A CFOs Guide to Managing Your Nonprofit Operating Budget

In this guide, we’ll walk through four essential steps to build an operating budget for your new nonprofit. As you follow this process, always remember to align your budget with your organization’s general goals and plans for future growth. This budget template is designed to help nonprofits quickly and accurately estimate operating expenses while creating a plan to reach their goals in the new year. Every nonprofit is unique, so feel free to adjust the categories and templates to fit your needs. Most likely, your organization’s executive director will lead the budgeting process, but a nonprofit accountant can also provide support. The primary purpose of nonprofit budgeting is to ensure that the organization can meet its goals without running out of money.

Staff salaries and benefits

Write down every possible expense you can think of, and then ask around to see what you’ve missed. Everyone in your nonprofit will have different expertise, so check in on what they might know that you don’t. Once your costs are set, you know precisely what numbers you can expect to work with.

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Now that you understand your nonprofit’s financial goals, it’s time to begin drafting your budget. Since you’ve already identified many of your organization’s expenses, start by outlining and categorizing those costs. Nonprofit organizations, driven by their missions to create positive change, often operate under financial constraints. Ensuring that resources are used efficiently and in alignment with the organization’s goals is essential. Effective expense management plays a central role in this endeavor, enabling nonprofits to https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ maximize the impact of every dollar spent. To help you get started, we’ve created a basic nonprofit budget template to track your revenue and expenses.

The difference between program budgets and organizational budgets

Budgets form the basis for boards to make better decisions and to avoid making mistakes. Budgeting allows boards to put limits on certain expenses as necessary and work to increase income sources early when it looks like there may be a shortfall. Monitoring the budget also provides an opportunity for board directors to move money around to allocate it efficiently as their cash flow changes. Good budgeting demonstrates accountability and transparency, which are important issues that donors and grant-makers look for before offering funds.

Operating budgets reflects the organization’s planned financial activities for the year ahead, showing how much revenue it expects from which sources and how much it will spend on operations. It’s a key tool in effectively and efficiently achieving the organization’s stated purpose, and should always align with an organization’s strategic plan. The operating budget must be centered around the primary goals and objectives of the organization.

• Capital budgets typically span multiple fiscal years and often require specific fundraising campaigns or financing arrangements.
• If you’re ready to dive into creating budgets for your nonprofit, there are various templates available online to help you get started.
• The committee will need to determine the costs for the upcoming program goals, organizational goals and strategic goals.
• This can help ground you in setting realistic goals for your expenses and fundraising efforts.
• Your nonprofit’s operating reserves are the portion of your unrestricted net assets set aside in the case of an emergency.

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• Getting an idea of what these streams bring in will help you see how useful each of them are to your organization long-term.
• But, grantmakers often also ask for your organizational budget as a part of a grant proposal.
• When determining operating expenses, nonprofit professionals should forecast their organization’s resources needed to carry out its activities during a fiscal year.
• Use a program-based approach to understand true costs, include adequate overhead allocation, and build in reserves.

Then, add them together with your existing expenses, such as rent, bills, and salaries for your current staff members. Use this estimate to set an overall goal of how much revenue you’ll need to bring in to cover all of your costs for the year. Here’s a very basic example—but remember that your organization’s budget might be more complicated than this (or maybe even simpler!).

What percentage of a nonprofit budget should be salaries?

Be sure to also put an individual or team in charge of reviewing and approving requests to use the funds, such as the Executive Director of the board of directors. Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. The opinions and views expressed in this article are solely those of the authors.