A Complete and Actionable Guide to Nonprofit Budgeting in 2025

Once you’ve established a new nonprofit, one of your first considerations will likely be fundraising. After all, the only way you can fulfill your organization’s mission is if you can bring in the funding you need to support your programs and initiatives. Even after your budget is created, reviewed and approved, there is much more to consider, especially when it comes to how your budget will influence your organization’s financial management and reporting. Nonprofits can identify areas where resources are underutilized or additional funding may be required. Furthermore, this analysis helps organizations allocate resources strategically, ensuring that every cent is used effectively to achieve the organization’s goals.

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To learn more, contact your Warren Averett advisor directly, or ask a member of our team to reach out to you to start the conversation. This document should serve as a helpful reference as you build the budget itself to keep you on course. Our work to build talented leaders is only possible through the generosity of our donors. Share draft plans with department leads, program managers, and finance committee members for feedback. But sooner or later you need to take a more formal approach, to meet compliancy rules, impress potential donors with clearly displayed information, or simply to avoid errors.

Ensuring Transparency and Compliance

You’ll outline all of your expenses first, ensuring you’ve included everything you need to reach your nonprofit’s annual goals. Then, you’ll line up all of your revenue sources to ensure you’ll have enough to cover those goals. When using this model, you may need to go back and forth between cutting expenses and finding new revenue sources to ensure a balanced budget.

Now that I have the right people and materials gathered, what are best practices for putting an actual budget together?

• Perhaps some guesses will be little less educated than the other numbers on your budget, so adjust your numbers if needed.
• If your numbers don’t add up or pieces of the project are missing, that can suggest you may not fully understand how the project really works.
• A budget helps you track your income and expenses, set financial goals, and make sure you’re using your resources in the most effective way possible, essential for successful nonprofit financial management.
• Furthermore, collaborative budgeting allows for better integration between budgeting and reporting systems.

An inclusive budgeting process Accounting Services for Nonprofits: Benefits and How to Choose the Right Provider can certainly be challenging and messy and with a great deal of debate. However, this approach to budgeting presents a great opportunity to bring in and unite various perspectives. If you’re managing a multiple six- or seven-figure budget, asking a financial expert for help is always a good idea.

• Most nonprofit organizations fall under the 501(c)(3) IRS designation, which means most of their funding comes from outside sources.
• In order to be successful, there are a few things to keep in mind when establishing a nonprofit budget.
• Once the initial nonprofit budget is prepared, it should be reviewed and approved by the organization’s Board of Directors.
• Whether you’re just getting started or putting the final touches on your grant proposal, the resources below can help you refine your budget.
• Ask participants what went well and what needs improvement so you can continue to hone the budgeting and reporting process.
• If you’re ready to dive into creating budgets for your nonprofit, there are various templates available online to help you get started.

For example, if the goal is to increase access to services, then a greater proportion of funds should be allocated to program expenses. Alternatively, if the goal is to increase donor support, then a greater proportion of funds should be allocated to fundraising expenses. Given that many grant managers look first at the grant proposal budget, you’ll want to ensure it’s well crafted and clearly defined.

Align nonprofit budget planning with your goals

When creating your budget, you will need to estimate the income you expect to receive. Unlike companies, however, most of your income will be in the form of donations. You may also receive income from grants, fundraising events, or investment earnings. The best way to calculate your expected income is to review your organization’s financial history and base your estimates on that. Budget-to-actual performance should be reviewed monthly by both management and the Board.

Prioritize Cash Flow Management

A well-structured budget also promotes transparency and accountability within non-profit organizations. It allows stakeholders, including board members, donors, and beneficiaries, to understand how funds are utilized and ensure that the organization operates with integrity. Transparency is essential for building trust and confidence among stakeholders. When nonprofits openly share their budget with stakeholders, it demonstrates a commitment to responsible financial management. In essence, a nonprofit budget is more than just a spreadsheet of numbers.

Help us connect, champion, and inform charitable nonprofits.

As nonprofits scale, they may face donor pressure to reduce overhead ratios, which can unintentionally hinder desired program outcomes. Bring your donation platforms, accounting systems, and program expenses under one roof. With everything in sync, you can identify funding gaps before they become crises. Building reserves is essential, but contingency planning requires more than saving for 3-6 months of operations. Create dedicated https://holycitysinner.com/top-benefits-of-accounting-services-for-nonprofit-organizati/ funds for predictable scenarios, like equipment replacement or program expansion, with clear rules for their use.

When you create your personal budget, you probably use just one piece of paper or spreadsheet. However, due to the nature of nonprofit accounting, your organization may need to use several different budgets regularly. However, the board offers important thought partnership at the start of the process, and will be responsible for approving the final budget annually.