We’re going deep on budgets in this post because we’ve still been getting a lot of questions about budgets after our last post on them.

And it’s no surprise. For many grant writers, this is the most challenging piece of a grant to put together.

Typically, the organizational budget isn’t something that a nonprofit’s grant writer has to assemble on their own, but if you work for a small- to medium-sized nonprofit, then it’s likely that one of your many hats will involve working on the organizational budget.

And if you’re a self-proclaimed “word-person” like me, then the thought of having anything to do with nonprofit organizational budgets might make you turn green with worry.

Here’s what we’re covering today:

• The difference between program budgets and organizational budgets
• Actual budgets vs. projected budgets
• Why grantmakers ask to see budgets for several years prior
• How to organize the revenue section of the budget
• How to organize the expenses section of the budget
• Net income
• Hiring an accountant for your organizational budget needs

The difference between program budgets and organizational budgets

If you’ve written a grant before, then you’re probably familiar with program budgets. Program budgets are more limited in their scope than organizational budgets, since they only deal with the financials of one specific program.

But, grantmakers often also ask for your organizational budget as a part of a grant proposal. Organizational budgets are both plans and records of all the money that comes in and all the money that goes out of your organization, broken down by years and into more specific categories.

Grantmakers wants to see your organizational budget because it helps them to gauge the financial health and stability of your organization.

Actual budgets vs. Projected budgets

For a lot of our Grant Writing Made Easy students, the difference between actual budgets and projected budgets is a challenging concept to grasp.

In your organizational budget, you’ll probably several years worth of budgets—maybe the previous fiscal year, the current fiscal year, and the next fiscal year. For the  past years, your entries will be the records of how much actual money you spent and received. But for the current and next fiscal year, you can only estimate or project your expenses and income.

Grantmakers want to see the estimated total revenue for your nonprofit because they need to see how much their grant will matter to your organization. Typically, they want to see that you’re not relying too heavily on their funding. For example, if in your organizational budget you show total actual revenue for the fiscal year-to-date is $30,000, and you are asking for a grant of $20,000, then the grantmaker might be hesitant to give you that funding. Why? Because you would be relying on one funder for 40% of your total yearly funding, and that seems like a risky investment to them.

But that’s where the estimated total revenue column on your organization budget spreadsheet comes in to play. You might only have received $30,000 in revenue so far in a fiscal year, but you expect to receive a total of $150,000. Once the grantmaker sees that number, they’ll feel better about granting you the funding you ask for because it is only about 13% of your estimated yearly revenue.

Why grantmakers ask to see budgets for completed years

Sometimes, grantmakers will want to see your organizational budgets for several years prior to the year that you’re asking for funding for. This allows them to understand the financial health and history of your organization.

If your nonprofit is new and you don’t have several years of budgets, then you’ll have to tell them that. But, if you do have several years of budgets, then you’ll need to make sure it’s all in order. This means submitting it all on one spreadsheet with clear formatting and labeling. (If this seems like a daunting task, then you might be interested to learn that our students in Grant Writing Made Easy have access to organizational and program budget templates.) The grantmaker should be able to quickly and easily find the relevant numbers and compare them across years. Your goal is always to make it as easy as possible for the grantmaker for find the information they need.

The revenue section

The two main sections of any budget are revenue and expenses. Let’s talk revenue first.

Your nonprofit likely relies on several types of revenue. So, you’ll want to break this category up by revenue type. For example, you might list earned income, membership dues, grants, and individual donations and each of their values as subcategories under revenue. I recommend being even more specific and breaking these categories down further. Include separate line items for corporation grants, foundation grants, state grants, and other.

Then, you’ll be able to total up the revenue by year. Excel and Google Sheets can total ranges of rows and columns for you. This allows the grantmaker to compare the total income across years. What they’re looking for is consistency across time. 

The expenses section

Your expenses section of the organizational budget, like the revenue section, should be specific and organized. You could break down expenses into these categories:

• Payroll expenses
• Taxes – payroll
• Travel expenses
• Other business expenses (insurance, registrations, etc.)
• Contract services (grant writers, board trainings, etc. These should be broken down by type into separate line items.)
• Operating expenses (supplies, fundraising, and other things your nonprofit needs to run day-to-day)
• Marketing, advertising, video, photography, etc.
• Other (interest/depreciation on the money in your accounts, for example)

Below the revenue and expenses section on your organizational budget, there is one more line that you need to include: your net income. Net income = total income – total expenses.

There’s clearly a lot that goes into developing nonprofit organizational budgets. They’re hard to understand at first, and even once you have a basic idea of what they’re like, you might still need an accountant to help you do it correctly.

If you have a new nonprofit, I recommend finding an accountant as soon as possible. Typically, the cost for getting set up with an accountant is very small. They may have an affordable consultation fee, but then they generally only charge you on a yearly basis. I also recommend looking for a nonprofit accountant to work with. There are some major differences between for-profit and nonprofit accounting. You’ll want to work with someone who understands the specifics of the nonprofit industry and what records you’ll need for grant reporting purposes.

Ready to tackle your organizational budget?

I hope you found this crash course on organizational budgets helpful. I will say, though, that there’s a lot more to the topic than we can cover in one post. If you’re interested in learning everything there is to know about organizational and program budgets, including getting access to pre-made budget templates, please consider joining Grant Writing Made Easy today.