A nonprofit budget is a guide that can help a nonprofit plan for the future as well as assess its current financial health.
This document shows how an organization is planning on getting their money in the fiscal year (which is the list of its different sources of revenue) and how that money is supposed to be spent on the organization’s programs to achieve its goals and mission.
There are two key components to a budget, which are
Projected Income: This includes gifts, grants, membership fees, and/or income from fundraising events or investments.
Planned Expenses: Expenses are broken into two sections—
- Overhead expenses: Overhead includes management, general, and fundraising expenses (for example, rent and utilities).
- Program expenses are associated with the fulfillment of your mission (for example, the cost of food program for a disadvantaged group)
Notes
- Use real numbers when creating a nonprofit budget. Don’t pull numbers out of the air. Use last year’s actual numbers as a starting place and get quotes from vendors for new or expanded expenses.
- Have enough detail to be meaningful. There’s no perfect list of items to include in your budget and every nonprofit is different. Include enough detail so that your budget makes sense. If one line item makes up more than about 10-15% of the total expenses or revenue, break that item down and use sub-categories.
The Bottom Line
Budgets don’t have to be hard, even if you’re not a numbers person. Do your best and be open to learning through the process. Very soon, you’ll have a budget that serves your nonprofit well and helps you manage the finances.
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