.
- Manage Financial Risks: A budget helps non-profit organizations identify potential risks and prepare for unexpected costs or funding downturns, thereby avoiding financial crises.
- Maintain Financial Stability: Planning can help nonprofits maintain an efficient cash flow and reserves to cover revenues and expenses.
- Informs Decision Making: You can use the data from your comprehensive budgeting to decide which programs to invest in, allocate resources, and identify expansion opportunities.
- Demonstrate Accountability: By showing how funds are used for your organization, you can demonstrate transparency and maintain trust with your donors, stakeholders, and grantmakers.
- Facilitate Goal Setting: Nonprofit budgets help with strategic planning and creating a financial strategy based on your organization's objectives and mission.
- Measures and Controls Performance: A budget serves as a benchmark to assess financial progress, identify areas for improvement, and match objectives with organizational goals.
Tip: With Martus Solutions, you can unlock the power to completely control your cash flow and manage your non-profit finances effectively.
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Key Components of a Nonprofit Budget
Now that you know the importance of a nonprofit budget, let’s break down what should go in it.
- Revenue Projections: List grants and restricted funding, donations and unrestricted funding, and revenue from the organization's services or products.
- Expenses: Know where funds must go—to program expenses, administrative costs, fundraising expenses, reserves, and contingency funds.
- Staffing and Payroll: Plan for full-time team costs, part-time staff costs, benefits, and payroll taxes.
- Capital Expenses: Budget for significant purchases, such as facility renovations, technology investments, and equipment upgrades.
- Cash Flow: Map out the money that’s coming in and going out by month to identify tight spots and plan on how to cover potential gaps.
- Project-Based Budgets: Create budgets for specific projects to help you allocate resources to different initiatives based on their unique requirements.
How to Create a Budget for a Nonprofit
Now that you know what should go into your non-profit budget, it’s time to start creating one.
Below, we’ll walk you through the steps you should take to create your nonprofit budget:
1. Gather All Financial Information
Start by collecting financial information for your nonprofit organization. Gather past budgets, income sources like donations and grants, and expense records. For a new organization, you should estimate the figures based on similar nonprofits in the industry.
2. List All Revenue Sources
List all the revenue streams for the upcoming year, including donations, grants, memberships, fundraising income, and other sources. Remember to have realistic projections to avoid overestimating your income.
3. Categorize Your Expenses
Sort your expenses, such as employee salaries, administrative fees, marketing costs, and other fundraising expenses. You should also list indirect costs and have funds for unexpected expenses.
4. Allocate Funds to Programs
It’s time to decide what programs and activities you want to allocate resources to that year. Be realistic about what you can successfully handle, and take on more projects that you can handle.
5. Document and Share
Once your budget is ready, share it with everyone. You can ensure that there is transparency about financial goals among your team and volunteers.
6. Review and Adjust
You should subtract your expenses from your income to understand your net income. A positive number shows a balanced or surplus budget, while a negative one shows a deficit. Once you have the numbers, conduct regular reviews and review your budget by the board of directors to make any changes.
Tip! If you’re unsure how to create a nonprofit budget, consider partnering with us. Our software can help you create a budget based on your previous budgets or actual expenses. You can also collaborate in real time as you make it.
Want to learn how you can secure your financial future? Grab your guide to future proofing your budget— for free!
Nonprofit Budget Example
Now that you know how to create a budget, let’s look at a sample that covers all the essentials.
Organization Name:
Fiscal Year:
Revenue Source
| Category | Projected Amount |
| Individual Donations | $50,000 |
| Corporate Sponsorships | $20,000 |
| Grants | $25,000 |
| Fundraising Events | $40,000 |
| Membership Fees | $60,000 |
| Total Income | $195,000 |
Personnel Expenses
| Category | Projected Amount |
| Salaries and Wages | $30,000 |
| Benefits (Health, Dental) | $10,000 |
| Payroll Taxes | $2,000 |
| Total Personnel Costs | $42,000 |
Administrative Expenses
| Category | Projected Amount |
| Office Supplies | $4,000 |
| Technology/Software | $1,000 |
| Legal and Accounting Fees | $5,000 |
| Total Administrative Expenses | $10,000 |
Facilities Costs
| Category | Projected Amount |
| Rent | $12,000 |
| Equipment/Infrastructure | $10,000 |
| Other Facilities Costs | $5,000 |
| Total Facilities Costs | $27,000 |
Fundraising and Marketing Costs
| Category | Projected Amount |
| Fundraising Event Costs | $15,000 |
| Marketing Materials (Print/Digital) | $7,000 |
| Social Media Advertising | $3,000 |
| Donor Appreciation | $2,000 |
| Total Fundraising and Marketing Costs | $27,000 |
| Category | Projected Amount |
| Total Income | $195,000 |
| Total Expenses | $106,000 |
| Net Surplus/Deficit | $89,000 |
Nonprofit Budgeting Software
Budgeting software for nonprofits can help you track finances and provide accurate, real-time insights to make informed decisions.
Here are the 4 leading budgeting tools for nonprofits:
1. Martus Solutions
A cloud-based budgeting solution built to centralize and simplify the financial management of your nonprofit.
Top Features
- Detailed Financial Reports: Access custom reports, for example, projected balance sheets and cash flow statements, to gain real-time insights into your organization's finances.
- Integration with Other Apps: Keep using the ERP and accounting systems (like unlock the full potential of Sage 100 and 365 Business Central) you trust while unlocking advanced budgeting and reporting
- Multi-Year Budget Forecasting: Perform forecasts by month and year to help you anticipate possible scenarios.
- Multi-Year Reporting: You can compare budgets vs. actuals across multiple years, helping you get reports on your financial plans and real performance.
- Collaborative Tools: Collaborative budgeting for nonprofits allows multiple team members to create and review budgets in real time.
Check out our demo and see how our software helps you create a budget and plan your finances efficiently.
2. Vena
Vena is an Excel-like budgeting process that can help your team streamline financial processes.
Top Features
- Grant Planning and Budgeting: Easily track your grant reports and reconcile your budgets.
- Funds Reporting: Generate reports regularly on the status of your grants.
- ERP and Accounting Systems Integration: Connect your accounting software with Vena, such as Saga Intacct and Microsoft 365 Business Central.
3. Xero
Xero is excellent for small nonprofits or charities that want a cost-effective, cloud-based accounting software.
Top Features
- Invoicing Templates: Use the invoice templates for billing and donations for your nonprofit.
- Payment Processing: With Xero, you can accept contributions using methods like digital wallets and credit cards, making it convenient for your donors.
- Account Reconciliation: Xero provides basic bookkeeping and easily reconciles your financial records to ensure accuracy.
4. Aplos
Aplos is a cloud-based software for accepting donations, tracking your mission, and managing bookkeeping.
Top Features
- Donor Management: You can categorize your donations by donor and purpose.
- Financial Reporting: You can create custom financial reports for your projects and departments.
- Funds Accounting: You can track your grants and projects and create custom financial documents, such as the balance sheet by fund.
Best Practices for Nonprofit Budgeting
Beyond using the software we’ve discussed above, it’s vital for non-profit organizations to keep an eye on these best budgeting tips to keep them on track:
- Have a Flexible Budget: Remember to stay on track with your non-profit budget, but remember that not all the numbers will be accurate. Be flexible and embrace changes.
- Start Creating a Budget Early: Approximately three months before the next fiscal year, gather information to create a budget and present it to your board for approval.
- Use Past Data: When creating a budget for your non-profit, don’t just rely on your gut. Use your past numbers to forecast future expenses and revenue.
- Create a Realistic Budget: To estimate your future revenue, create a realistic budget.
- Categorize Your Expenses: Sort your expenditures by fixed or variable categories. Also, an operating budget and a capital budget should be created.
Frequently Asked Questions (FAQs)
Have some questions about budgeting and financial management for nonprofit organizations? We’ve got some answers.
How Often Should a Nonprofit Review Its Budget?
Generally, the board of directors should review and approve a nonprofit's budget annually.
However, you can conduct regular reviews when there are significant changes, such as grants, or when you need to add to your team.
What Are the Main Risks in Nonprofit Budgeting?
Some key risks in nonprofit budgeting include:
- Inaccurate revenue projections due to unreliable and restricted funding.
- Underestimating expenses like operational costs and variable expenses that are unforeseen.
- Issues with managing cash flows due to delays in grants, minimal cash reserves, and a lack of a contingency plan.
- Problems with communication between stakeholders; therefore, there are conflicting priorities and misunderstandings.
How Do You Prepare for Unexpected Financial Challenges in Nonprofit Budgeting?
You can prepare for unexpected financial challenges in non-profit budgeting in these ways:
- Have a solid cash reserve
- Plan and anticipate variations in fundraising
- Allocate the funds raised to your needs
- Break down project costs and set realistic milestones for each program
Conclusion
Creating a budget for a non-profit organization helps you manage funds and make wise resource allocations. Follow the budgeting tips we’ve shared, and use a budgeting software to simplify the budgeting process.
Speaking of budgeting software, you should opt for Martus Solutions, which focuses on helping nonprofits.
Our platform is specially designed to be intuitive and easy to use, helping you create, manage, and analyze budgets. It also allows for collaboration with your team and provides real-time reporting capabilities.
Request a demo and take the first step to staying on top of your nonprofit's finances and operations.
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