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Funds raised may come from ticket sales, membership fees, proceeds of auctions, galas, sales of goods or services, or other fundraising activities. Fundraising is a primary activity for nonprofit boards. The budget lists all of those sources and provides an indication of the amounts the board can expect to come in from each source. It typically requires getting income from multiple sources for nonprofits to thrive. The two primary components of a budget are income and revenue, and many subcategories fall under the umbrella of each. Important Considerations in Evaluating a Nonprofit Budget Most importantly, nonprofit budgets should be constructed around the organization’s programs and activities, which will help them stay focused on their goals. Monitoring the budget also provides an opportunity for board directors to move money around to allocate it efficiently as their cash flow changes. Budgeting allows boards to put limits on certain expenses as necessary and work to increase income sources early when it looks like there may be a shortfall. Budgets form the basis for boards to make better decisions and to avoid making mistakes. The budget paints a clear picture of how much cash is coming in and how much is going out. Maintaining a proper budget gives boards proper control. Having a good budget aids board directors as well. Good budgets assure donors that the nonprofit is actively overseeing the budget process. Donors want to know where their money will be going. Good budgeting demonstrates accountability and transparency, which are important issues that donors and grant-makers look for before offering funds. Technology is an important tool for responsible budgeting for nonprofits. With proper budget planning, nonprofits can easily reap the benefits of good budgeting. Revenue may not stream in as expected and large, unexpected expenses can creep up. Many unexpected things can happen that greatly impact the budget. Nonprofit budgets should be considered flexible documents. It’s crucial that the budget be centered around the primary goals and objectives of the organization. There are two parts to the budget - expenses and revenue. A nonprofit budget is a financial document that provides an overview of how the organization plans to spend its money. In both cases, a sound budget is important for financial sustainability and provides a guide for financial health and sustainability.Ī budget isn’t a prediction, a forecast, a target or a wish list. Managing a budget for a nonprofit organization is much like planning a household budget, except that there are generally more sources of income and more categories of expenses.