How much of a nonprofit budget should be salaries? 2025

A nonprofit budget is more than just a collection of numbers; it’s a strategic blueprint that reflects an organization’s priorities, goals, and mission at a foundational level. It outlines expected income and planned expenses for a specific period, typically a fiscal year, ensuring that resources are allocated efficiently and transparently. For nonprofits, budgeting plays a pivotal role in aligning limited resources with their mission-driven objectives. It’s not just about balancing the books; it’s about creating a clear financial roadmap, a basis that aligns resources with mission-driven goals. A well-crafted nonprofit budget ensures financial sustainability, supports strategic decision-making, and fosters transparency with donors, stakeholders, and the communities you serve. In short, for nonprofits, where every dollar has a purpose, efficient budgeting is highly important.

• If you’ve written a grant before, then you’re probably familiar with program budgets.
• The ability to make a positive impact in the communities they serve hinges on effective financial management.
• Before you can figure out where your nonprofit is going, it’s vital to figure out what happened in the past.
• Budgeting allows you to identify potential risks and develop effective contingency plans to manage unexpected expenses or revenue shortfalls.
• The success of a charity nonprofit like Harmony Hearts Initiative depends on effective nonprofit financial management, where understanding your charity nonprofit operating costs is key.

Hire An Accountant or Use Accounting Software to Help

Instead, your budget should guide your organization’s spending, fundraising, and reporting throughout the year, so check in with it frequently. While the goal is to maximize resources and achieve mission-driven objectives, nonprofits often encounter significant challenges in their financial planning. Below, we explore the major challenges of a nonprofit budget proposal and provide real-world examples of how organizations have successfully addressed them. To truly stick to your budget—and ensure you have enough money to fulfill your nonprofit’s mission—you need an efficient way to manage cash flow and organize spending. Relay is an online banking and money management platform that can help you (and your team members) avoid overspending, get clear on income, and simplify financial management. You may want to create both types of budgets to help your team stay on track and avoid overspending.

• Budgeting for non profit organizations is, perhaps, the most important financial document for your organization because it is a financial management and strategic tool.
• The process of building a nonprofit operating budget is fundamentally a planning process.
• Many nonprofits strategically select their fiscal year to align with their operational rhythm.
• Grant-makers have the potential to contribute large sums to nonprofits and board directors should ensure that they meet the grantor’s requirements to qualify.
• One way that board and staff plan for income and expenses in the future is by creating a budget.
• You may want to create both types of budgets to help your team stay on track and avoid overspending.

Get started with a free nonprofit budget template

If your nonprofit needs TV streaming, cable, or satellite service, include that here too. This category includes things like educational materials, workshops, and conferences. QuickBooks Online is a small business accounting software and app that allows you to manage your business anywhere, anytime. Using the budgets, you can determine where you’re losing and earning the most. Once your costs are set, you know precisely what numbers you can expect to work with. Making a budget is a whole lot easier when you’re not relying on guesswork.

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Capital budgets are an excellent planning tool and visual aid to show when cash will be needed for future capital asset acquisitions and replacements. Without capital budgets it becomes very difficult to manage long-term cash flow needs. A capital budget focuses on long-term investments rather than day-to-day operations. It includes major purchases like buildings, vehicles, technology systems, or equipment that will serve your organization for several years.

Which Taxes Do Nonprofits Pay?

Ultimately, remember that your budget should categorize revenue by different funding sources and your expenses by program vs. overhead costs. Including contracted services in the budget lets you plan and allocate funds for these essential services. This category includes all accounting services for nonprofit organizations the costs of hiring and retaining staff—including salaries, payroll taxes, health insurance, retirement contributions, and other benefits. Nonprofit organizations need to budget enough for these expenses to ensure they can attract and retain qualified staff while remaining financially sustainable. There are lots of budgeting templates available online or you could create one of your own.

Why grantmakers ask to see budgets for completed years

Moreover, tracking volunteer recruitment costs through accurate nonprofit cost analysis aids in maintaining financial transparency. These steps are integral to sustaining long-term operational success and are a critical part of strategic nonprofit financial management. Leveraging technology for efficient operations helps minimize administrative overhead costs and enables nonprofits to allocate more resources toward mission-critical activities. Additionally, significant funds are dedicated to cybersecurity and data protection. Recent industry benchmarks indicate that nonprofits are increasing their cybersecurity budgets by 18% year-over-year to counter evolving threats.