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As a nonprofit professional, you likely focus on fundraising and programming as the main activities that further your organization\u2019s mission. However, financial planning<\/a> is also a critical (and often overlooked) piece of that equation\u2014after all, your nonprofit can only engage supporters and make a difference in your community if you use your resources wisely!<\/span><\/p>\n Budgets are among the most important financial planning tools for nonprofits like yours, since they outline the funding your organization will bring in and spend for a given year or initiative. While you don\u2019t have to be an accountant or financial advisor to run a nonprofit, any professional in the sector should have at least a basic understanding of budgeting to help keep your organization\u2019s revenue generation and expenditures on track throughout all of its activities.<\/span><\/p>\n In this guide, we\u2019ll walk through four budgeting tips you can use to promote financial health at your nonprofit. No matter your role, these essentials will help you get a better grasp of your organization\u2019s finances through Financial Literacy Month<\/a> and beyond. Let\u2019s dive in!<\/span><\/p>\n Your organization\u2019s operating budget is a cornerstone of nonprofit financial management. This is the master plan that lays out all of your revenue and expenses for a full fiscal year.<\/p>\n <\/span>However, Jitasa\u2019s nonprofit budgeting guide<\/a> mentions a few other types of budgets you should be familiar with, including:<\/span><\/span><\/p>\n For this article, we\u2019ll focus primarily on operating budgets because of their central role in nonprofit management. However, don\u2019t be surprised if you encounter the other types of budgets in your work\u2014and if you do, keep in mind that they should always align with your operating budget.<\/span><\/p>\n Generally speaking, all effective nonprofit budgets have the following characteristics:<\/span><\/span><\/p>\n Data is your best friend during the budgeting process. Review your financial records, donor data, past campaign results, and any other relevant information to ensure you can stick to your budget and use it effectively. If you need help with this process, outsourced nonprofit financial professionals like accountants, controllers, and fractional CFOs can expertly analyze your data and forecast cash flows for improved accuracy.<\/p>\n <\/span><\/p>\n Once you\u2019ve set some general goals, it\u2019s time to lay out the more specific, practical aspects of your nonprofit\u2019s budget. The best way to organize the revenue side is by source, since this method will help your budget to align with your organization\u2019s financial records and reports (financial statements, tax returns, etc.) and allow you to assess your funding model more effectively.<\/p>\n <\/span>Here is a quick overview of the five major categories of nonprofit revenue to include in your budget and some funding sources that fall into each category:<\/span><\/span><\/p>\n One of the most common misconceptions about nonprofit budgeting is that because nonprofits can\u2019t turn a profit by definition, their operating budgets have to break even every year. However, the term \u201cnonprofit\u201d just means that you need to reinvest all of your funding into your organization, either by spending it or saving it for the future. So, if you can budget for a revenue surplus to create a safety net for emergencies and grow your reserve funds, do it!<\/p>\n <\/span><\/p>\n On the expense side of your budget, the most effective organizational method is functional expense categorization. Besides also aligning with required nonprofit financial reports, this system makes it easier to see how your organization\u2019s spending furthers its mission. <\/p>\n <\/span>The three categories of functional expenses are:<\/span><\/span><\/p>\n Another widespread nonprofit budgeting myth centers around overhead expenses, a term that refers to your organization\u2019s administrative and fundraising costs combined. Overhead often has a negative connotation because some donors historically believed that it hindered nonprofits\u2019 mission-related progress. Today, attitudes around overhead are changing as nonprofit professionals and supporters alike realize that organizations need to run fundraisers and keep their lights on to make a difference in the community.<\/p>\n <\/span>However, this doesn\u2019t mean your nonprofit can incur unlimited <\/em>overhead, and mission-critical spending should still be your top priority. If you need to cut costs while budgeting, start by finding reasonable ways to reduce your administrative and fundraising expenses (for example, looking into free marketing tools or creating a wishlist of new office equipment so supporters can donate it to your organization in-kind) before taking funding away from your programs.<\/p>\n <\/span>Once your nonprofit has created a budget and your board of directors has approved it, your work isn\u2019t finished yet! Check in with your budget regularly to keep your spending and fundraising on track all year long. If your actual numbers deviate from the plan, discuss the situation with your team to determine why that happened and how you can proactively adjust your strategy to maintain your organization\u2019s financial health long-term.<\/span><\/p>\n To explore how Spave can transform your company’s approach to social impact, try it yourself! Download the app today:<\/a> App Store<\/a> | Google Play<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":" 4 Nonprofit Budgeting Tips to Promote Financial Health<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"pagelayer_contact_templates":[],"_pagelayer_content":"","footnotes":""},"categories":[1],"tags":[2],"class_list":["post-231","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-for-nonprofits"],"_links":{"self":[{"href":"https:\/\/devsiteomg.com\/spave\/wp-json\/wp\/v2\/posts\/231","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/devsiteomg.com\/spave\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/devsiteomg.com\/spave\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/devsiteomg.com\/spave\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/devsiteomg.com\/spave\/wp-json\/wp\/v2\/comments?post=231"}],"version-history":[{"count":0,"href":"https:\/\/devsiteomg.com\/spave\/wp-json\/wp\/v2\/posts\/231\/revisions"}],"wp:attachment":[{"href":"https:\/\/devsiteomg.com\/spave\/wp-json\/wp\/v2\/media?parent=231"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/devsiteomg.com\/spave\/wp-json\/wp\/v2\/categories?post=231"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/devsiteomg.com\/spave\/wp-json\/wp\/v2\/tags?post=231"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}1. Understand the Different Types of Nonprofit Budgets<\/span><\/h2>\n
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2. Set Clear, Data-Driven Goals<\/span><\/span><\/h2>\n\n
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3. Categorize Revenue by Source<\/span><\/h2>\n
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4. Organize Expenses by Function<\/span><\/h2>\n
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