5 Best Practices for Building a Nonprofit Annual Operating Budget

Address overhead costs transparently in your nonprofit budget and donor communications. A budget for non-profit organizations often faces scrutiny over administrative expenses. While many funders and donors focus on program expenses, sustainable nonprofit organizations need appropriate investment in core operations. Financial decision-makers should feel empowered to spend on overhead in order to improve operations, take care of staff, and build a sturdy organizational infrastructure. Instead of dedicating days to preparing financial reports, nonprofits can generate them instantly with clear, visual dashboards.

What features should I look for in nonprofit budgeting software?

When your organization is not in line with the budget, you should look at “why,” and what factors you can control or change. This is where the budget becomes an effective management and operations tool for your organization. This allows for accounting services for nonprofit organizations a better overview, more speedy addressing of any potential issues, more nimble management of the staff and volunteers, and a more informed everyday decision-making process.

• This segment of the budget is a key element in ensuring transparent nonprofit financial management.
• This is the budget of revenues received and expenses paid, broken down monthly to ensure cash will be there when needed.
• For example, you might need to redesign your website to improve your branding, but if you don’t have the right dev and design support, that can be a challenge.
• Every organization’s budget will look slightly different, so make sure you can customize your chosen template to fit your needs and goals.
• Programs are more effective, better managed, and more responsive to the community when an organization has good accounting and technology, high quality leadership, planning, and governance.

Tip: Enhance Program Cost Efficiency

Since you’ll detail the source of each line item, you can pinpoint which areas need more resources and where you can cut back on spending. At the same time, the media is filled with stories of executives—in both for-profit and nonprofit corporations—with excessive compensation. The salaries of some nonprofit execs—with a median of $75,000 for organizations https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ with annual budgets of between $1 million and $2.5 million—are also legal but raise eyebrows in different circles. In California, nonprofits with non-governmental income of $2 million or more are now required to have the board approve the salaries of the CEO/executive director as well as that of the CFO.

Assign direct expenses

Many nonprofits have trouble developing effective marketing strategies that connect them with their audiences and help them achieve their goals. Working with an outside agency can help you find the correct strategy quicker and not waste time with guesswork. Outsourcing some of your marketing needs provides flexibility and access to specialized skills without having to pay full-time salaries or benefits, which can be hard to do at a nonprofit due to budget concerns. Once your nonprofit marketing budget is in place, the next hardest part can be sticking to it and managing it throughout the year.

For example, if your year-end campaign consistently brings in 40% of annual donations, factor this timing into your financial planning. Striking the right overhead-spending balance is always a delicate dance for nonprofits. CSD was spending a significant portion of its time on manual, repetitive tasks. They needed a solution that could automate these processes, allowing staff to focus on their primary goal—serving the deaf community.

Currencycloud stops safeguarding your funds when the money has been paid out of your account to your beneficiary’s account. For example, if you have a strong fundraising track record and anticipate an 80% chance of achieving the predicted $100,000 revenue goal, the forecasted amount would be $80,000. For example, if you are seeking a $10,000 grant with a 75% chance of being awarded, adjusting the revenue forecast to $7,500 accurately reflects the projected income. “Our nonprofit will increase overall contributions by 20% by the end of 2024 through partnerships with local businesses and corporate sponsors.”

These costs involve building relationships with community organizations, facilitating joint events, and sharing resources to maximize program reach. Allocating around 5-10% of the budget towards these collaborations helps foster sustainable impact while supporting nonprofit cost-saving strategies. Nonprofit organization expenses in this area include efforts to attract and retain donors through social media campaigns, digital advertising, and community events. Typically, these expenses may range between 10-20% of the overall operational budget. For those interested in learning how to balance these costs efficiently, visit How Can You Write a Business Plan for a Charity Nonprofit in 9 Steps? After completing the full program-based budget or financial analysis it’s worthwhile to take a fresh look for both accuracy and a gut check.

Propel Nonprofits Program Budget and Allocation Template and Resource

This fictional nonprofit provides extracurricular activities, such as sports, to kids in their community. A larger budget on salary increases alone is not strictly enough to address attraction and retention challenges. Half of respondents also indicated that they would continue to leverage sign-on bonuses. From culture management to harassment prevention to diversity, equity and inclusion, Nonprofit HR provides the needed knowledge and insights for your organization to best support your people.