Understanding budgets are a part of work some nonprofit leaders never grow to like but are necessary for building capacity. Budgets tell a story and paint a picture for how your nonprofit operates and how well it stewards finances.
All nonprofits operate differently. Oftentimes, the budget will reflect unique financial needs. Here we’ve outlined some best practices that may help on the journey of nonprofit growth!
- Review financial reports quarterly. Take note of any unordinary expenses. Don’t be afraid to ask questions about regular expenses, new expenses, and large expenses.
- Approve your budget annually at minimum and place it in your board meeting minutes. It should be accessible to board members at all times.
- Be transparent about your budget. Your donors and stakeholders will place more trust in your board and in your organization when they have the opportunity to see how much money is coming in, how much money goes out, and how you allocate funds.
- Strive to equal or exceed your expenses. It’s good practice to have a reasonable amount of money allocated for cash flow to avoid having a deficit.
- Consider restraints or limitations on gifts or grants in your budget. Some grantors may offer a grant with payouts over a period of months or years. Factor the revenue at the time it comes in. Also, be aware of any limitations of what you can spend grant or gift money on.
- Evaluate your budget history. You may have larger expenses in certain months than others. Fundraising events and the timing of large donations also have a big impact on your budget. You can always amend your budget as necessary to account for variations.
Budgets are living documents that you will need to revisit throughout the year. Make sure you are reviewing your budget with your board and maintaining transparency on cash flow and expense reports at least two times yearly. If there are issues that need to be addressed, you should address them immediately and create plans in advance for any deficits that come up as well as surpluses. Lastly, keep your budgets updated, clean, and professional-looking for donors and stakeholders. Fundraising is highly competitive, so make sure to take every opportunity to stand out above the rest!
For more information, support or help budgeting and navigating nonprofit finance, visit our contact us page or email us at firstname.lastname@example.org. Until next time!