Most new non-profit founders need to understand what it means to create a budget. So many people approach budgeting incorrectly. They believe that a budget is designed to limit your spending. Or, they may believe that they can only budget depending on what is presented in the bank (which is frequently insufficient) rather than on what they require. Such beliefs are utter lies.
This article will instruct you on healthy budgeting and provide a simple technique for creating your budget, as provided by Andrea Copeland
Why A Budget Is Important
Writing down your budget increases your chances of success. Without a budget, you’re just praying and hoping you’ll make enough money, but what for?
Besides, prospective donors and sponsors need to be confident that you have the financial ability to manage their gifts. You must be aware of your actual program expenditures to reply to questions about where the money will go with certainty. Knowing how you want to spend your money and knowing how much you have to spend establishes your trustworthiness.
Feasibility Study: A Key to Success for Nonprofits
Conducting a feasibility study can be highly beneficial for nonprofit organizations as it helps them determine whether their proposed mission-driven ideas are viable or not. A feasibility study provides a comprehensive assessment of the resources required, the potential for success, and the challenges that may arise during the execution of the project.
By conducting a feasibility study, nonprofits can identify project costs, projected rewards, and highlight the overall benefit to the community, which helps them to make informed decisions and create strategies for growth and sustainability. The study can also help in identifying potential sources of funding, community support, and other resources that can be leveraged for the success of the project.
It would help if you had some structure to characterize your activities to sort expenditures and keep track of them. The most straightforward method is to arrange your operations into programs. You can categorize programs based on demographics (e.g., a senior nursing home program and a separate kids’ daycare program).
You might also organize your programs by activity. Your programs should be well-defined and named so that they can be distinguished from one another. It is advisable to start with 1-2 programs for effective execution and to reduce the chances of getting distracted or burned out.
Identify And Quantify Goals
Consider what you want to achieve. This is the stage where you begin laying down your hopes for the organization, and then you begin quantifying those hopes. Ask yourself
- The approximate number of people you could serve annually
- How many services are you offering
- The activities you will carry out
Consider the necessary infrastructure and communication, and marketing goals at this stage.
Classify Budget Categories
- Typical revenue sources; contributed income (donated or granted income) and earned income (income from providing goods or services in exchange for cash).
- Standard cost categories for expenses (insurance etc.)
- Operational costs are the expenses incurred by a nonprofit organization to keep its day-to-day operations running such as rent,utilities, salaries,office supplies etc.
- Program Costs are the expenses associated with delivering the organization’s specific programs and services to its beneficiaries, materials, staff time, equipment etc. Operational costs are indirect and are related to specific programs or services.
Work with an accountant to come up with categories that work for your non-profit.
Have an anticipated cost for each session of your activity or program, and make sure to include all related expenditures; do not spare any expense. This means you may build an expected cost for a month or even a year, depending on the schedule.
If you have more than one program, it is best to create separate budgets for each one that will be rolled into your overall organization budget.
Make An Estimate of The Revenues
Assuming that the projected revenue sources are grants, individual contributions, and earned income options. Consider this; grants frequently have severe requirements and don’t cover overhead costs. Find a group of contributors ready to cover your expenditures by providing you with funds directly.
For the sake of furthering the mission and achieving charitable goals, consider ways in which you could earn income while in operation. Nonprofits are often thought as completely reliant on donations but in reality, they can and do generate revenue. The idea that nonprofits cannot generate income is a myth. Therefore, determine a service or product you can sell or charge using a fee-for-service strategy. There are no constraints on how tousethis money after you acquire it. Estimate the total amount you wish to bring for each revenue source and add it to your budget. Ensure that your annual revenues are sufficient to offset all of your costs
Track your progress toward achieving your budget targets at least quarterly, and review your initial plan to see whether you need to revise your approach halfway through the year. For optimum results, get expert guidance from Andrea Copeland.