10 financial best practices for volunteer boards

From fluctuating income streams to increasing demand for programs, organizations must plan carefully to navigate financial complexities while maximizing impact. Whether you’re managing general operations, launching a new program, or amplifying your marketing efforts, a thoughtful budget can be the difference between a successful year and a strained one. If you’ve created a budget for your household before, you probably averaged your expenses, calculated your income, and determined how much you could save for the future. Nonprofit budgeting follows a similar process, except you’re projecting revenue and expenses for your entire organization. Most financial experts recommend nonprofits maintain cash reserves equal to 3-6 months of operating expenses.

Fluctuating Income Sources

This will ensure that everyone is aware of the organization’s financial position, goals, and priorities, and it will help create a sense of ownership and accountability. Before you begin budgeting, establish your organization’s goals and objectives for the upcoming fiscal year. Clearly defining these will help you allocate resources effectively and guide decision-making throughout the budgeting process. If you’re ready to work with accounting services for nonprofit organizations us for your nonprofit budgeting and other financial management needs, don’t hesitate to contact us so we can get started. As we look towards 2025, nonprofits face a unique set of challenges and opportunities.

• It showcases the organization’s ability to manage resources effectively and achieve meaningful results.
• Go one category at a time, and don’t panic about getting overly detailed.
• For each reporting period, the organization assesses its actual performance in comparison to the initial plan, ensuring progress and financial stability.
• Give yourself enough time to gather the necessary information and data, to think through and discuss the various elements of the budget, and to put it down on paper (or in Excel).
• This detailed justification of expenses strengthens the organization’s case for support and increases its chances of securing funding.
• Consider board expectations, grant requirements, and program manager input.
• A Corporate Project Budget Narrative is essential for any significant business initiative requiring substantial financial resources.

Evaluate and Learn from the Budgeting Process

• Everyone in your nonprofit will have different expertise, so check in on what they might know that you don’t.
• This narrative goes beyond simply listing costs; it provides a compelling rationale for each expenditure, emphasizing its contribution to the company’s strategic goals and overall financial health.
• When it comes to budgeting, context is essential when considering every item.
• Depending on the type of grant you win, the award will cover only direct costs, or, if a general operating grant, it may cover much more.
• However, a solid budget helps you navigate these challenges, ensuring your nonprofit can operate effectively while making a meaningful impact.
• But, there’s a place in the nonprofit universe for a surplus in the budgets too.
• Below, we explore the major challenges of a nonprofit budget proposal and provide real-world examples of how organizations have successfully addressed them.

Another common misconception about nonprofit operating budgets is that they have to break even every year because nonprofits by definition can’t turn a profit. What the term “nonprofit” actually means, though, is that all funding received needs to be reinvested into the organization. Each sample highlighted the nuances of tailoring your financial justifications to specific audiences and objectives.

What Are the Different Types of Nonprofit Budgets?

For example, a small nonprofit focused on youth development should regularly include volunteers in their budget planning meetings. Their on-the-ground perspective will help forecast realistic program costs and identify cost-saving opportunities. Here’s a comprehensive, step-by-step guide to building a budget that supports your nonprofit’s mission effectively. To clear up any confusion surrounding these resources, we’ll begin by answering some common questions about nonprofit budgets. Reliable accounting https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ software makes it easier to generate these insights from your financial data.

Sample Annual Nonprofit Budget Template

• This includes determining how much revenue will come from small, mid-level, and major gifts, as well as whether you’ll use any existing funding toward the initiative.
• If you are comfortable working with numbers and have a good understanding of your organization’s finances, you may find that zero-based budgeting is not as difficult as it initially seems.
• Once you develop your budget, you will have a clear plan for moving forward, shaped by concrete data and strategies.
• Variable costs, like program supplies, event expenses, and part-time staff hours, offer flexibility when funding fluctuates or new opportunities arise.
• Be sure to consider inflation, potential cost increases, and one-time expenses.
• A cash flow budget is focused on covering big expenses like capital projects or payroll work.
• You can use cost-benefit analysis to determine if the event would be more valuable than some other methods of fundraising.

To learn more about annual business budget templates, that can be used across different organizations, see Free Annual Business Budget Templates. Ultimately, remember that your budget should categorize revenue by different funding sources and your expenses by program vs. overhead costs. Once you have your budget, compare the predicted numbers to the actual figures every month in order to look for differences and establish why they occurred.