How to Create a Nonprofit Budget

Creating a budget reaps many benefits.

Having a budget in place can mean the difference between operating a successful nonprofit and never seeing your nonprofit get off the ground. Budgets help nonprofits foresee expenses and revenues within a certain period. Budgets are also necessary when applying for federal and private grants, and they help you calculate the costs to run your programs. Nonprofit managers use budgets to determine the planning steps, the timing of events and the costs needed to implement the nonprofit organization's mission.

Things You'll Need

• Spreadsheet software

Instructions

1. 

   Calculate expenses.

   Gather a list of expenses from the past accounting period, and enter each item and dollar amount in separate columns in a spreadsheet under the subheading "Operating Expenses." Subtotal the expenses. Operating expenses should include salaries, wages, payroll taxes, supplies, equipment and other expenses.

2. Make a list of the yearly costs to run the programs of the nonprofit, and enter each item and dollar amount in separate columns in your spreadsheet under the subheading "Program Costs." Subtotal the costs. Program costs include rental fees, utilities and the personnel costs for each program.

3. 

   Calculate revenue.

   Make a list of projected revenues that includes all money from grants, private donors, fundraisers and any other form of revenue. Enter each revenue source and dollar amount into separate cells in the spreadsheet under the subheading "Projected Revenue." Subtotal the revenue.

4. Double-check that each expense has a form of revenue to match it. If this is not the case, eliminate unnecessary expenses from the budget. Assess whether volunteers can take the place of paid staff or if it is possible to trim travel expenses.

5. Review the budget by double-checking that your income and expenses are reasonably estimated. Look for excessive or unusual income or expense amounts. If anything is incorrect, revise your nonprofit's budget accordingly.

Tips & Warnings

• Increase fundraising activities if expenses are far greater than revenue.

• Excess revenue must go back into your nonprofit to fulfill its mission. Do not issue bonuses to members or staff.

• Track all your revenue and expenses to avoid penalties from the Internal Revenue Service.

References

• Alliance for Nonprofit Management: Financial Management 6
• University of Oregon: Nonprofit Financial Statements

Resources

• Free Management Library: A Basic Guide to Nonprofit Financial Management