Budget making for nonprofit organization

The budget of a nonprofit organization shows its projected expenses and revenues for a given time period. Thus it is essentially recording of the organization’s plans in quantifiable money terms.

The organization’s budget should be drafted as an appendix to the organization’s mission and programs. It should be prepared more as an internal guiding resource than an external reporting requirement.

The general thumb rule to make a realistic budget is to be conservative when estimating income but liberal when estimating the expenses of the organization.

A budget unlike all other financial statements need not be in any specified format. As long as it conveys its intent – the format does not matter in case of a budget.

A budget made for a particular program as opposed to the overall organizational budget would be called a ‘Program budget’

Steps in making a budget for a nonprofit organization

Budgeting for a nonprofit organization is generally made in the following manner –

Step 1: Estimation of overall expenses or program expenses (in case of a program budget). See: sample format below.

Step 2: Estimation of potential income sources. – say fund raising campaigns, drives, grants, endowments etc.) See: sample format below.

Step 3: Matching expenses to potential income source – The income and expenses estimated as above need to be matched. If there is a likely deficit, it could mean reducing budgeted expenses or searching out for new sources of income.

Step 4: Board review and approval – This involves a formal adoption of the budget by the board thus recognizing the expected deliverable.

Step 5: Periodical evaluation of the budget – to assess the achievements versus the target and to review the budget, if necessary. This is the last but the most important aspect, without which the entire budgeting exercise would be futile.

Sample Expense estimation format

Sample Income estimation format