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.

 

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.