How to create a financial plan for your nonprofit

It focuses on setting clear financial goals, creating strategies to meet them, and efficiently allocating resources toward programs and operations that align with the nonprofit organization’s revenue and mission. Effective nonprofit financial management needs active board involvement. Boards must work closely with staff to create strategic financial planning for nonprofits.

Key Takeaways

The reality of the United States economy is that there is almost always a threat of recession. Nonprofits are in danger during these threats because most of their income comes from individuals and corporate excess wealth. During recessions, people tighten their purse strings and limit these expenses.

Over-Reliance on a Single Funding Source

If your project or initiative doesn’t yet have any funding, of course, you can simply go on to the next step. You’re probably familiar with the importance of a budget for your nonprofit’s financial success. One mistake that many people make as they craft their budgets is being too “optimistic” in their estimates for expenses and revenue. Too many organizations overestimate their potential for fundraising while underestimating the cost of nonprofit expenses. Monitoring the right financial metrics is essential for understanding your nonprofit’s funding model, revenue, cash flow, expenses, and debt management. Identifying your nonprofit’s primary revenue stream lays the foundation for your financial plan, guiding resource allocation, anticipating funding cycles, and managing income variability.

• Integrate your fund accounting with your fundraising software to ensure data consistency and accuracy across your systems.
• Higher costs from the tariffs are also imperiling major sectors such as manufacturing, agriculture, tourism and shipping in California, whose largest trading partner is China.
• Having an accounting system that incorporates these elements will make it easier to generate more accurate and relevant financial statements both internally and externally.
• Developing a plan is easier, more enjoyable, and more effective with shared leadership.

Financial Planning

Finally, we’ll close the section with some tips from the field from folks who have been doing this work for a long time. Starting a nonprofit thrift store involves donation intake, volunteer schedules, pickup requests, and community impact — all while keeping the store organized and mission-focused. Building a consistent donation pipeline is one of the most important (and often underestimated) parts of starting a nonprofit thrift store. Securing an affordable storefront can be challenging for new nonprofit thrift stores, but local partnerships can ease the pressure. Teaming up with a neighborhood arts center, school, or church to share unused space can help lower startup costs. LeadingAge, a nationwide organization of nonprofit and government aging-services providers, recommends that prospective residents ask these 10 key questions when considering a continuing care retirement community.

Whether you’re managing general operations, launching a new program, or amplifying your marketing efforts, a thoughtful budget can be the difference between a successful year and a strained one. The second ‘what’ is the functional expense category that expenses are used for. A nonprofit exists to perform specific services and programs, as stated in their mission.

• Explore a range of nonprofit budget templates available for download to enhance your financial planning and ensure your organization’s sustainability.
• While this may not always be feasible, aiming for a ratio of 0.5 or higher is a good practice.
• It influences everything from pricing and policies to donation messaging and volunteer outreach.
• Nonprofit organizations seeking retirement savings plans can select from the many available 403(b) plan investment options from Ameriprise Financial.

Create board policies for key areas, such as conflicts of interest, separation of duties, whistleblower protection, and gift acceptance. These policies should define the principles, rules, and expectations for your organization’s governance and oversight. This statement provides insights into the organization’s liquidity and its ability to generate cash to fund operations and growth. By analyzing the organization’s own balance sheet, stakeholders can assess the organization’s liquidity, financial stability, and capacity to meet its obligations. Regularly review financial policies and procedures to ensure they remain effective and compliant with current regulations.

Nonprofit Financial Plan Example

Common crises include sudden funding shortages, leadership transitions, public relations issues, and cyber-attacks. When you think about it, though, that attitude might be a little naive. All of us have reasons for the things that we do, or we simply wouldn’t do them. Those reasons may be simple – to make us feel better, to avoid negative consequences, or just out of habit. When planning for financial sustainability, we can’t afford to expect potential donors to be any different.

• Well-developed budgets help your nonprofit be financially transparent with its team, board, supporters, and community at large.
• Link your financial data to your non-financial data, such as fund accounting software that has a performance management feature or an outcome measurement tool.
• Now that you know how to create a solid nonprofit financial plan, it’s time to explore an example for easy understanding.
• Standard ratios analyze the organization’s total assets and liabilities.

Explore diverse funding sources, incentives, and expert tips to transform your clean energy dreams into reality. When you plan expenses first, you know how much money you need to raise. Non-profits that don’t plan well often struggle when they make less than $50,000 a year. Include rules like board approval and repayment plans to avoid misuse.

Nonprofit Budget 2025: Steps, Planning, Examples & Template

Goodwill Industries operates under a complex structure, with over 3,300 locations worldwide and a diverse range of programs and services. The organization’s financial performance is influenced by https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ various factors, including donations, grants, and revenue generated from its retail operations. As a nonprofit entity, Goodwill Industries is required to disclose its financial information, including executive compensation, to the public.