How to Construct a Nonprofit Budget Based on Your History
As your first year passes and your nonprofit organization develops programs, it also develops a financial track record. After you have a financial history, anticipating the future can be easier. You need to analyze every assumption you make, but at least you have a baseline of revenues and expenses from the first year.
Here are some questions to consider when drafting future years’ budgets:
What are your earned income trends? Are they likely to continue or change? Do you face any new competition or opportunities?
How many of your current year’s grants or contracts may be renewed and at what levels?
How healthy is the current financial environment? Will it affect your previous donors’ abilities to give?
How likely are you to increase individual giving or special-events revenues in the coming year?
What’s the duration of all employees’ employment periods? Anticipate the timing of possible annual raises and the need for additional staffing.
Do you offer benefits that kick in after an employee has worked with you for three months or six months or five years? If so, don’t forget to include these increased costs.
When does your lease obligate you to pay for rent increases or taxes?
Have rate increases been scheduled for utilities, postage, or other services?
Does your organization need new technology — perhaps additional or upgraded hardware, website development, or software?