Start Your Year With A Budget
Jan 08, 2023
Your Nonprofit Needs a Budget
Even if your annual budget is only $10,000 per year, your nonprofit should absolutely start 2023 with a projected budget, sometimes called a “current year operating budget” on grant applications. It’s true that you’re going to have to look at last year’s numbers and estimate. It’s also true that by the end of the year things will probably have changed. That’s okay! Over time, your nonprofit will get better and better at estimating your yearly operating budget.
Reasons You Need A Budget
- Organizational Planning: Most people wouldn't start off on a road trip with no destination in mind. Even if there was some element of spontaneity, there would likely be a few key destinations along the way and some points to plug into a navigation system. Having a budget serves a similar purpose; it gets you thinking about where you are going and how you'll get there.
- Stakeholder Communication: Having a written, projected budget helps you communicate to board members, donors, and funders.
- Grant Readiness: At least 90% of grant applications that I see require the submission of a current year operating budget. Having an operating budget for the current year is one of the things that makes your organization “fundable”; without it, you won’t be eligible for larger grants.
What to Include in Your Budget
A basic operating budget for 2023 should include the following:
- A list of your anticipated expenses by category. This includes basic animal care (including food), rent/shelter, veterinary care, marketing, staff, transportation, and equipment. Your categories will be customized to your nonprofit. A list of your anticipated income. This includes general donations, fundraising income, and grants.
- A total projected income number.
- A total projected expenses number.
- Ideally, the income number should show as higher than the expense number.
Your budget should be approved by your Board of Directors in a meeting. Then, as you go through the year you will compare your actual income and expenses to your projected budget and adjust along the way.
Getting Started
If you have never done a budget and are not sure where to start, here are a few ideas:
- Gather any financial records you have, including reports from bookkeeping software, tax returns, or spreadsheets. Look at any income and expense data available and use it to estimate numbers for this year.
- Is there a Board Member (or can you recruit a Board Member) with financial experience who can assist your organization with budgeting?
- Who does your taxes? If you have someone, it could be that you actually have some of these things in place. You just might be out of the loop because that person completes it all for you. Schedule a call to find out what you have and what you need.
- You can hire a nonprofit coach, a consultant or other professional by the hour to assist you with these tasks.
- Take a course. There are many great courses out there both online and through community colleges and adult education programs. Although mainly focused on grant writing, My Train Your Own Grant Writer course has several in-depth lessons on finances to help you get organized.