If you had wanted your focus to be money, you would have gone into banking or something similar. Simply put, such a plan is a tool used to help the organization or initiative – and more importantly, its goals – thrive. In this section, we’ll look at the basics of planning for the financial sustainability of your organization.

Building Resilience in Uncertain Times

Although it might seem otherwise, a plan for financial sustainability is not just about getting money. You may raise money through donations, grants, user fees, or all of the above, to name a few examples. Sometimes, it seems like community work has a high price tag, and no one wants to foot the bill. There is so much change we want to see happen, but our finances are in such a sorry state that we’re just trying to maintain what we’ve done so far. Staff is underpaid, overworked, and burning out; necessary programs are dropped or scaled back because there’s no money; and closing the organization’s doors is a constant fear in the back of everyone’s mind. This goes on for years for many nonprofit groups; for others, the doors really do slam shut.

Budget Management Software Options

Many individuals, particularly those who don’t work in the nonprofit sector, believe that it’s not right for organizations to spend much of their funding on overhead expenses. However, in order to continuously create a larger impact on the mission, nonprofits must support themselves and grow, which requires an investment in overhead expenses. Boards of directors have a fiduciary duty to ensure that the assets of a charitable nonprofit are used in support of the charitable mission, and in accordance with donors’ intent.

Long-term sustainability

• This feature gives nonprofit leaders a clear picture of the organization’s economic health, enabling swift decision-making.
• Direct Relief is a great example of how contingency funds can help tackle unforeseen emergencies.
• This question comes from a common myth about nonprofit budgeting—that because your organization can’t turn a profit by definition, your total predicted revenue for the year always has to equal your total expenses.
• Dynamic dashboards display critical key performance indicators (KPIs) such as cash flow, expense tracking, and program efficiency.
• Those reasons may be simple – to make us feel better, to avoid negative consequences, or just out of habit.
• Identifying your nonprofit’s primary revenue stream lays the foundation for your financial plan, guiding resource allocation, anticipating funding cycles, and managing income variability.
• See how even small groups can use Excel templates to make forecasting easier and ensure every dollar counts towards their mission.

They keep programs running well and manage money that can be used freely. For example, a shelter used extra money for software upgrades, making it easier to report to donors. If your fund accounting software does not allow for budget scenarios, export your current budget to a spreadsheet and run scenarios on different tabs. It’s not as integrated and easy to manage, but it can still provide some planning benefits.

• It’s not just about looking at past numbers—it’s about understanding what those numbers mean for the future.
• The worst thing you can do for your nonprofit’s financial health is to depend on one event or campaign.
• This provides a method of measuring if a nonprofit has the resources available to meet their mission-based goals.
• We’ll share why it’s so important to have a plan, policies you should include, and some best practices to guide you.

Regularly check your financial health with The Key Benefits of Accounting Services for Nonprofit Organizations balance sheets and income statements. Effective nonprofit budget management starts with how you categorize and prioritize expenses. The functional method allocates expenses to programs, fundraising, or administrative tasks. Start with last year’s data as a baseline, then adjust for new programs, salary increases, or grant deadlines.

• By forecasting expenses and revenues, nonprofit organizations can better prepare for unforeseen financial hurdles and ensure they remain aligned with legal and operational standards.
• This lack of nonprofit financial planning can lead to reduced impact, lost opportunities, and even compromise a critical component of the organization’s survival.
• When your predicted income exceeds your projected expenses, you’ll be more prepared to course correct if you incur unexpected costs or some revenue sources fall short of your goals.
• You also need to specify the circumstances and criteria for drawing from and replenishing your reserve, and the roles and responsibilities of those involved in the decision-making process.
• Securing an affordable storefront can be challenging for new nonprofit thrift stores, but local partnerships can ease the pressure.
• Whether you are just starting out or are looking to improve your existing budgeting process, nonprofit budget templates are the perfect tool for you and your organization.