{"id":29660,"date":"2025-04-17T09:00:00","date_gmt":"2025-04-17T13:00:00","guid":{"rendered":"https:\/\/www.sage.com\/en-us\/blog\/?p=29660"},"modified":"2025-04-24T10:54:14","modified_gmt":"2025-04-24T14:54:14","slug":"nonprofit-budget-example-best-practices","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-us\/blog\/nonprofit-budget-example-best-practices\/","title":{"rendered":"Planning a nonprofit budget: Example and best practices\u00a0"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--has-illustration entry-header--has-illustration--generic\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-us\/blog\/category\/money-matters\/\" class=\"entry-header__link\">Money Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tPlanning a nonprofit budget: Example and best practices\u00a0\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\t\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2025-04-17T09:00:00-04:00\">April 17, 2025<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"Planning a nonprofit budget: Example and best practices\u00a0\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-us\/blog\/nonprofit-budget-example-best-practices\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n<\/header>\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-us\/blog\/author\/yassirmalik\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2024\/03\/Yassir-Malik.jpg\" class=\"entry-author__image\" alt=\"yassir-malik-profile-picture\" \/>\t\t\t\t<span class=\"entry-author__name\">Yassir Malik<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n<p>Fundraising is already challenging enough, but keeping your organization financially sustainable adds another layer of responsibility.&nbsp;&nbsp;<\/p>\n\n\n\n<p>In fact, <a href=\"https:\/\/www.sage.com\/en-us\/blog\/key-findings-2024-nonprofit-tech-trends\/\">a survey conducted by Sage<\/a> found that nonprofits rank budgeting and financial planning as one of their top five internal challenges.<\/p>\n\n\n\n<p>Why? <\/p>\n\n\n\n<p>Because nonprofit revenue streams can be unpredictable, and it\u2019s easy to prioritize program funding over internal needs.&nbsp;<\/p>\n\n\n\n<p>However, a solid budget helps you navigate these challenges, ensuring your nonprofit can operate effectively while making a meaningful impact.&nbsp;<\/p>\n\n\n\n<p>In this guide, you\u2019ll walk through the essentials of budgeting for nonprofits, covering different budgeting methods, best practices, and key components. <\/p>\n\n\n\n<p>By the end, you\u2019ll have the knowledge and tools to build a reliable financial plan with confidence that balances financial constraints with your nonprofit\u2019s ability to carry out its mission.&nbsp;&nbsp;<\/p>\n\n\n<?xml encoding=\"utf-8\" ?><div class=\"wp-block-yoast-seo-table-of-contents yoast-table-of-contents\"><ul><li><a href=\"#h-what-is-a-nonprofit-budget\" data-level=\"2\">What is a nonprofit budget ?<\/a><\/li><li><a href=\"#h-the-purpose-of-budgeting-for-nonprofits\" data-level=\"2\">The purpose of budgeting for nonprofits<\/a><\/li><li><a href=\"#h-sample-nonprofit-budget-layout-and-key-components\" data-level=\"2\">Sample nonprofit budget layout and key components<\/a><\/li><li><a href=\"#h-methods-for-building-a-nonprofit-budget\" data-level=\"2\">Methods for building a nonprofit budget<\/a><ul><li><a href=\"#h-zero-based-budgeting-nbsp\" data-level=\"3\">Zero-based budgeting &nbsp;<\/a><\/li><li><a href=\"#h-driver-based-budgeting-nbsp\" data-level=\"3\">Driver-based budgeting &nbsp;<\/a><\/li><li><a href=\"#h-top-down-budgeting-nbsp\" data-level=\"3\">Top-down budgeting &nbsp;<\/a><\/li><li><a href=\"#h-bottom-up-budgeting-nbsp\" data-level=\"3\">Bottom-up budgeting &nbsp;<\/a><\/li><\/ul><\/li><li><a href=\"#h-different-nonprofit-budget-types-nbsp\" data-level=\"2\">Different nonprofit budget types &nbsp;<\/a><ul><li><a href=\"#h-operating-budget\" data-level=\"3\">Operating budget<\/a><\/li><li><a href=\"#h-capital-budgets\" data-level=\"3\">Capital budgets<\/a><\/li><li><a href=\"#h-program-specific-budgets\" data-level=\"3\">Program-specific budgets<\/a><\/li><\/ul><\/li><li><a href=\"#h-how-to-write-a-nonprofit-budget\" data-level=\"2\">How to write a nonprofit budget<\/a><ul><li><a href=\"#h-define-the-initial-plan-and-process\" data-level=\"3\">Define the initial plan and process<\/a><\/li><li><a href=\"#h-evaluate-your-organization-s-readiness\" data-level=\"3\">Evaluate your organization&rsquo;s readiness<\/a><\/li><li><a href=\"#h-align-nonprofit-budget-planning-with-your-goals\" data-level=\"3\">Align nonprofit budget planning with your goals<\/a><\/li><li><a href=\"#h-thorough-research-on-revenue-and-expense-s\" data-level=\"3\">Thorough research on revenue and expense s<\/a><\/li><\/ul><\/li><li><a href=\"#h-nonprofit-budget-best-practices\" data-level=\"2\">Nonprofit budget best practices<\/a><ul><li><a href=\"#h-1-adequate-research-and-realistic-cost-estimation-nbsp-nbsp\" data-level=\"3\">1. Adequate research and realistic cost estimation&nbsp; &nbsp;<\/a><\/li><li><a href=\"#h-2-monitor-cash-flow-regularly-nbsp-nbsp\" data-level=\"3\">2. Monitor cash flow regularly&nbsp; &nbsp;<\/a><\/li><li><a href=\"#h-3-implement-a-contingency-fund-nbsp-nbsp\" data-level=\"3\">3. Implement a contingency fund&nbsp; &nbsp;<\/a><\/li><li><a href=\"#h-4-attention-to-detail-nbsp\" data-level=\"3\">4. Attention to detail &nbsp;<\/a><\/li><li><a href=\"#h-5-the-right-tool-for-the-job-nbsp\" data-level=\"3\">5. The right tool for the job &nbsp;<\/a><\/li><\/ul><\/li><li><a href=\"#h-nonprofit-budgeting-made-eas-y\" data-level=\"2\">Nonprofit budgeting made eas y<\/a><\/li><\/ul><\/div>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">The Nonprofit Accounting Software Buyers Guide<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p>The ultimate guide to selecting the best accounting and financial management software for your nonprofit.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-00008083-d376-4e58-9b85-32535d417557\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Download now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-965936890-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-965936890-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-a-nonprofit-budget\"><strong>What is a nonprofit budget<\/strong>?<\/h2>\n\n\n\n<p>A nonprofit budget is your organization\u2019s financial blueprint.<\/p>\n\n\n\n<p>It outlines your projected income and expenses over a specific period, usually a fiscal year. <\/p>\n\n\n\n<p>Think of it as a roadmap that helps your team manage financial resources effectively, ensuring you have the funds to support your programs and initiatives.&nbsp;<\/p>\n\n\n\n<p>Your budget brings together income from various sources, including donations, grants and fundraising efforts. <\/p>\n\n\n\n<p>It indicates which items are subject to specific stipulations\u2014otherwise known as restricted funds\u2014which typically make up the bulk of revenue for nonprofit organizations.&nbsp;&nbsp;<\/p>\n\n\n\n<p>To keep everything organized, your budget categorizes funds into clear nonprofit budget categories, helping you allocate resources efficiently and maintain financial stability.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-purpose-of-budgeting-for-nonprofits\"><strong>The purpose of budgeting for nonprofits<\/strong><\/h2>\n\n\n\n<p>If your organization qualifies for special tax rules, a nonprofit budget serves as a financial model that outlines projected income and expenses. <\/p>\n\n\n\n<p>Unlike standard budgeting, your priority as a nonprofit is to consider project goals from the perspective of donors and stakeholders rather than generating profits.<\/p>\n\n\n\n<p>&nbsp;This means your budget must detail the use of restricted and unrestricted funds and prioritize mission-driven spending over the financial results.&nbsp;&nbsp;<\/p>\n\n\n\n<p>A well-structured budget details how restricted and unrestricted funds will be allocated, ensuring transparency and accountability. <\/p>\n\n\n\n<p>By prioritizing mission-driven spending, you can clearly demonstrate to donors how their contributions directly support your organization\u2019s goals and impact. <\/p>\n\n\n\n<p>At the same time, balancing mission-driven initiatives with responsible financial management is key to ensuring your nonprofit\u2019s long-term sustainability.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-sample-nonprofit-budget-layout-and-key-components\"><strong>Sample nonprofit budget layout and key components<\/strong><\/h2>\n\n\n\n<p>When creating a nonprofit budget, you\u2019ll typically include key financial details in a structured format. <\/p>\n\n\n\n<p>Most nonprofit budgets have columns indicating the period covered, budgeted amounts, actual spending, and the percentage difference from the previous period or year.&nbsp;<\/p>\n\n\n\n<p>Your budget will also have two main sections.&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Income sources\u2014<\/strong>including donations, grants, fundraising revenue, and other funding streams.&nbsp;<\/li>\n\n\n\n<li><strong>Operating expenses\u2014<\/strong>including program costs, administrative expenses, salaries, and overhead.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>Many nonprofit budget templates include separate sections for restricted and unrestricted funds, helping you track donor-restricted contributions and general operating funds more effectively.&nbsp;<\/p>\n\n\n\n<p>Below is a basic nonprofit operating budget example to show how these components typically come together.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td>&nbsp;<\/td><td><strong>Current year figure so far<\/strong>&nbsp;<\/td><td><strong>Current year projected budget<\/strong>&nbsp;<\/td><td><strong>Previous year budget<\/strong>&nbsp;<\/td><td><strong>% Difference<\/strong>&nbsp;<\/td><\/tr><tr><td><strong>Revenue Sources<\/strong>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td>Donations&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td><em>Restricted<\/em>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td><em>Unrestricted<\/em>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td>Grants&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td><em>Restricted<\/em>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td><em>Unrestricted<\/em>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td>Investment returns&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td><strong>Total revenue<\/strong>&nbsp;<\/td><td>$$&nbsp;<\/td><td>$$&nbsp;<\/td><td>$$&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td><strong>Expenses<\/strong>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td>Salaries&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td>Materials and services&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td>Rent&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><td>&nbsp;<\/td><\/tr><tr><td><strong>Total expenses<\/strong>&nbsp;<\/td><td>$$&nbsp;<\/td><td>$$&nbsp;<\/td><td>$$&nbsp;<\/td><td>&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">The Nonprofit Accounting Software Buyers Guide<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p>The ultimate guide to selecting the best accounting and financial management software for your nonprofit.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-00008083-d376-4e58-9b85-32535d417557\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Download now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-965936890-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-965936890-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-methods-for-building-a-nonprofit-budget\"><strong>Methods for building a nonprofit budget<\/strong><\/h2>\n\n\n\n<p>Not only do the key budget components vary depending on your mission and structure, but there may also be differences in the budgeting method used by different nonprofits. <\/p>\n\n\n\n<p>Here are some common methods:&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-zero-based-budgeting-nbsp\"><strong>Zero-based budgeting<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Zero-based budgeting requires your financial planners to evaluate each expense based on current needs, starting from scratch for each new budgeting period.&nbsp;<\/p>\n\n\n\n<p>This approach ensures that resources are allocated more strategically and efficiently. <\/p>\n\n\n\n<p>It is most useful for nonprofits that want to avoid unnecessary expenditures or when they need to adapt to significant changes in their operating environment. <\/p>\n\n\n\n<p>Such changes could include the addition of new funding sources or new restrictions dictated by existing donors.&nbsp;<\/p>\n\n\n\n<p>Preparing a real-world budget example for nonprofit organizations can help guide your approach and aid in the decision on whether to use these budgeting methods or another variant.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-driver-based-budgeting-nbsp\"><strong>Driver-based budgeting<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Rather than starting zero at the beginning of each budgeting period, the driver-based method links budget resources to the key drivers influencing your costs and revenues, such as the number of program participants, fundraising events, or grant cycles. <\/p>\n\n\n\n<p>By focusing on these drivers, you can create more accurate and dynamic budgets that reflect the underlying factors affecting your financial performance.&nbsp;<\/p>\n\n\n\n<p>Driver-based budgeting helps your nonprofit align its financial planning with operational activities, making adjusting to changes and improving decision-making easier.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-top-down-budgeting-nbsp\"><strong>Top-down budgeting<\/strong>&nbsp;<\/h3>\n\n\n\n<p>In this method, your nonprofit senior management first develops a high-level budget for the organization. <\/p>\n\n\n\n<p>Once the top-level numbers are created, amounts are allocated to individual functions, programs, or departments that must create a detailed budget and plan with their allocated expenses or revenue targets.&nbsp;<\/p>\n\n\n\n<p>With top-down budgeting, you can ensure all departments and programs in your organization are working towards the same goal. <\/p>\n\n\n\n<p>It\u2019s also quicker to implement and help senior leaders stay on top of the organization\u2019s resource allocation.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-bottom-up-budgeting-nbsp\"><strong>Bottom-up budgeting<\/strong>&nbsp;<\/h3>\n\n\n\n<p>Bottom-up budgeting starts with the people who know the details best\u2014your team. <\/p>\n\n\n\n<p>By involving staff from various departments in the budgeting process, you get a more accurate and realistic picture of your financial needs. <\/p>\n\n\n\n<p>This approach establishes trust and openness within the organization, as your employees understand how their input influences the overall financial plan.&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-different-nonprofit-budget-types-nbsp\"><strong>Different nonprofit budget types<\/strong>&nbsp;<\/h2>\n\n\n\n<p>Having a detailed plan, such as a nonprofit budget sample for each program or fundraising activity, helps you maintain transparency and meet donor expectations. <\/p>\n\n\n\n<p>However, the budget type you choose will depend on the size of your nonprofit and where you are in your mission\u2019s journey.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Here are some common nonprofit budget types and when to use them:&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-operating-budget\">Operating budget <\/h3>\n\n\n\n<p>This is the most common type of budget, typically covering an entire fiscal year (usually 12 months).<\/p>\n\n\n\n<p>It serves as your financial roadmap, guiding day-to-day financial planning, monitoring cash flow, and evaluating your organization\u2019s overall financial health. <\/p>\n\n\n\n<p>In this sense it is the primary source for making informed decisions, assessing funding needs, and communicating financial expectations to your board and stakeholders.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-capital-budgets\"><strong>Capital budgets<\/strong><\/h3>\n\n\n\n<p>A capital budget focuses on long-term investments and major expenses, such as acquiring property and equipment, or technology upgrades. <\/p>\n\n\n\n<p>It is typically used when you embark on projects that require large upfront costs and may span multiple years. <\/p>\n\n\n\n<p>You can use a capital budget to ensure such initiatives have minimal impact on daily operations. <\/p>\n\n\n\n<p>Examples include building a new facility, such as an aid distribution center, purchasing vehicles, or investing in new IT infrastructure.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-program-specific-budgets\"><strong>Program-specific budgets<\/strong><\/h3>\n\n\n\n<p>Program-specific budgets detail the income and expenses related to a specific initiative, such as a youth mentoring program, a community food bank, or an educational campaign. <\/p>\n\n\n\n<p>This budget model helps you track each program&#8217;s financial performance separately, ensuring funds are used effectively and in accordance with donor or grant requirements. <\/p>\n\n\n\n<p>This type of budget is particularly useful for managing restricted funds\u2014allowing you to demonstrate compliance with donor stipulations, report to funders, and evaluate a program\u2019s financial sustainability.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Following on from program-specific budgets, it\u2019s worth noting that this category includes the subcategories of grant proposal budgets and opportunity budgets:&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Grant proposal budget<\/h3>\n\n\n\n<p>If your nonprofit relies heavily on grant funding, this budget outlines program costs to meet grantor specifications, including fund-matching requirements.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Opportunity budget<\/h3>\n\n\n\n<p>This budget allocates funds for unplanned or emerging opportunities, such as piloting a new program, investing in innovative technologies, or responding to unexpected needs.<\/p>\n\n\n\n<p>It reflects your capacity for strategic growth, agility, and flexibility.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-write-a-nonprofit-budget\"><strong>How to write a nonprofit budget<\/strong><\/h2>\n\n\n\n<p>A well-organized nonprofit budget makes all the difference in your effort to align financial resources with your mission. <\/p>\n\n\n\n<p>Here are the basic steps for drafting a nonprofit budget template that will guide your success:&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-define-the-initial-plan-and-process\"><strong>Define the initial plan and process<\/strong>\u2003<\/h3>\n\n\n\n<p>Start with setting clear goals and bringing in key stakeholders\u2014such as program managers and department heads\u2014who can provide detailed estimates of expected costs and revenues.&nbsp;<\/p>\n\n\n\n<p>At this stage, it\u2019s also important to assign roles to those involved in budget management. <\/p>\n\n\n\n<p>Clarify who will oversee different aspects of the budget as your project takes shape and outline the processes that will guide them.&nbsp;<\/p>\n\n\n\n<p>Finally, a realistic timeline for budget preparation should be established, ensuring enough time for review and adjustments before final approval.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-evaluate-your-organization-s-readiness\"><strong>Evaluate your organization\u2019s readiness<\/strong><\/h3>\n\n\n\n<p>Your budget is a recipe for financial health over the forthcoming year, but don\u2019t ignore the health status you expect when closing the current year. <\/p>\n\n\n\n<p>Failure to do so could set you up for awkward surprises if the budget is built on shaky ground.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Another finding from our nonprofit tech trends survey was that global economic uncertainty in 2024 was a significant concern for most nonprofit leaders.<\/p>\n\n\n\n<p>An assessment of your readiness should therefore also consider the external factors and trends shaping the current context, as well as past performance of your programs.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-align-nonprofit-budget-planning-with-your-goals\"><strong>Align nonprofit budget planning with your goals<\/strong><\/h3>\n\n\n\n<p>A well-structured nonprofit budget aligns expected financial resources with your organization\u2019s mission and goals, ensuring financial sustainability while maximizing project impact.&nbsp;&nbsp;<\/p>\n\n\n\n<p>For example, your programs may have multiple goals, such as improving the quality of aid while also reaching more beneficiaries. <\/p>\n\n\n\n<p>Since different funding sources often come with specific restrictions, your budget should carefully allocate resources to cover each need effectively.&nbsp;<\/p>\n\n\n\n<p>A popular methodology for this kind of planning is the <strong>S.M.A.R.T model<\/strong>, originally formulated for determining management goals. <\/p>\n\n\n\n<p>The acronym stands for Specific, Measurable, Attainable, Realistic, and Time-related criteria.&nbsp;<\/p>\n\n\n\n<p>In the case of budget planning, the criteria translate into:&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>S<\/strong>pecific: clearly defined the goal&nbsp;<\/li>\n\n\n\n<li><strong>M<\/strong>easurable: means of tracking progress and success&nbsp;<\/li>\n\n\n\n<li><strong>A<\/strong>ttainable: how to achieve the goal, and who will do it&nbsp;<\/li>\n\n\n\n<li><strong>R<\/strong>ealistic: ensuring there are sufficient resources to achieve the goal&nbsp;<\/li>\n\n\n\n<li><strong>T<\/strong>ime-related: a workable timeframe for each goal&nbsp;<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-thorough-research-on-revenue-and-expense-s\"><strong>Thorough research on revenue and expense<\/strong>s<\/h3>\n\n\n\n<p>Creativity is key to keeping your fundraising campaigns fresh and engaging. <\/p>\n\n\n\n<p>But with each campaign being unique, costs can vary significantly. <\/p>\n\n\n\n<p>Plus, funding sources like grants, social campaigns, or corporate donations can be unpredictable, changing from year to year. So, how do you plan for these variables?&nbsp;<\/p>\n\n\n\n<p>In both cases, the standard advice is to start by reviewing past performance to isolate patterns, such as cyclical trends. <\/p>\n\n\n\n<p>This will also show you which funding sources are most reliable, especially true of recurring donations and multi-year grants.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Be sure to analyze external factors, such as economic trends and changing industry conditions, that may affect your sources\u2019 ability to maintain the flow of contributions.&nbsp;<\/p>\n\n\n\n<p>While variations in funding may be beyond your control, make sure to monitor your expenses. <\/p>\n\n\n\n<p>A popular rule of thumb is to ensure that at least 65% of total resources go to program costs, such as materials, rentals, and operations, while overheads never account for more than 35% of resources.<\/p>\n\n\n\n<p>For nonprofits, overheads include fundraising costs (such as maintaining your website and hiring campaign staff) and administrative costs (such as maintaining your HQ).&nbsp;<\/p>\n\n\n\n<p>Modern solutions like predictive analytics can help you visualize past and future scenarios and are often built into commercially available nonprofit accounting solutions.&nbsp;<\/p>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">The Nonprofit Accounting Software Buyers Guide<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p>The ultimate guide to selecting the best accounting and financial management software for your nonprofit.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-00008083-d376-4e58-9b85-32535d417557\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Download now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-965936890-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-965936890-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-nonprofit-budget-best-practices\"><strong>Nonprofit budget best practices<\/strong><\/h2>\n\n\n\n<p>It&#8217;s easy to be overly optimistic when planning a nonprofit budget, especially when launching new programs or initiatives. <\/p>\n\n\n\n<p>A common mistake is prioritizing program spending without setting aside emergency funds for unexpected challenges.&nbsp;<\/p>\n\n\n\n<p>To help you avoid these pitfalls, here are some essential budgeting best practices to keep your nonprofit financially stable and mission-focused.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-adequate-research-and-realistic-cost-estimation-nbsp-nbsp\"><strong>1. Adequate research and realistic cost estimation&nbsp; <\/strong>&nbsp;<\/h3>\n\n\n\n<p>Use detailed historical data and consult with your nonprofit program managers to develop accurate estimates of expenses and stay on top of underestimating costs.&nbsp;<\/p>\n\n\n\n<p>Be sure to consider inflation, potential cost increases, and one-time expenses. <\/p>\n\n\n\n<p>Regularly update budget estimates based on real-time information and feedback from staff involved in program delivery.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-monitor-cash-flow-regularly-nbsp-nbsp\"><strong>2. Monitor cash flow regularly&nbsp; <\/strong>&nbsp;<\/h3>\n\n\n\n<p>Budgeting is all about staying on track. <\/p>\n\n\n\n<p>Review your spending regularly to ensure it aligns with your strategic goals and keeps your nonprofit financially healthy.<\/p>\n\n\n\n<p>These check-ins also help your team adapt to unexpected changes, like program roadblocks or additional funding needs, so your budget stays relevant and effective.&nbsp;<\/p>\n\n\n\n<p>One critical area to watch? <\/p>\n\n\n\n<p>Cash flow.&nbsp;<\/p>\n\n\n\n<p>Creating a cash flow forecast that tracks expected income and expenses on a monthly or quarterly basis can make a big difference. <\/p>\n\n\n\n<p>It helps prevent your organization from focusing only on total budgeted amounts without considering <em>when<\/em> the cash will actually be available.&nbsp;<\/p>\n\n\n\n<p>This is especially important for nonprofits that rely heavily on grants or fundraising events, which often lead to large, irregular payments instead of a steady revenue stream. <\/p>\n\n\n\n<p>By monitoring cash flow closely, your team can anticipate and plan for periods of lower cash availability.<\/p>\n\n\n\n<p>Investing in <a href=\"https:\/\/www.sage.com\/en-us\/accounting-software\/cash-management\/\">cash management software<\/a> is also a great way to gain better visibility and ensure financial stability.\u00a0\u00a0<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-3-implement-a-contingency-fund-nbsp-nbsp\"><strong>3. Implement a contingency fund&nbsp; <\/strong>&nbsp;<\/h3>\n\n\n\n<p>Setting aside a portion of the budget (typically 5-10%) as a reserve will help your organization handle unexpected challenges like sudden drops in donations, emergency repairs, or economic downturns. <\/p>\n\n\n\n<p>To prepare for anomalies without disrupting operations, you should regularly review and adjust the contingency fund based on your financial situation and any emerging risks.&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-4-attention-to-detail-nbsp\"><strong>4. Attention to detail<\/strong>&nbsp;<\/h3>\n\n\n\n<p>When creating your nonprofit budget, it\u2019s important to strike a balance\u2014you want it to be clear and easy to follow while still capturing the details that impact your organization\u2019s financial health.&nbsp;<\/p>\n\n\n\n<p>While big-ticket expenses often take center stage, small costs add up fast. <\/p>\n\n\n\n<p>Things like utility, bills, office supplies, and software subscriptions may seem minor on their own, but when combined they can create significant overhead costs that eat into your budget.&nbsp;<\/p>\n\n\n\n<p>Make sure your budget clearly outlines the key components needed to sustain operations, so all stakeholders understand how financial resources are being managed.&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-5-the-right-tool-for-the-job-nbsp\"><strong>5. The right tool for the job<\/strong>&nbsp;<\/h3>\n\n\n\n<p>You may see many nonprofits start as grassroots organizations, and at that stage it\u2019s reasonable to use spreadsheets to plan budgets. <\/p>\n\n\n\n<p>But sooner or later you need to take a more formal approach, to meet compliancy rules, impress potential donors with clearly displayed information, or simply to avoid errors.&nbsp;&nbsp;<\/p>\n\n\n\n<p>More and more nonprofits are finding that cloud-based tools solve these issues, often incorporating templates and automated pathways that take a lot of the stress out of budgeting. <\/p>\n\n\n\n<p>Such tools centralize data storage and manipulation, eliminating the need to copy or download documents, and adding a layer of security.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-nonprofit-budgeting-made-eas-y\"><strong>Nonprofit budgeting made eas<\/strong>y<\/h2>\n\n\n\n<p>Making a real impact starts with financial stability. <\/p>\n\n\n\n<p>A well-planned budget ensures that your nonprofit can continue serving its mission while maintaining its financial health.&nbsp;<\/p>\n\n\n\n<p>You can simplify the process\u2014incorporating best practices, adapting to your organization\u2019s needs, and making budgeting easier to manage\u2014with Sage cloud-based <a href=\"https:\/\/www.sage.com\/en-us\/accounting-software\/financial-planning-budgeting\/\">financial planning and budgeting software<\/a>.\u00a0\u00a0<\/p>\n\n\n\n<p>Choosing the right <a href=\"https:\/\/www.sage.com\/en-us\/industry\/nonprofit\/\" target=\"_blank\" rel=\"noreferrer noopener\">nonprofit accounting software<\/a> will streamline how your organization understands itself.&nbsp;<\/p>\n\n\n\n<p>Getting the right tools to help with research, reporting, and financial tracking will give your mission programs the support they need to grow healthily and stay resilient.<\/p>\n \n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">The Definitive Guide to Driving Nonprofit Finance Efficiency with Paperless Automation<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p class=\"\">Download your free e-book<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"https:\/\/www.sage.com\/en-us\/cp\/ebook-the-definitive-guide-to-driving-nonprofit-finance-efficiency-with-paperless-automation-nfp\/\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\tid=\"cta-id-18605\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\tdata-button-location=\"cta_box\"\n\t\t\t\t\t\t\t\t\t\t\t>Download now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"700\" height=\"425\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/04\/hand-heart-hero.webp\" class=\"single-cta__image\" alt=\"nonprofit\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/04\/hand-heart-hero.webp 700w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to our Sage Advice Newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Get our latest business advice delivered directly to your inbox.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-ab515c6e-7e90-4c2f-a67e-113872516e8b\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg\" class=\"single-cta__image\" alt=\"Working from home with tea in hand\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2022\/04\/GettyImages-1073797282-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Are you responsible for managing a nonprofit\u2019s budget, or are you looking to support an organization and want to understand how its finances work? Dive in to learn everything you need to know about a nonprofit budget.\u00a0<\/p>\n","protected":false},"author":1774,"featured_media":20205,"menu_order":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"footnotes":""},"categories":[43],"tags":[],"business_type":[40,312],"lilypad":[],"context":[418],"industry":[58],"persona":[150,98],"imagine_tag":[],"coauthors":[509],"class_list":["post-29660","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money-matters","business_type-small-business","business_type-accountants","industry-nonprofit"],"sage_meta":{"region":"en-us","author_name":"Yassir Malik","featured_image":"https:\/\/www.sage.com\/en-us\/blog\/wp-content\/uploads\/sites\/2\/2023\/09\/GettyImages-1438131355.jpg","imagine_tags":[]},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice US","distributor_original_site_url":"https:\/\/www.sage.com\/en-us\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts\/29660","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/users\/1774"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/comments?post=29660"}],"version-history":[{"count":0,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/posts\/29660\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/media\/20205"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/media?parent=29660"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/categories?post=29660"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/tags?post=29660"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/business_type?post=29660"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/lilypad?post=29660"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/context?post=29660"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/industry?post=29660"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/persona?post=29660"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/imagine_tag?post=29660"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-us\/blog\/api\/wp\/v2\/coauthors?post=29660"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}