Budgeting for Nonprofit Organizations and Why It’s Important to Start with Revenue and Support [SUBSCRIBERS-ONLY]

This piece is Part 2 of 4 in our Budget Building Essentials Series.

Assembling a budget for a nonprofit organization often feels like an endeavor that requires more artistic methods than scientific computations. This is especially true when it comes to budgeting for revenue and support, which is usually hard to predict with accuracy. To help balance the art (intuition) with the science (analysis) of budget building, consider using a “funding-first” approach.

The funding-first approach to budget building prioritizes budgeting for revenue and support before assembling the expense side of the budget. Front-end funding assessment and estimates will help nonprofit organizations to better align and scale programs, activities, and operations to available funding.  This will help organizations to actively manage the budget bottom-line, add to operating reserves, and avoid unintended budget deficits.

This process will also help nonprofits to focus on funding risks such as changes in constituent demand for services, donor satisfaction, and funder temperament, all of which will impact the willingness of patrons to continue to purchase services, donate, and award funding.

To facilitate this process, separate funding sources into three categories: