Budgeting is a critical factor in every business, as this allows organizations to plan for the future and help meet their current fiscal goals. Although all organizations benefit from proper budgets, those with limited or fixed funding typically rely most heavily on budgets. Non-profit organizations face particular challenges, many of which can be remedied by proper budgeting.
Determining the Revenue
Unlike for-profit businesses that sell a product or a service to make money, many non-profit businesses rely on in-come from fundraising and grants. There are other sources of income such as donations, programs, interest income from endowments, or various forms of sponsorships. However, many of these things could change drastically from year to year. This means that revenue is limited and often puts a constraint on spending. To best identify your organization's revenue, review your financial statements from previous years and work to project your anticipated revenue for the upcoming year.
Nonprofits have many fixed expenses such as salaries, benefits, building costs, and standard supplies. However, each year nonprofit organizations also set new objectives and plans, which typically require sources of funding. One of the best ways to ensure that programs are implemented in a nonprofit business is to properly allocate funds to the various projects in a budget. Especially with larger projects, significant research may be necessary to determine a projected cost. Budgets help to identify what programs are possible and what actions can realistically be taken in a given year.
Facilitating a Systematic Plan
Budgets are also a great way to instill confidence. The community, organizations, and members who are invested in the nonprofit business want to know where the money is being used and ensure that there is a plan in place. Identifying projects, setting a budget, and adhering to the budget will help to achieve the nonprofit’s objectives while maintaining a good relationship with the board of directors, the organization’s donors and the community. This becomes important when looking for more funding sources in the future, too.
If you have questions about budgeting or ways to help your non-profit