5 Tips on How to Create an Annual Budget

  Photo provided by Pexels

Photo provided by Pexels

Creating a budget for your nonprofit can seem like a daunting task.  Having a clear understanding of what to look for will make the process easier.  Remember, no one has a crystal ball- only historical performance, common sense and forecasting.

When creating an annual budget, consider the following...


1.       Anticipated Revenue. You want to look to see if there are certain amounts of revenue growth and decline each year (due to an increase or reduction in donor growth, major gifts, capital campaigns, etc.).  Sometimes there are events in the outside world, like tragedies or political unrest, which may increase or reduce your revenue and/or expenses.  Your organization may be able to ride the wave of what is trending at the moment, which can help you generate more funds. 

a.       What repeat funding foundations do you have?

b.       Do they increase their funding each year, or does it remain the same?

  Photo provided by Pexels

Photo provided by Pexels


 Photo by  rawpixel  on  Unsplash

Photo by rawpixel on Unsplash

2. Past Expenses Drive Future Forecast.  Ideally, you would want to look at the past 3 years to determine:

a. What costs are constant?

b. What costs fluctuate? 

c.  Keep in mind: Sometimes this method does not work if there is a significant change in the organization like growth/expansion, new programs that are being added or eliminated, a gift of a large sum of money for a building, etc. 


3. Trends.

a. Are specific expenses going up or down, and for what reason?

b. Will this trend continue, or was it just for a specific period of time?

  Photo provided by Pexels

Photo provided by Pexels


 Photo by  Ross Findon  on  Unsplash

Photo by Ross Findon on Unsplash

4. Change. Are there predictable new expenses or cuts that will be taking place in the new fiscal year? 

Examples can include: Expanding/decreasing staffing, purchasing equipment and/or capital improvements, increasing/reducing rental costs, purchasing new software, re-vamping of marketing materials/website, wage increases or reductions, etc


5. Communicate and Collaborate.  Remember to meet with your leadership team (ie. Executive Director, Program Director, other key stakeholders) to see what everyone has planned for the new year- both in terms of growth, expenses, programs, etc.

  Photo provided by Pexels

Photo provided by Pexels


Keep in mind, budgets are living and breathing things that are guidelines for your organization to follow.  They are not concrete and may have to be adjusted as you go.  Unforeseeable situations arise that can impact your budget, both positively and negatively!

Need help with your budget?  BV is here to guide you through the process.  Contact us today!