How to Calculate a Nonprofit Operating Budget

The best practices we shared in this guide are the fundamentals of sound budgeting for nonprofit organizations. To help you get started, we’ve created a basic nonprofit budget template to track your revenue and expenses. Operating budgets reflects the organization’s planned financial activities for the year ahead, showing how much revenue it https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ expects from which sources and how much it will spend on operations.

• Here’s your step-by-step guide to creating an effective and sustainable budget to fulfill your organization’s mission.
• Financial advising called him, and he built one of the first ever outsourced accounting firms.
• You can keep all the information in one sheet, or break it up into different pages.
• More and more nonprofits are finding that cloud-based tools solve these issues, often incorporating templates and automated pathways that take a lot of the stress out of budgeting.
• This template should include line items for all of the above expense categories, as well as others that may be specific to your organization.
• With each reporting period, the organization compares actual performance against its plan.

Step 3: Submit the Proposed Budget to the Board

These programs often have templates that you can use, which can make the process of creating a budget much easier. When you create a nonprofit budget sample, you’ll first need to develop an exhaustive list of program expenses. To make sure you don’t forget anything critical, here’s a look at several key areas you need to include in a program budget plan. Start with a nonprofit budget template excel sheet that includes all the expenses you can think of. Your annual nonprofit budget is a straightforward document with all of your projected expenses and revenue for the year. These numbers help guide your business choices—a sample nonprofit budget will show you what to include.

Who Is Involved in the Nonprofit Budgeting Process?

Some funders may cap how much of the grant can be allocated to indirect costs (overhead or administrative expenses), with most placing this cap at around 15%. Taking the above into consideration, let’s explore a brief example of a nonprofit operating margin calculation. The operating margin will demonstrate the efficiency of the organization’s day-to-day operations. Capital budgeting is the process of making long-term capital asset investments and financing decisions. Capital assets are long-lasting assets that advance the organizational mission and assets, i.e., land, facilities, and costly equipment.

Capital Budget

Once the board of directors accepts the proposed budget, it is referred to as the adopted budget. Throughout the fiscal year, the adopted budget is referred to as the operating budget. Using both of these strategies will help your organization to stay closely aligned with its mission.If you’re also wondering how to calculate your cash flows, download Keela’s cash flow forecasting tool! Use this simple resource to help balance your books and reduce your financial worry. In these meetings, it’s also helpful to look forward to the next few months and revise your budget to match your current reality.

• Work with this realistic baseline upon which you can create an accurate budget for your nonprofit organization.
• Your annual nonprofit budget is a straightforward document with all of your projected expenses and revenue for the year.
• Contrary to popular belief, overhead isn’t inherently bad—it’s actually necessary to keep your organization running.
• Setting aside a portion of the budget (typically 5-10%) as a reserve will help your organization handle unexpected challenges like sudden drops in donations, emergency repairs, or economic downturns.

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• Customize your template based on your organization’s specific needs and reporting requirements.
• “Our nonprofit will increase overall contributions by 20% by the end of 2024 through partnerships with local businesses and corporate sponsors.”
• Just be prepared with our information above and you’re charity will be in a much better position to grw and thrive.
• Ultimately, remember that your budget should categorize revenue by different funding sources and your expenses by program vs. overhead costs.
• If any of the sources don’t apply to you, you can just delete them—likewise, you can add anything that’s missing.
• Are you looking to expand a program, hire additional staff, or purchase new technology?

This includes program expenses, staff salaries, an operating budget and other expenditures. Once finalized you can create the nonprofit budget template in excel to make it easy for you to update next year. It’s not just about balancing the books; it’s about creating a clear financial roadmap, a basis that aligns resources with mission-driven goals. A well-crafted nonprofit budget ensures financial sustainability, supports strategic decision-making, and fosters transparency with donors, stakeholders, and the communities you serve. In short, for nonprofits, where every dollar has a purpose, efficient budgeting is highly important.

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• Gather historical financial data, project future revenue sources, and estimate program costs.
• The researchers concluded that 75% to 85% of these nonprofits were improperly allocating their expenses.
• This guide offers tips on tailoring your approach for each funder type, helping you excel in both areas and increase your chances of securing funding for your nonprofit.
• The main budget you’ll create is your operating budget, which details the costs you’ll incur and the revenue you’ll generate over the next year.
• Nonprofits should be prepared for the impacts of capital acquisitions, even if the assets are donated.
• However, there are certain nonprofit expense categories that remain consistent, regardless of industry or individual mission.

Here’s your step-by-step guide to creating an effective and sustainable budget to fulfill your organization’s mission. Nonprofit organizations often rely on multiple sources of funding to support their missions. However, revenue diversification is not merely about having multiple income streams; it is an essential strategy for long-term sustainability and growth. Diversifying revenue sources can bolster financial resilience, reduce dependency on a single funding channel, and open doors to new opportunities. Nonprofit organizations exist to make a difference in the world, whether by addressing social issues, supporting the arts, promoting education, or any number of other noble causes.

List program expenses (staff salary, insurance, supplies, fundraising fees, etc.) to see your total nonprofit program expenses vs. your actual revenue. To learn more about annual business budget templates, that can be used across different organizations, see Free Annual Business Budget Templates. His growth-hacking abilities have helped Donorbox boost fundraising efforts for thousands of nonprofit organizations. Monitoring your revenue and expenses should ideally become a part of your nonprofit’s organizational culture, something everyone is aware of and contributes to. Mark the events in everyone’s calendars, so that it becomes easier to repeat the process each year. When preparing a grant budget, it’s important to comply with the guidelines of the funder.

After the organization’s income and expenses have been estimated, the next step is to create a budget that allocates the organization’s resources in a way that supports its financial goals and objectives. As we look towards 2025, nonprofits face a unique set of challenges and opportunities. From fluctuating income streams to increasing demand for programs, organizations must plan carefully to navigate financial complexities while maximizing impact. Whether you’re managing general operations, launching a new program, or amplifying your marketing efforts, a thoughtful budget can be the difference between a successful year and a strained one. In reality, the meaning of “nonprofit” is simply that your organization has to reinvest all of its funding into its mission rather than paying investors or shareholders.

Providing financial tools and fundraising

This real time integration helps avoid overspending while ensuring accurate financial records. Additionally, the platform’s cost-saving features, such as automated reminders for recurring expenses, help nonprofits manage their limited resources much more effectively. All funding sources can fluctuate, even government grants can dry up or disappear. This is why it’s so important to diversify your income streams as much as possible so you’re never reliant on one funding source. Some ways to do this can be hosting different or seasonal fundraising events, offering membership programs, or partnering with local businesses for sponsorships. Additionally, setting aside a small portion of your revenues during periods of surplus can act as a financial cushion if it’s possible.