Non-profit or Small Business Budgeting for the Fiscal Year in Five Easy Steps

When you just say this word, it is sure to clear the room.

Just mentioning the dreaded topic sends staff members, executive directors and CEOs running for the exits.

But before your colleagues or bosses plug their ears and curl up in the fetal position on the couch in the lobby, have your reasoning ready. The steps for doing it are pretty simple but for many it is as scary as a snake pit and even more hazardous.

The topic we’re speaking of? Budgeting, of course. office_budgeting

Now before you close out this blog page thinking this topic is too traumatic, please consider this from an experienced accountant: You can create a reasonable, practical and understandable budget for your non-profit organization or small business. There are several steps you have to take to get there, however.

So, here are Five Steps to Budgeting for your Non-profit Organization or Small Business:

  1. Admit you need to budget and create a “budget committee”: The first step to creating a real budget is admitting that you need it. Usually, the payroll manager, staff accountant, executive secretary or even the CEO/Executive Director make the first move and say it’s time to create a budget for the fiscal year. Once that first big step is taken, appoint a “budget committee”. This committee should include department heads, head accountant/financial officer and board chair. They need to have the statements from the last year (three preferably) and access to all relevant financials.
  2. Estimate costs or income required to meet your profit objective/goal.: Using the previous year’s expense or budget as a starting point, begin reviewing each line item and see if any item can be added or deleted. Of course, last year’s budget is only one factor in crafting this new budget. If there are new employees to be hired, new programs or activities or new equipment or inventory to be purchased, then estimate the costs using an itemized list of all the expenses involved in reaching those goals. Also, don’t be conservative in your cost estimates. Research actual costs (including freight or maintenance) and err on the side of it costing more if you don’t have an exact amount.
  3. Estimate the amount of revenue and the dates when it will be generated: What is your expected income this fiscal year? Do you expect a 5% rise in revenues? This can be very difficult to estimate as there are so many factors: sales, donations, competition and even the economy. This is where your department heads and fundraising team can give you objective (hopefully) revenue estimates using the customer or donor base as their guide. In this case, it’s better to be conservative on revenue estimates. Overestimating revenues could be disastrous. Also, set a timeline for cash flow based on donor events, sales and holiday events.
  4. Compare the estimated revenue to the estimated expenses along with the timeline. Once the raw figures have been entered onto the budget spreadsheet, compare the revenue and expense estimates. Do they match? What is the projected profit? For the non-profit budget: do the expenses and revenues zero out? Make sure all figures add up correctly. (A misplaced comma or decimal point can play havoc with your budget and cause some hurt feelings, too.) Please note: Non-profits need to stay within their program allocated costs. Make sure your budget items do not exceed the exact money allotted to certain programs based on specific allocations (grants, scholarships, donations) for each program.
  5. Develop the final budget: Now that everyone has signed off on the draft, develop the final working budget. Double-check all figures. Once that is done, you can then submit it to the board, CEO/Executive Director or other recognized authority for approval.

Now you see, budgeting isn’t that bad! Five steps and you’re there!

If you are intimidated by the process and need guidance, JFW Accounting Services LLC can help you from beginning to end. We will even help you monitor it during the year. Please give us a call (301) 684-3932 or send a message to if you need more information.