Budgeting is one of the major critical factors every nonprofit’s leader should focus on while running their organization’s affairs. No matter how noble your nonprofit objectives appear, if you do not adequately allocate financial resources to match your objectives, money will not flow to the areas it will do the greatest good. And as a result, your nonprofit’s mission will hardly come through. Savvy nonprofits don’t joke around with their financial activity; they ensure to follow the best budgetary process to maintain sound financial health.
Good budgeting involves strategic planning to engender sound financial management that will bring about a steady cash flow. It also entails looking for funding sources that will help you sustainably finance your community project.
However, the big question that perplexes leaders of nonprofits is: what are the key steps to follow while making a budget for nonprofit organizations. This blog post intends to explain to nonprofit stakeholders the key steps in the nonprofit budgeting process.
Stay put and read on!
Summary
What is a Nonprofit Budget?
The budgetary allocation is at the heart of every nonprofit operation. A thriving nonprofit always makes adequate financial arrangements to cater to revenue and expenses.
A nonprofit budget is an estimation of revenue and expenses over a specified future period which is usually compiled and re-evaluated periodically. It’s a detailed financial plan for future savings and spending that outlines the projected income and expenses in a fiscal year. In other words, the management of a nonprofit organization makes use of the budget to estimate the revenues and expenses for the future period based on their nonprofit objectives.
Proper budgeting helps keep nonprofits on track while making financial decisions. And it fosters accountability and transparency in their financial management. A budget allows the management of nonprofits to have a glimpse of how the upcoming accounting is likely to end. Plus, the proposed plan serves as a yardstick on which to measure the actual performance of the nonprofit.
3 Key Steps in the Nonprofit Budgeting Process
For you to make a good nonprofit budget, there are three key steps you would want to consider. Most often, nonprofit budgets don’t usually accomplish the goals they intend to achieve as a result of the inability of people drafting the financial plan to follow a well-thought procedure during the budget preparation. However, by figuring out expenses, establishing financing, and monitoring the plan throughout the year, you will have a working budget that fosters a healthy financial outlook.
Figure Out Expenses
The preparation of a good nonprofit budget begins with knowing the dynamics of your organizational expenditure. First, you need to review your previous financial record to determine how you make expenses. When doing this, ensure you separate the fixed expenses from variable expenses.
Once you figure out your nonprofit spending, you will be able to adjust certain expenses. Plus, understanding your organizational expenses help you know areas that demand more financial resources in order to make plans to meet up with the demands. 
Establishing Financing
Financing is critical in the execution of a nonprofit budget. In fact, money is the core of the budgeting process. Every budgetary allocation must factor in the source of funding in order to be complete.
When preparing your nonprofit budget, consider all the feasible funding sources that will aid the implementation of the budget for the smooth operation of your nonprofit. For example, there are many financing options including loans and grants from the government and philanthropic institutions, bank loans, business credit cards, fundraising, crowdfunding, nonprofit line of credit, and more. Even so, most of the available funding sources are not readily available for nonprofits, still, it’s important you leverage as many funding options as possible to finance your community projects.
However, unlike for-profit organizations, nonprofits struggle to raise money to cover payroll and bankroll operating costs and, in some cases, even execute their projects. But the good news is that the availability of a nonprofit line of credit has made possible the accessibility of cash for nonprofits to finance their operations. At the same time, they wait for funding to come.
A nonprofit line of credit is a cash backup plan that enables nonprofits to cater to emergencies or opportunities when cash flow is temporary down. In other words, nonprofits can use a line of credit to meet working capital needs, take advantage of strategic opportunities, and make payroll.
If your nonprofit requires a financial lifeline, Financing Solutions’ line of credit may be all you need to regain your organization’s financial health.
Be Sure to Monitor the Plan Throughout the Year
It’s essential you periodically monitor and re-evaluate your budget to compare your actual expenses and income in order to make necessary adjustments. Your budget should be flexible enough to cater to financial contingencies. Things are bound to change. And it will be proper if you keep tabs on events that might impact your nonprofit spending limit. This will help limit the chances of incurring a budget deficit.
Final Thought
The importance of nonprofit budgeting cannot be overstated. Any nonprofit that craves financial security should not hesitate to create a working budget that will guide its financial activity throughout a fiscal year. A budget helps nonprofit executives map out their organizational financial goals, keep track of their progress, and effectively reach their objectives.
In addition, it helps nonprofits get ready for unforeseen circumstances that might occur at any time. There’s no doubt that emergencies always arise, and a lack of preparation to face them head-on can stifle your nonprofit journey to achieving its goals. Adequate preparations entail having a cash backup plan in form of business loans for nonprofits.
