Tag Archive for: budget

Comparing Your Nonprofit Budget to Actual

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Do you know the financial health of your nonprofit organization? Knowing where your finances stand is essential to effective nonprofit management. One of the best ways to get a quick read on your organization’s financial health is to compare your nonprofit budget to actual performance.

A budget to actual analysis helps you look at your estimated revenue and expense versus what your organization actually saw. Let’s take a closer look at the importance of budget to actual analysis and go over some tips for performing a budget to actual review.

nonprofit budget

The Importance of Nonprofit Budget to Actual Reporting

Nonprofit budget to actual reporting is the process of comparing your organization’s budget to the actual revenue and expenses over a given time. It’s an essential part of nonprofit financial management for a few reasons.

First, reviewing your nonprofit budget compared to actual performance helps you maintain financial transparency and accountability. By knowing where budgeted funds actually end up, you reduce the chance of fraud or inaccuracies in your financial statements. This helps improve donor confidence in your organization. Accurate data also helps you stay in compliance with legal regulations and tax laws, such as annual IRS filings.

In addition, budget to actual reporting can help improve strategic decision-making and financial performance evaluation. Budget to actual reporting lets you spot trends and identify issues in your finances so you can make data-driven decisions.

What to Look for in a Nonprofit Budget to Actual Analysis

There are a few different metrics to keep on your radar as you complete a budget to actual analysis, including:

  • Variances: Budget variances are the difference between your organization’s budget and its actual finances, generally by category. For example, you budget $2,000 per month for payroll, but your actual costs are $2,500. You have a negative variance of $500 in the payroll category.
  • Revenue sources: Recording revenue is an essential part of running a nonprofit. Your budget to actual analysis helps you identify regular sources of revenue–as well as any areas where you could improve revenue streams.
  • Expenses: Your nonprofit expenses are one of the most straightforward areas of a budget to actual analysis. However, looking at budgeted versus actual expenses can provide helpful insights into where your organization’s money is going.
  • Cash flow: Monitoring your budgeted and actual cash flow can help you spot and fix cash flow issues proactively.
  • Budget assumptions: Budget to actual reporting helps you accurately create budget assumptions using real data from your current–and past–finances. Regularly reviewing budget to actual reports can make it easier to form accurate and effective budget assumptions for the future.
  • Financial ratios: Financial ratios are financial calculations that help you monitor your organization’s financial state. They can help you identify which areas of your organization are most financially successful, or where you may need to trim the budget.
  • Budgeting process: Comparing your budget to actual data is an important step in improving your budgeting process. The closer your budget to actual reports gets, the more effective your budget becomes.

Tips for Making Adjustments if Your Nonprofit Budget to Actual Is Off

Even the most financially savvy nonprofit leaders can have variances in their budget to actual reports. If you find your budget to actual is off, you may need to reevaluate your budgeting process to create more accurate budgets going forward.

A budget to actual report makes it easy to identify where you may need to work on your budgeting. Being proactive and strategic with budget adjustments will help your organization improve the usefulness of a budget.

Follow these five tips to help get your budget to actual back on track:

  • Identify the root cause: This involves looking through your estimated and actual expenses and revenue to find where the variations occurred–and why they happened in the first place.
  • Prioritize areas for correction: Make a list of the areas or categories of your budget to actual report that is the most impactful for your organization and plan to focus on fixing those areas first.
  • Adjust spending priorities: It’s not always possible to completely cut expenses, but you may be able to reallocate funds between expense categories to better align your budget and actual data.
  • Explore ways to generate more revenue: If your actual expenses are higher than your budget allows, it may be time to consider new revenue streams, such as additional fundraising or applying for grant money.
  • Continue monitoring process: Regularly reviewing your budget and comparing it with your actual expense and revenue data is the key to improving your budget and reducing variances. Additionally, regular reviews can help promote accountability and transparency, building trust with your donors and your board of directors.

nonprofit budget

Leverage Your Nonprofit Budget to Actual for Success

Effective budgeting and monitoring of actual financial performance are essential for the long-term sustainability of your nonprofit. Reviewing your budget to actual data gives you a chance to spot trends and identify problems in your organization’s financial health. This information then helps you proactively address issues and make strategic adjustments to improve your financial standing.

If you’re unsure of where to start comparing budget to actual performance, consider working with a trusted nonprofit accounting firm like The Charity CFO. Our dedicated team of nonprofit accountants can help you review your budget to actual reporting. We’ll help you identify trends and create solutions so your nonprofit can run smoother and more effectively.

Contact us today to learn more about budget to actual analysis.

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Budget Tracking for Nonprofits

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Budget tracking is the process of monitoring your nonprofit’s income and expenses to ensure they stay within your planned budget. Effective budget tracking is essential to financial transparency, efficient resource allocation, and strategic planning for your nonprofit.

Tracking your budget helps with overall budget management, which contributes to your financial stability and the success of your nonprofit mission. 

Keep reading to learn more about budget tracking and how it can help your organization improve financial efficiency and effectiveness.

budget tracking

Budgets are Essential for Nonprofit Organizations

While they can be overwhelming to create, having a budget is a necessity for any organization. Think of your nonprofit budget as the financial roadmap for your organization. With a budget in place, you can easily align your finances with the mission of your organization to achieve goals. 

Not only will you need a budget for operations and internal decision making, you will also need a budget for grant applications and when asking for gifts from the general public.

As you get started with the budget making process, here are a few things to keep in mind: 

  1. Include a detailed look at all revenue sources. Start with the certain revenue streams and work your way to the less certain (we’ll cover this in more depth later). 
  2. Include programs, fundraising, and administrative costs
  3. Budget by program (if applicable)
  4. Budget for a surplus to finance expansion in future years 

Without a budget in place, you’re left scrambling to ensure you have the funds to cover expenses, such as paying employees or funding nonprofit programs.

But your budget shouldn’t be a “set it and forget it” plan. You also need to track your expenses and income to make sure you’re sticking to your carefully-planned budget. The role of budget tracking is to ensure resources are allocated correctly, especially to key initiatives that are essential for organizational success.

A budget and tracking system also help with transparency and accountability at all levels of your organization. It’s easy to audit a nonprofit budget to check for potential errors and reduce the possibility of fraud.

Creating a Comprehensive Nonprofit Budget – Start with the Details

There are two common ways to budget; starting high-level and moving granularly or starting granularly and moving high-level. At The Charity CFO, we like to do the latter because we feel it leaves you with a more realistic budget base. From there, we move on to reviewing the prior year’s activity.

Review Prior Year Activity

To review your prior year’s activity, you’ll use a “Profit and Loss Detail” report or something similar. This is found in your accounting system and you’ll want to run a report based on the current year. It’s the best way to review current-year expenditures for what you might be spending next year, in fact, you can consider it as a template for your budget. 

Discuss Upcoming Expenses, Revenues, and Adjustments 

Go line by line with the Profit and Loss Detail. Start with expenses and figure out what investments you need to be making in the coming year to achieve your goals and objectives. Try not to think about where the money is coming from, just think of the ideal scenario about who you want to hire, the investments you want to make, and the cost of the space you’re using. 

Start with the largest expense and map it out in detail. (Example: The largest expense is typically payroll. Consider exactly what you want to pay each employee.) Then move to the next largest. Continue this process until you’ve reviewed every expense. We advise you to be a little generous in these categories. It’s better to expect more expenses than to underestimate.

Move On To Revenues

Start by recording what you expect to fundraise in the coming year. We like to start with any revenue that is most certain and then work our way to the least certain. For example, if you receive an annual grant from the government, that’s a fairly “certain” revenue. Budget these first. 

Then move on to your less certain revenue streams, like fundraising event income, because these are tougher to estimate. Our tip: budget conservatively for these.

Budget for a Surplus 

Once you’ve gone through all of your revenue and expenses, you’ll need to see if you are in a surplus or a deficit for the coming year. Your goal is to be in a surplus so that you can financially expand in the future. 

Keep in mind that you won’t be able to budget in a massive surplus; your funders won’t let you get away with that. However, a modest surplus will allow you to build up your reserves so that you can fund your next growth plan. This will look different for every organization. 

For a more detailed explanation of creating a budget, check out this video. 

budget tracking

Leverage Budget Tracking for a More Successful Nonprofit

Your nonprofit’s budget only works if you know you’re sticking to it. Implementing a budget tracking system helps you monitor your budget so you can stay on target to meet financial goals.

Make creating an effective budget tracking strategy a priority as you set your upcoming budgets. Taking the time to set up your tracking correctly will aid in the long-term financial success of your organization.

Not sure where to start with creating your budget tracking system? Working with a nonprofit accountant like The Charity CFO takes the challenge off of your plate. As financial professionals specializing in nonprofit financial success, our team can help you create and implement an effective budget tracking strategy no matter the size or revenue of your organization.

Contact us today to get started building your budget tracking system.

 

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When to Look for Expert Nonprofit Accounting Services

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When you are a nonprofit organization, finding expert nonprofit accounting services may not be high on your to-do list. Surely there are more important things to focus on instead of focusing on accounting, especially because your organization’s goal is not to make more profit?

In reality, nonprofit organizations can benefit a lot from nonprofit accounting. This article will go through the scenarios when you would need to look for expert nonprofit accounting services.

1. You Need to Consider COVID-19 Implications

The pandemic has resulted in a lot of changing regulations and greater overall uncertainty regarding the finances and accounting requirements of a firm. The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was passed in March 2020, affects nonprofits as well.

For organizations with less than 500 employees, you can have access to small business administration (SBA) loans or loan forgiveness. You can also access emergency economic injury disaster loans (EIDL) grants and employee retention credits.

For larger organizations with more than 500 employees, you can only access employee retention credits and EIDL grants.

The eligibility criteria and the need to report benefits from the CARES Act will mean that you can benefit from having expert accounting services providing you with greater insight. They are a lot more knowledgeable on how the CARES Act will change what you report on your statements, and they will ensure that your financial reports will accurately reflect the adjustments while complying with regulations.

At the same time, other COVID-19 considerations can cause an accounting headache for your nonprofit. For instance, you may experience modifications in the number of liabilities you have or will need some guidance with the ongoing financial concerns of your nonprofit.

The COVID-19 pandemic is an unprecedented situation, and responding to accounting rule changes can be a challenge for everyone. By relying on an accounting service, you can rest well knowing that your audits and bookkeeping are all up to par.

2. You Find it Hard to Manage Cash Flow

Managing cash flow in a nonprofit can be more difficult or unstructured than a typical company. At the same time, it’s an important thing to consider, because you need that money to keep your organization going. You will therefore be able to benefit from nonprofit accounting, which aims to both manage and improve your cash flow.

A common challenge that nonprofits face is that their greatest cash flow only happens in certain seasons or months in a year, which means they will have to allocate this money throughout the less profitable months. By taking the time to properly plan your cash flow and ensure your balances will remain positive, you will need to spend a lot of time evaluating your finances and your budget.

An accounting service can analyze the existing financial information to understand where you get most of your revenues and benefits, and whether this is enough to sustain operations for a certain period of time. They can also pinpoint risk areas, where you may be spending too much or where you may be liable to losing a lot of money.

The information they gather will allow you to make well-informed decisions regarding your cash flow.

3. You Need Better Staffing and Payroll Strategies

Payroll management is a headache for any company, and it is a particularly challenging aspect of running operations for a nonprofit. Nonprofits are usually motivated by passion, so matters of staffing changes or payroll requirements can be a bit awkward to focus on. What happens, for instance, if there are some incredibly loyal staffers who are also becoming financially burdensome?

An accounting service can provide some insight into this area by identifying cost-effective strategies and the financial impact of having a certain amount of staff members. While it may not be the easiest thing to consider, expert accounting services will be able to pinpoint areas where you will have to cut costs to ensure that your organization can succeed in its endeavors.

At the same time, you will benefit from speaking with an accountant before hiring someone new so that you can understand how this will impact your financial position in the long run.

4. You Have Difficulty Tracking Revenues

As a nonprofit organization, the way you receive revenues will be very different from the orthodox method of selling products for profit. Your revenue will come from donations and grants more than anything else. The accounting process will be different for you, but it is just as important so that you can manage cash flow and understand your company’s financial position.

By having nonprofit accounting services helping you out, they will be able to maintain accurate and updated financial records which track all the revenues you receive. This ensures that you have a sound knowledge of how well your company is doing, and also prevents the possibility of you presenting inaccurate data in your financial reports.

Tracking this information will also be important in ensuring you continue receiving grants in the future.

Situations When You Need Nonprofit Accounting Services

As a nonprofit, you can benefit a lot from accessing nonprofit accounting services. Your accounting needs may be unique, and you may not be profit-motivated, but managing your finances is essential to ensure your organization survives.

Nonprofit accounting services can provide assistance if you need help with COVID-19 considerations, if you find it hard to manage cash flow, if you need better staffing strategies or if you have difficulty in tracking your revenues.

Contact us today for expert accounting services for nonprofits.

How to Create a Budget for Grant Writing

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Crafting a budget for grant writing can be tricky. That’s why you need to listen and subscribe to A Modern Nonprofit Podcast, feat. Kate West.

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The Complete Guide to Nonprofit Startup Funding

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We have created a complete guide to nonprofit startup funding. The guide is for both those looking for seed money to start a nonprofit and existing organizations that need additional funding. The topic is overwhelming to many,  but considering the best nonprofit startup funding strategies is important.

Your dream can become a reality.

Funding is a key step for any charity, but this does not happen overnight. This blog will help you learn how to raise funds for your nonprofit so you can help your organization grow.

4 Types of Funding 

We’ve covered four broad types of initial funding (or for existing nonprofits)

1. Start With Your Community for Nonprofit Startup Funding

What do nonprofits do? Nonprofits serve their communities. If you are looking for funding options, start in your community. Work colleagues, friends, and neighbors might see the potential benefits your startup could bring. Don’t be afraid to post calls for help on your social media, too!

Businesses or Community Leaders

Established businesses have cash to spare if they believe your idea can bring something positive to society and be profitable. Also, community leaders tend to be well-connected. They could assist you in reaching out to other people who will likely be interested.

You can present your startup to these leaders and ask them to become board members. This way, they can represent more active stakeholders in your organization. This action will also increase your access to individual donations. Residents are likely to trust these leaders, so they might donate more.

Other Organizations

You can also contact other organizations who provide similar services, or who would be interested in the benefit your startup will bring. For example, churches are likely to find interest in funding food relief centers or homeless shelters. Food providers might also potentially willing to donate some of their own stock to supply your nonprofit. It never hurts to ask.

Friends and Family

You may find it awkward to approach your loved ones for money. But, reaching out to them will give you a good starting ground. They are more likely to understand how passionate you are about the organization. They might be willing to share a stake in the success of your creation. Even if they don’t, they will be more open to sharing your initiative with their circle of friends, thus expanding your reach.

2. Access Grants for Nonprofit Startup Funding

As a nonprofit, you cannot finance your startup in a traditional way. You don’t get to sell items and use the additional money to uphold your organization, so accessing nonprofit grants is a great way for your startup to flourish. However, nonprofit startup grants are a possible option.

What exactly are nonprofit grants, and what do they do?

Nonprofit startup funding is important for your charity.

Well, when it comes to grants, the earlier you receive them, the better. Instead of waiting until you’ve officially started your organization to begin applying, make sure you have a plan. Start reaching out before your organization becomes fully operational because this will prevent future instability. It will also enable the eventual success of your nonprofit.

Here are two prominent types of grants:

Government Grants

There are many government grants out there. This fact will benefit you because there’s no end to the applications you can send out to finance your startup. That being said, make sure to go through the different grants and see which ones will suit your organization the most. To have a better understanding of available grants, you can look through grants.gov.

There are differences between federal grants and state grants. So, make sure to research the ones that are applicable in your area. Keep in mind that there are requirements to meet and contracts to negotiate. You should expect some initial hurdles!

Foundation Grants

Private foundations also provide nonprofit startup grant funds. It may be difficult to know where to begin, but focus on your state and start researching the available private grants in the area.

You may also need to approach the foundation and give them details about what you plan to do with your nonprofit. This will include your projected budget and the specifics of your business plan. If all seems to be suitable, they’ll happily finance your organization.

Note: Business grants are a possible fundraising strategy. Many for-profit businesses create corporate programs, grant options, or scholarships, available to nonprofit organizations. A different type of corporate funding, if you will.

3. Individual Donations for Nonprofit Startup Funding

Did you know that several nonprofits exist by relying on individual contributions from the public? For example, individual donations are the major driving force for the World Wildlife Fund.

To access public donations, set up fundraisers or auctions. Don’t be afraid to get creative. That’s what will draw people in. Fundraising is also a great way to tell people what your nonprofit is all about. This could improve the chances of more donations or public support. Events like bake sales to full-on carnivals, in a post-COVID world, would be useful.

4. Offering Memberships

Providing membership options is a suitable method to earn a fixed amount regularly. People who sign up will contribute to your nonprofit on a recurring basis. You won’t have to worry about finances drying up.

Offering memberships do not apply to all forms of startups. If you have an idea about what to provide to your members- for example, exclusive access to events or information — then this may be a viable funding option.

Tips for Finding Funding Sources

There are several ways to show your organization is ready for funds, improving your chances to bring in more (and do more for your cause).

  • Compile relevant programs: Doing the research work of gathering all relevant programs (nonprofit grant programs, for example) helps determine the possibilities.
  • Clearly convey your nonprofit projects: Whether it’s through memberships, individual donations, grants, or other funding methods those giving will want to know about your track record and how the fund will be used.
  • Show transparency: Keeping accurate track of how dollars and donations are utilized gives people a sense of trust. Accurate financial record-keeping also mitigates issues with governance. Working with a qualified team, experienced in nonprofits, helps immensely.

Nonprofit Startup Funding Can Be Easy

It may seem scary at first. But, you have many options to access nonprofit startup funding. From grants to memberships, you will benefit from researching. You will also benefit if you try out as many options as possible.

Why should you believe in your dreams? If you are compelled to start a nonprofit, use this as your selling point. Helping your community is a great mission to guide your organization. There will always be others who see the potential in your charitable acts.

For more nonprofit help and outsourced bookkeeping assistance, check out our services. This is also a very popular topic in a Modern Nonprofit Facebook Group, which you can join TODAY.

Nonprofit Taxes & the IRS: Ep. 2 of A Modern Nonprofit Podcast

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A Modern Nonprofit Podcast is back for Episode 2. Tosha Anderson and Ben Golden of Golden Tax Relief discuss nonprofit taxes and the IRS!

But before we dive in, if you were lucky enough to donate to a charity this year, The Charity CFO thanks you. As expert accountants for nonprofits, our team knows that contributions of any kind are important. There is a lot of money involved in the nonprofit world, especially on the business side!

This episode covers nonprofit taxes.

A Modern Nonprofit Podcast Ep. 2 covers nonprofit taxes and dealing with the IRS.

Nonprofit Taxes and the IRS Key Points

Aside from payroll, the leaders agree that compliance is the key. When considering nonprofit taxes, Tosha and Ben discuss the responsibilities of nonprofit board leadership. They also talk about why you must have plans for payroll, reimbursements, and compensation purposes.

SUBSCRIBE, THEN LISTEN TO A MODERN NONPROFIT EPISODE 2: NONPROFIT TAXES AND AVOIDING TROUBLE WITH THE IRS FEAT. BEN GOLDEN OF GOLDEN TAX RELIEF

Administrative work is important for nonprofits, but if you are wondering if a nonprofit gets taxed, then listen in as Ben talks about how nonprofits can save money with taxes.

If you haven’t already, listen to Episode 1 of A Modern Nonprofit Podcast here. Tosha talks with Eileen McGhee of Veer Up to talk about how to reduce racism, be a diverse organization and promote a positive nonprofit culture.

Additional Links

Questions about the IRS and your nonprofit? The conversation continues at A Modern Nonprofit Facebook Group. Here, professionals collaborate to talk about industry trends and issues. Don’t miss out.

Additionally, if you are seeking help with wage garnishes and delinquent tax returns, check out Ben Golden at Golden Tax Relief.

Lastly, forget to Subscribe to A Modern Nonprofit Podcast for future episodes, and make sure to share/tag us on your Twitter, Facebook, and additional social media feeds!

 

Taking Control of Your Nonprofit Finances

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Today, you might feel there are few things you have control over. Fortunately, taking control of your nonprofit finances is not one of them.

Since the novel COVID-19 pandemic has forced the world into a remote economy, nonprofits face a time of financial transition.

91% of global nonprofit organizations suffered operational damage in the crisis. This 91% is an improvement from the 96.5% recorded in March.

Waiting for normalcy is only a long-term solution that many organizations can’t afford. However, learning how to transition into a new normal can help your organization get back on its feet.

Understanding how to manage your finances is the best path to regaining stability. Here’s how you can start taking control of your nonprofit finances sensibly and effectively.

Taking Control of Your Nonprofit Finances

It’s important to consider how money transfers through different hands within your organization.

A board of directors should oversee general operations. An added financial branch of operation can still go a long way. Delegate financial tasks to a specific individual or group of individuals. That way, you centralize the information handled in the accounting process.

Along with financial managers, you can outsource your accounting tasks. Getting professional advice is a much more efficient way to get your finances in order.

Nonprofits that manage finances internally can appoint at least 2 or 3 people to manage. They can be direct points of contact between the organization and the finances.

You can also assign different functions to those in your financial branch. One member can manage executive functions while supporting members manage secondary tasks. This structure promotes organization, accountability, and transparency within your financial branch of operation.

Multiple Streams of Funding

Adding more streams of funding to your organization is essential to financial balance. Receiving support from more than a few sources adds to the revenue to collect.

It also adds more financial security. Instead of relying on one funding source, you open up more opportunities.

Collective revenue from various sources adds up and gives you more stability. If one stream dries up, you’ll still have the flexibility to focus on others in times of need.

Relevant Streams of Funding

While you grow more streams of funding, you should also make your sources relevant to the times. Prior to the pandemic, common sources of funding for nonprofits included:

  • Sponsorships
  • Grants
  • Programs tuition
  • Fundraising Events
  • Donations
  • Subscriptions

Nonprofits that focus more on in-person fundraising should consider more reliable funding sources.

Instead, there are more reliable, contactless methods of funding. These include sponsorships, grants, donations, and subscriptions.

Sponsorships and grants often involve some research and individual outreach. The scope of their awarding processes also requires waiting periods and gaps. Still, they’re useful sources to consider for long-term operations.

Tracking Expenses and Profits for Taking Control of Your Nonprofit Finances

Multiple streams of funding ensure that money flows into the organization.

This is a two-way stream. It’s possible for cash to flow out of an organization at a high rate.

Tracking the expenses shows you funds entering and exiting the budget. Your financial branch tracks expenses and two-way cash flow. The board of directors advises the active spending goals and habits.

The board and financial managers should meet on a regular basis. Your budget and the size of your organization should determine how often you meet.

It’s also helpful to automate some of the tracking process through software. You can use tools like Quickbooks or GetApp. Tools like these will allow you to begin taking control of your nonprofit finances.

These have specialized features for nonprofit organizations. They can also help you with the distinction between nonprofit and commercial operations. Many softwares also include tax forms and documents. You can use these to help your organization with legal compliance guidelines.

Basic Budgeting

Your organization should use budgeting to inform the other areas of financial management. Here are two basic budgeting tips to follow.

Budget Structures

Each nonprofit should have monetary goals relative to their operational goals. There are three main budgeting structures every nonprofit should know:

  • Surplus budget
  • Balanced budget
  • Deficit budget

These structures are often used in government or commercial spending. They’re useful guidelines to help you estimate profit margins and losses.
When your fundraising efforts exceed expectations, you have a surplus budget.

A balanced budget indicates the expenses are expected to meet profits. In contrast, a deficit budget means that expenses exceed profits. So, there’ll be a margin of lost funds to recover.

Your total budget operates within these structures. As you continue to fundraise, you can determine which type of budget your organization currently operates on.

Budget Timelines

A budget should also include a realistic timeline for specific goals. Be sure to include important landmarks in the year where you need to measure performance.

You can split the fiscal and calendar years into quarters to make goals more realistic. Then expand to an annual timeline to measure more long-term growth.

Board meetings should also align with your timeline of goals. Or, you can increase their frequency to keep up with constant changes.

Taking Control of Your Nonprofit Finances: Outlining Policies

The most important step in financial management is documentation. This includes recording tangible copies of your budget, funding sources, and financial goals.

However, you should also consider implementing or updating your operational policies. This includes spending and investment policies.

Updating your policies may crossover with budgeting. Typically, a budget tends to represent your organization in numbers. A policy shows the larger investment potential.

The content in your policy may also intersect with legal guidelines. For nonprofits, these guidelines often determine eligibility for certain funding opportunities or methods.

Manage Your Nonprofit Finances Now

Financial health is an essential part of any nonprofit organization. We can show your organization how to weather the storm and become financially resilient.

With our team of experts, you can get professional accounting and bookkeeping services. We’ll tailor your financial services to the needs of your organization.

To begin taking control of your nonprofit finances today, contact us, and request a meeting.

Create a Nonprofit Operating Budget

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Are you looking for new ways to keep up with the hustle and bustle of your nonprofit organization? Have you noticed that the bookkeeping is starting to slip by the wayside? If so, then you need to create a nonprofit operating budget and learn how to manage it effectively.

Doing so can help ensure that you’re staying on task. you’ll find yourself with more financial peace of mind after knowing that there’s a specific purpose for every dollar you raise.

See below for an in-depth guide on how to create a nonprofit operating budget to get yourself back on track. Be sure to consider everything that’s listed.

1. Set Aside Time with Your Team to Manage your Budget. 

Perhaps this is the first time that your organization will be addressing the budgetary needs that you have. Maybe it’s been so long since you kept a budget that you need to reassess where you are currently.

No matter the case, it’s important that you set aside time to hash out a new budget with your team. Find a time period where at least one person from each department can offer their input.

For example, if you have an in-house marketing coordinator, be sure to clue them in on your new budget to ensure your marketing needs are being met.

You’ll find that a great deal of this meeting will be compromised. Don’t get discouraged if it feels like you can’t get anywhere at first. It’s all about compromise. Every department will feel like their side of the operations deserves a higher portion of the budget.

If you need assistance with building your budget, then you can also decide to outsource it to a nonprofit accounting and bookkeeping service. If you need help creating a nonprofit operating budget, The Charity CFO is an expert accountant for charities. 

2. Gather Data

You might be wondering to yourself “where am I supposed to come up with the numbers? How would I know how much to budget for marketing, events, fundraising, and so on?”. By looking at the previous data.

They say business is all about learning from the past; building a nonprofit operations budget is no exception.

 

How do you create a nonprofit operating budget? The Charity CFO explains.

Gather up all your bank statements from the checking account you use for your nonprofit’s finances. This might be overwhelming at first, but take a deep breath and give yourself a few weeks/months to comprise all the data (if necessary).

Decide which expenses fall under the umbrella of the different departments of your business, then add them up on a month by month basis. Did you spend more than you raised in previous months? Are you overspending in one area of your organization?

If need be, sit down with each department chair individually to assess the money you spent and the areas in which you could cut costs. This will give you a better idea of the amount you can set for that department’s monthly budget.

Be sure to get input from your board. This budget is a collaborative effort. Accounting for nonprofit organizations can be tricky, so we encourage you to utilize the resources and information we offer! 

3. Plan Your Activities

Nonprofits are all about the activities and events that you both attend and organize for your faithful following. It can lead to some tremendous fundraising opportunities.

However, too many nonprofits design their budget without considering those activities first and foremost. They’re then thrown out of whack when they can’t find the financial room to either attend the event or put on an activity that represents their brand in the right light.

Start by scheduling your activities as far out as possible (preferably a year out). How much money needs to be allocated to those activities? Which ones take priority?

As much as it might hurt, this is a great opportunity to cleanse your schedule of any activities that you aren’t seeing great returns from.

4. Properly Estimate Income

Planning income and expenses for a nonprofit can be challenging, but it isn’t impossible.

First, be sure to list your estimated income if different tiers of risk. This should be prioritized from “least trustworthy” to “most risky”.

For example, say you organize 4 groups for your income sources: group 1, group 2, group 3, and group 4. You might decide that people listed in group 1 are “most trustworthy”, meaning they’re most likely to donate generously and often.

Let the data guide you while you estimate this part of the budget. Put your most frequent sources of funding into group 1, the least frequent in group 4, and so on.

5. Put a Job to Every Dollar

Disclaimer: the job of your budget isn’t to primarily track the money that you spend. It’s to assign a job to every dollar that you raise for your cause.

For example, (for the sake of simple math), say that you budget to receive $1,000 in funds for this upcoming month.

You might consider putting $200 towards donations, $500 towards operations for the month, $200 towards activities and events, then have $100 leftover. This is the wrong way to do it.

You need to budget for all $1,000 in funds that you receive, down to the very last penny. If things change (which they often do), then your budget can be adjusted. Your ability to create a nonprofit operating budget also involves some critical thinking!

What You Can Do Today

Now that you have seen several effective steps that you need to take when building a nonprofit operating budget, it’s time for you to do so the right way.

Be sure to read this article to learn more about how to raise money with virtual events for your nonprofit organization.

And for more inquiries on our ability to be an expert accountant for nonprofits, be sure to reach out by requesting a meeting and we will be happy to discuss our bookkeeping services.