How to Calculate a Nonprofit Operating Budget

The accompanying spreadsheet template may be used for a one-time analysis project or to implement ongoing program-based budgeting and financial management practices. While a calculation can be completed for a single program or activity, we highly recommend that these concepts and practices be used throughout a nonprofit. Program-based financial information will be most useful for planning, management, and communications if it is comprehensive, accurate, and used consistently.

Administration and fundraising may have direct expenses assigned to them as well. The cost of return envelopes to be included in a fundraising how to calculate operating budget nonprofit mailing would be assigned directly to fundraising. You also must allocate funds to cover expenses related to your professional facilities.

Benefits of an Ironclad Budget for Nonprofits

The budget lists all of those sources and provides an indication of the amounts the board can expect to come in from each source. Funds raised may come from ticket sales, membership fees, proceeds of auctions, galas, sales of goods or services, or other fundraising activities. While some of your actual fundraising campaign goals might be “reach” goals to push your team, it’s best to write more conservative estimates in your budget. That way, you’ll know to keep your predicted expenses low enough that you can still cover them if you fall short of your “reach” goal. Congratulations – you now have the basics of your nonprofit operating budget!

The ability to make a positive impact in the communities they serve hinges on effective financial management. One of the key pillars of this financial management is the nonprofit operating budget. This nonprofit startup operating budget template features sections for total one-time startup expenses, monthly expenses, and total funds required to operate.

Managing Cash Flow

Nonprofit organizations have several sources of revenue—some of which are more dependable than others. These include traditional income sources like the sale of products and services as well as nonprofit-specific income sources like fundraising and grants. Nonprofit organizations, driven by their missions to create positive change, often operate under financial constraints.

For instance, if you operate a community health clinic, you might sponsor a health fair and breast cancer screening event in a low income neighborhood. You can probably generate funding for this project from transitory sources such as grants or one-time donations. A nonprofit budget is essentially a financial document which lays out how your nonprofit is planning on spending its money. It’s not so much about setting goals as it is making a plan for how you’ll meet your goals. Your administrative and fundraising costs together make up your nonprofit’s overhead. You may have heard of the 65/35 “rule” of nonprofit expense allocation, which states that nonprofits should spend at least 65% of their funding on programming and no more than 35% on overhead.

Budget for Nonprofit Project Template

Using your mission statement as the guiding light, your operating budget guides your organization to fulfilling both its financial and philanthropic goals. The second meeting of the budget committee should focus on developing a draft of an expense budget and an income budget. The committee will need to determine the costs for the upcoming program goals, organizational goals and strategic goals. In determining the income budget, the committee will need to project income based on the current fundraising and revenue activities. In addition to an operating budget, you’ll also need to prepare cash-flow projections to ensure that you’ll have the cash on hand when you need to spend it. To prepare this financial document, you’ll need to think about the timing of key fundraisers, appeals, and corporate or philanthropic donations, and any time-based factors that influence spending.

You could easily overspend, winding up deep in debt or worse – unable to continue serving your beneficiaries. 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. When estimating fundraising income, don’t forget to look at multi-year trends in your organization’s fundraising. Then, estimate likely gift increases per donor, based on the quality of the relationships. Don’t forget to track restricted and unrestricted funds, and how you are spending them.