Budgets are an important tool for nonprofit organizations. In addition to being required by the U.S. government, budgets help nonprofits plan how they are going support their cause and receive the donations to do it.
To help your nonprofit meet its goals, it’s important for the budget to be realistic, measurable and cover defined activities. And here’s why:
Creating an Effective Nonprofit Budget
Budgets should be realistic.
Creating a budget with inflated and wrong numbers not only hinders your nonprofits ability to support its cause, but also gives the Board of Directors a false sense of security. Creating a realistic budget with real numbers will help you figure out what programs to participate in and how much you need to raise from donors.
Base your realistic budget on historical facts, numbers you can easily get from your nonprofit accounting software. Your accounting software and its ability to create reports will come in handy when it comes time to create the annual budget.
Budgets should be measurable.
Your budget should be created using the same accounting method that you use for bookkeeping. This allows you to easily measure your budget against actual numbers in real time. Should there be any discrepancies, such as revenue shortfalls or unexpected expenses, you’ll be able to see where the issue may have stemmed from and take the appropriate actions.
Budgets should cover defined set of activities.
Each activity, program and project should have its own budget, which is then combined into one organization-wide budget. This will help you analyze how each item is doing separately, allowing you to identify problem areas easily.
By outlining the various activities, programs and projects, you’ll also be able to confirm that your budget reflects the priorities and long-range goals of the mission.
Need help using your nonprofit accounting software to better manage your budget? Capital Business Solutions offers software consulting services to help nonprofits better understand how to use their software to their advantage. Give us a call at 877-889-0629 or fill out our online contact form to get started!