6 Effective Budgeting Tips for Nonprofit Boards

Your board members, especially those who aren’t particularly interested in finances, might not find budgeting one of the most engaging parts of their roles. However, it’s crucial for board members to fully understand their role in the budgeting process and do everything in their power to help it run smoothly. 

Why? It’s simple: your budget is one of your nonprofit’s most important guiding documents. It predicts your expected revenue and expenses for the upcoming year, providing a roadmap to help your organization plan for future growth and maintain fiscal responsibility.

Reviewing and approving your budget is among your board members’ most influential responsibilities. In this quick guide, we’ll cover six budgeting tips to help nonprofit boards approach the budgeting process more effectively: 

1. Understand the board’s role in budgeting. 
2. Set realistic but ambitious goals. 
3. Develop diverse fundraising sources.
4. Align the budget with program goals. 
5. Start reviewing the budget well in advance. 
6. Assess and amend your budget as needed throughout the year. 

Proper budgeting supports financial sustainability, allowing your organization to continue working toward its mission for years to come. Read on to learn more about how board members can contribute most effectively to the process. 

1. Understand the board’s role in budgeting. 

When it comes to budgeting, the board’s most important role is reviewing and approving the budget each year. But certain board members, such as your treasurer, take a more hands-on role in crafting the budget. Let’s take a closer look at how your board fits into the process: 

• Your treasurer supports the chief executive or chief financial officer in preparing your annual budget. Your board’s treasurer works closely with these individuals to prepare the document for presentation to the board. 
• Your entire board reviews the budget, then approves or disapproves it. Your executive committee alone does not have the power to approve or amend the budget. That power lies with the full board. After the budget has been prepared, board members hold a vote to either approve the budget or send it back for revision. 
• Your board can vote to edit or amend the budget throughout the year. Treat your budget as a living document. Your board members can assess your budget at regular intervals and determine whether to make any adjustments.

Make sure your new board member orientation provides a thorough explanation of how board members will be involved in the budgeting process so there are no surprises. Understanding budgeting expectations allows board members to jump right into the process when it comes time to approve the budget each year. 

2. Set realistic but ambitious goals. 

As your financial team creates the budget and your board reviews it, you’ll want to ensure that your organization is setting goals that are within your reach but are still ambitious enough to spark growth. Your goals should be: 

• Realistic: Don’t count your chickens before they hatch by assuming you’ll have all of the funding you need to reach your most far-fetched goals. For instance, don’t automatically assume you’ll be able to win a certain grant with a highly competitive application process. Review the previous year’s budget to determine how well your organization met its goals in the past and how you can grow off this foundation. 
• Ambitious: At the same time, it’s important to adopt an assertive growth mindset because that’s what will help your organization thrive and ultimately be able to help more people. Set fundraising targets that are marginally higher than the previous year and plan to expand your income sources if necessary to help support your goals. 

Also, consider the benchmarks you’ll need to meet throughout the year to be on track to reach your goals. Mark these deadlines on a calendar to ensure everyone’s on the same page and working to reach each target. 

3. Develop diverse fundraising sources. 

The budgeting process is a great time to assess your revenue sources and decide whether your organization should expand into additional fundraising avenues. Having diverse revenue streams allows your organization to be flexible. If one or two channels dries up for any reason, you still have other avenues available to stay on target with your fundraising efforts. 

Your budget might include these types of fundraising efforts:

• Matching gifts
• Individuals donations of all levels, including small, mid-level, and major donors.
• Galas and auctions
• Online fundraising
• Year-end giving campaigns
• Major campaigns, such as a capital campaign
• Grants
• Monthly giving

Specify how much you expect to earn from each of these sources along with the time of year that each one will be most active. For instance, you might plan to see the greatest number of individual donations come in at the end of December, as donors send in their final tax-deductible contributions for the year. 

4. Align the budget with program goals. 

Your organization has plenty of operational costs that every budget must account for. These include overhead costs such as employee salaries, rent, and utilities.

But you may also plan larger initiatives for the year. Whether that includes constructing a new building, launching a new program, or purchasing new equipment, each of these programmatic goals is associated with a larger cost. As your board reviews your budget, ensure that your expenses are aligned with your nonprofit’s stated goals for the upcoming year. 

For instance, perhaps your organization is planning to: 

• Choose a new fundraising platform to help fundraise more efficiently.
• Renovate an office building or community center to better serve the community.  
• Purchase necessary supplies to launch a youth after-school program. 
• Gather charity auction items to increase interest in your annual gala fundraiser. 
• Invest in a new CRM system to better keep track of donor interactions. 

Ensure that each of your major priorities is accounted for with a predicted expense in your budget. You might even create a wish list for certain investments and prioritize them by placing your “must-have” expenses at the top and your “nice-to-have” items further down. 

5. Start reviewing the budget well in advance. 

Before voting on your organization’s budget, your board has to fully understand what the budget entails and its implications for the upcoming year. Give board members some time to deliberate by following these steps: 

1. Present the budget to your board for consideration. Be fully transparent in your presentation and address all questions and concerns. 
2. Use board feedback to adjust the proposed budget as needed. It’s ok to revise the budget a few times, adding as much detail as possible to ensure clarity. Boardable’s board voting guide recommends creating polls and sending them in advance to test the waters before hosting the formal vote. 
3. Hold a vote. Ensure all board members understand proper voting procedures. Use board management software to help streamline the voting process. These systems help you keep track of all votes and record whether proposed items were approved. 

After your nonprofit’s budget is approved, leave some time to allow your board to debrief. Gather feedback from board members about what they thought went well throughout the process and what could be improved for next year, whether it was the presentation, discussion process, or voting procedures. 

6. Assess and amend your budget as needed throughout the year. 

Host regular check-ins to assess your budgeting progress. Compare your initial plans with what’s actually happening to determine if any strategy adjustments are needed. 

Jitasa’s nonprofit budgeting guide recommends assessing the budget at these intervals: 

• Annually: This review takes place each year when it comes time to budget for the upcoming fiscal year. Assess your results from the previous year, determining whether you stayed on track and where you may have veered off course. 
• Quarterly: Once a quarter, review your budgeted revenue and expenses, then determine whether your expectations align with reality. Note any disparities for future reference. 
• Monthly: Ensure your team is keeping track of expenses and revenue associated with day-to-day projects. 

Frequently evaluating your budget allows you to quickly respond to challenges or roadblocks. This is where your wide range of fundraising streams can come in handy. You can focus your efforts on building up other revenue sources if certain avenues begin to taper off or stall unexpectedly. 

Your nonprofit’s board plays a significant role in developing and passing your budget each year, allowing your organization to keep its fundraising and programmatic wheels churning. Ensure board members have a thorough understanding of their role in the budgeting process and the necessary discussion time to hash out any concerns or questions. This will keep the budgeting process running smoothly year after year. 

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