How do I prepare a yearly budget for a non-profit organisation?

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 How do I prepare a yearly budget for a non-profit organisation?

Creating a yearly budget for a non-profit organization involves several steps to ensure all financial aspects are accounted for and align with the organization's mission and goals. Here’s a step-by-step guide:

1. Gather Historical Data

  • Review past financial statements, budgets, and reports.
  • Identify trends in income and expenses.

2. Set Financial Goals

  • Determine the financial goals for the upcoming year (e.g., expanding programs, increasing fundraising efforts).
  • Align these goals with the organization’s mission and strategic plan.

3. Estimate Income

  • Donations and Grants: Predict the amount expected from individual donations, corporate donations, and grants.
  • Fundraising Events: Estimate revenue from planned fundraising events.
  • Membership Fees: If applicable, forecast income from membership fees.
  • Sales and Services: Include income from merchandise sales, program fees, or other services.
  • Investments: Include interest or dividends from investments, if any.

4. Estimate Expenses

  • Program Costs: Direct costs related to delivering programs and services.
  • Operational Costs: Rent, utilities, office supplies, and other overheads.
  • Salaries and Benefits: Wages, benefits, and payroll taxes for staff.
  • Fundraising Costs: Expenses associated with fundraising activities.
  • Marketing and Communications: Costs for promoting the organization and its programs.
  • Administrative Costs: Legal, accounting, and other professional fees.

5. Draft the Budget

  • Create a spreadsheet to list all estimated income and expenses.
  • Ensure the budget is realistic and balanced (income should cover expenses).

6. Review and Approve

  • Present the draft budget to the board of directors or finance committee.
  • Make adjustments based on their feedback.
  • Obtain formal approval from the board.

7. Implement and Monitor

  • Communicate the approved budget to relevant stakeholders.
  • Monitor actual income and expenses against the budget regularly (monthly or quarterly).
  • Adjust the budget as necessary based on actual performance and unforeseen changes.

8. Adjust and Forecast

  • At the mid-year point, review the budget to see if adjustments are necessary.
  • Forecast the remaining months and make any necessary changes to stay on track.

Tools and Resources

  • Accounting Software: Use accounting software like QuickBooks, Xero, or specialized non-profit accounting software to track finances.
  • Templates: Utilize budget templates available online for non-profits.
  • Professional Advice: Consider consulting with a non-profit financial advisor for expert guidance.

Example Budget Template

IncomeAmountExpensesAmount
Donations$50,000Program Costs$40,000
Grants$30,000Salaries & Benefits$50,000
Fundraising Events$20,000Operational Costs$10,000
Membership Fees$10,000Fundraising Expenses$5,000
Merchandise Sales$5,000Marketing$5,000
Total Income$115,000Total Expenses$110,000
Surplus/Deficit$5,000

Creating a detailed and realistic budget is crucial for the effective financial management of a non-profit organization. Regular monitoring and adjustments will help ensure the organization remains financially healthy and can achieve its goals.

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