For decades, nonprofit organizations have always lead the world in making it a better place. They brought awareness to several issues, urged the people to speak, provided necessities, set up facilities, and sent support to countless people and civic groups. Whatever they earn, it’s always for their beneficiaries’ benefit. This is why they need an efficient tool to account for all of their expenses and income. If you’re managing this type of organization, you need the help of an annual nonprofit budget. Scroll down below and read further about this.
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What Is an Annual Nonprofit Budget?
An annual nonprofit budget is a financial document that covers a nonprofit company or organization’s 12-month expenditures. It’s part of financial planning that determines how they’ll fund their activities for a fiscal year and where they’ll source their income. It’s a vital tool in helping achieve a feasible and efficient nonprofit budgeting to achieve a smooth-sailing operation.
What a Nonprofit Organization Can Do
As of 2015, there are over 1.56 million registered nonprofit organizations in the US alone, according to Statista. Their combined assets amounted to $5.79 trillion, with a revenue of $2.54 trillion. It’s a known fact that nonprofits use their gains to support a cause and serve the needy and the disadvantaged through programs and activities that promote health, education, safety, human rights, and other socioeconomic issues. Statista’s figures show that many people and groups rally for the benefit of others who need their aid.
To put their purpose into motion, nonprofits spearhead activities that can help them garner support. They set up fundraising activities such as marathons, auctions, galas, and other occasions to dedicate the proceeds to their beneficiaries. They also do information drives to communicate with people in the society to extend their goals and reach out to those who need their assistance. This serves as a two-way approach as they can find people they can offer a helping hand and raise awareness about a certain issue. Nonprofits thrive on the need of the people and the cry of the society to get their work going. They seek to improve the populace’s quality of life.
How to Make an Annual Nonprofit Budget
Here are some ways on how you can make an annual nonprofit budget efficiently:
1. Consider the Annual Budget Limit
When you start making your annual nonprofit budget, your plan should consider the budget limit for that fiscal year. Do you have enough to cover all the activities for the year? Do you need to cut costs on your programs for a bit to make way for necessary expenditures? The budget limit roughly sets your expectations of what the year has in store for your organization. This also shapes and alters your goal plans for the year. If you want an overview of your monthly allocation based on the budget, you can divide the amount by the number of months in a year.
2. Include an Income Statement
Where did you get the money for the budget? How did the amount come up? Your organization’s income statement will provide the answers to these questions. There are several services and planned events that a nonprofit organization could do to earn or gather revenues to execute their project plans. This can come in providing services, setting fundraising events, welcoming sponsorships, and signing partnership agreements with other businesses. This should be on your budget to make way for transparency when making the financial document. This is also a way to determine inconsistencies in the financial plan and provide accountability for those responsible for handling the budget.
3. Separate Fixed Costs
Fixed costs are items on your budget plan are those that are consistently in use all throughout the operation. They’re permanent on your budget sheet’s item list. Separating your fixed costs allows you to prioritize your operations’ essentials and break down the remainder into the different variable costs of your operations. This includes office rent, staff salaries, insurances, utilities, and regular programs. This way, you can be sure to fund the important items used to run your nonprofit organization and use the rest of the budget for incoming project proposals, event plans, maintenance, and other activities. This is where you’ll be able to be flexible and make adjustments.
4. Reduce Line Items
Your annual budget can include several line items on a budget sheet that would make it difficult to review and assess. Make your nonprofit budget report easy to scan by reducing your line items. To accomplish this, you don’t need to provide a detailed account of a project or a nonprofit program’s budget plan in the overall nonprofit budget spreadsheet. Instead, you can provide attachments for each individual project where the evaluator can use it as a reference to interpret the amount. This way, your budget document won’t be lengthy and difficult to review.
Is a charity the same as a nonprofit?
They can be similar and are often used interchangeably, but they differ in definition and tax provisions. Generally speaking, a charity can be a nonprofit all the time, but a nonprofit can’t be a charity.
What are the different classifications of nonprofit organizations?
Some of the different types of nonprofit organizations are:
- Labor unions
- Chamber of commerce
- Child-care organizations
- Social and recreational groups
- Civic and social welfare organizations, volunteer fire companies, homeowners associations
What do you need to start a nonprofit organization?
Here are some requirements you need to start a nonprofit organization:
- Organization mission
- 501(c)3 application
- Articles of incorporation
- Board of directors
- Business name registration
A nonprofit organization works for the best interest of the people they hope to serve and the causes and goodwill that want to promote. This makes them a valuable part of every community and society as they address the most important socio-economic issues that need constant response and action. It’s no surprise that they should be able to manage their operation’s finances. Our premium and high-quality annual nonprofit budget templates are here to help. Download now!
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