Making Your Budget the Backbone of Your Nonprofit - Part 2

Budgeting Best Practices

With the goal of preparing a budacquire that deserve to function both as a high-level discussion tool and a in-depth map for the organization, there are several viewpoints to consider. As we check out finest practices in budgeting, we’ll be making use of a situation examine to show real-life numbers and scenarios: Assistance for Homeless Youth (HHY). 


HHY has a $675,000 budobtain that pays the salaries of eight permanent personnel in enhancement to regime supplies, rent, utilities, and also youth stipends. Leadership raises funds from government, structure, and corporate sources, in enhancement to hosting a small yearly fundincreasing occasion. Below is a budgain that the executive director of HHY, Jordan Johnson, submitted to for testimonial. 

HHY Budget FY 2018


Here are some advantageous tips that Jordan employed (and also you deserve to, too):

Set up your budobtain in its very own Excel spreadsheet. For a straightforward budobtain, you will certainly a lot of most likely use one tab. Make certain to include the adhering to on one page/tab:


Expenses (located under revenue). The factor I recommend this logic and also flow (revenue complied with by expenses) is that it’s useful for your budacquire layout to quickly align via various other financial presentations (e.g., year-to-date, past operating results ready by a software program accounting system, or your audits). Notice below that costs are detailed in the high-level categories of personnel, builders, occupancy, and assistance costs (which include all other program and also operating expenses). Personnel is very vital to segregate as it typically comprises all over from 60% to 90% of an organization’s budget. In HHY’s case, it represents 62%.

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Operating Surplus / Deficit line. Make sure to encompass a formula subtracting prices from revenue, which is a basic method to conserve board members from having actually to do the calculation in their heads (also if the calculation points to a breakalso budget). This appears obvious, however on more than one occasion I have actually not checked out the surplus/deficit calculation presented. Refer to line 95 in the graphic above wbelow Jordan consists of the operating surplus/deficit. This year’s projected financial results (e.g., revenue, prices, surplus/deficit) consisted of in a sepaprice column for comparikid functions. This must represent 12-month results, and also as debated in our last blog, where you think you will certainly the majority of likely end the year. This column is labeled Forecast FY 2017.Variance. The variance column represents the worth of the difference in between the budacquire and the forecast figures. For example, revenue from federal government resources is mirroring a variance of negative $5,000, meaning that HHY expects to obtain $5,000 less in the following year as compared to the current, 2017-year forecast. Likewise, for each of the price items detailed above, a positive variance is one in which the budgeted 2018 expenses exceed the 2017 foreactors price. Notes column. In the example below, you will watch notes and also assumptions for some of the categories of the budacquire to the right of the numbers. It is exceptionally essential to save great notes not only to save track of your reasoning, however also to be able to answer board concerns as they aclimb.

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Notice what is not included:

The start and ending years’ cash balance. If you execute list it, it must be only for recommendation functions. The budgain should just represent the financial activity of the following 12 months. Carryover. You just desire to encompass revenue that is intended to cover following fiscal year’s expenses. Nothing need to be carried over from the previous year to make this year’s budacquire balance, UNLESS it is a contribution or docountry that was limited in the previous fiscal year, and also its limitations are intended to be satisfied in this budgeted fiscal year. If that is the case, you will certainly desire to label it “Net assets released from restrictions” (see line 23 above). We will talk about this in our following blog, Budgeting for Restrictions.

How many kind of budacquire templates must I have? A in-depth one for staff, and even more basic one for board?

Instead of developing two or even more sepaprice budgets, the Group-and-Outline attribute in Excel helps you “roll up” the budobtain right into a high-level summary format for board discussions, or reveal even more information for staff and finance committee discussions, by arranging rows and/or columns into an outline. You’ll find this feature in the “Data” tab. Below is a brief video demonstrating exactly how you have the right to usage this feature.

Further Ideas

The complying with might be advantageous to encompass on different tabs and will depfinish on what is critical to track provided your organization model. We won’t be going into detail on all the topics that follow in this blog series, but consultants have the right to certainly help you strategically think through any of these different budgeting principles (click here to learn more). 

Revenue with donor constraints tab. For organizations that have many grants through donor limitations (especially multi-year grants), you will desire to list the grants, time constraints, quantities, probcapacity, and notes on a sepaprice tab (I will cover some budgeting tips for revenue with constraints in our next blog). Fundraising/advancement tab. For those institutions that have actually many kind of various funders, you must take into consideration tracking and surveillance your development tasks in a sepaprice tab, consisting of the probcapability of receipt. (Stay tuned for even more on the art of predicting added revenue in a future blog.) Core versus aspirational budgeting. Sometimes we desire to expand programming in the coming year, yet carry out not have funds to pay for the development. Or, we might get an out-of-the ordinary gift that we know won’t be repetitive in future years. One method to incorporate these deviations from our core budobtain is by segregating the one-time revenue rise and/or the brand-new programming expense(s) from the remainder of your budget. You might insert a sepaprice column (or create a brand-new tab) labeled “Enhanced 2017 Budget” to make it simple to check out the core budgain versus your aspirational thinking.Personnel tab. This category of expenses is exceptionally necessary, and it’s regularly instrumental for some leaders to more deliberately track each position, consisting of full-time, part-time, or contract personnel along with benefit presumptions. Program economics. Understanding the economics of individual programs deserve to aid you much better understand also how each contributes to your all at once company version. Contingency line item. Surprises take place, and also you need to be prepared to take care of them. One way is to insert a contingency line right into the price part of the budacquire. While this helps in planning for and also mitigating potential threat, please note that some funders might object to this line item. 

What around revenue that’s restricted?

Did Jordan capture her two-year $240,000 provide from the Sunshine Foundation in the finest way? Great catch! We’ll discuss how to budacquire for limitations in our next blog.