A nonprofit budget is an important financial document that allocates expenses and predicts revenue. Without a budget, nonprofits find themselves with more money going out than coming in. It’s crucial in helping your nonprofit plan for the future, stay fiscally responsible, and reach campaign goals.
Take this opportunity to build a financial strategy and refresh your existing budget.
This comprehensive guide will walk you through the value of a budget and explain how it translates to the actions outlined in your marketing plan. We’ll cover the following points:
- What is a good budget for a nonprofit organization?
- What should be included in a nonprofit budget?
- How much do nonprofits spend on marketing?
- 5 Nonprofit Budget Best Practices
- Our Final Tip: Work with a team of Google Ad Grant Experts.
Here at Getting Attention, our trusted experts will guide you through the process of incorporating Google Ad Grants into your marketing budget. We’re here to clarify your questions and serve your nonprofit’s mission by bringing new constituents to your organization.
Building a budget can bring value and structure to your nonprofit. Let’s get started with the elements of a good nonprofit budget.
What is a good budget for a nonprofit organization?
Financial planning is vital to the success and sustainability of an organization. The Better Business Bureau recommends that nonprofits spend under 35% of their funding on overhead expenses (facility costs, licensing fees, equipment costs, etc.) and spend at least 65% on programs.
To meet these guidelines, your team must devise a budget that outlines projected expenses and revenue. A budget for a nonprofit organization should be:
- Accurate: Information should be based on logic and strategy. Have your accounting team double-check each line item to ensure your records are accurate and reliable.
- Transparent: Nonprofits must disclose certain financial information to the public per request. Earn the trust of supporters and prospective donors by building a budget that reveals your financial history, goals, and programs.
Accuracy and transparency are crucial for your nonprofit’s image. After you calculate your financial statements, pull insights and share them with your staff, volunteers, and board. This will increase engagement within your organization and allow people to better understand your nonprofit’s financial health.
What should be included in a nonprofit budget?
From daily operational costs to monthly donations, there is a wide range of elements that should be included in your nonprofit’s budget. We’ll focus on the primary revenue and expense items.
Nonprofits rely on a combination of income sources from individuals, foundations, corporations, and grants. Diversify your revenue stream by accounting for the following types of income:
- Grants: Nonprofits can apply for grants from the government as well as corporations like Google. In the budget, specify which types of programming each grant will cover.
- General Donations: Monetary donations from major donors and a wider donor base are the lifeblood of nonprofits. In your budget, look at past years to estimate how much you can expect to raise from general donations.
- Monthly Giving: Recurring gifts are a reliable source of income for your nonprofit. Account for monthly, bi-montly, and yearly donations.
- In-Kind Donations: These include any volunteered services or supplies.
- Corporate Giving: Nonprofits depend on corporate gifts to increase their revenue and build relationships. Consider working with a matching gift professional to further boost your donations.
Projections are the best way to assess how your investment in each campaign or project relates to its relative importance in your plan. That’s a crucial ingredient in your decision making, so there’s no avoiding projecting what your expenses will be. Include the following costs in your budget:
- Administrative: This includes expenses for operations and management, including staff salaries, office space, utilities, insurance, and technology.
- Programming: These are the costs needed to carry out your mission-related activities. For example, if a nonprofit is dedicated to feeding the homeless, program expenses would include food and food preparation costs.
- Fundraising: Activities related to an appeal for financial support, which can include marketing efforts like newsletters, print ads, and blog posts.
How much do nonprofits spend on marketing?
According to a recent study, nonprofits spent an average of 4 cents on digital advertising for every $1 raised online last year and almost 70% of those advertising budgets were devoted to lead generation and new donor acquisition. Budgeting for these marketing costs is vital. Your marketing budget serves as a map to ensure you reach your goals and determines whether your plans are realistic.
In the for-profit world, it’s fairly standard to determine a marketing budget by allocating 10-20% of projected gross revenues to marketing and communications. For a general rule of thumb in the nonprofit sector, try to allocate between 5-15% of your budget to marketing.
What’s most important is that you establish a detailed marketing and communications budget prior to the start of each fiscal year. Track costs and results as you go so that you can analyze cost vs. benefit. The budget should be integrated into your annual marketing and communications plan, with a dollar cost allotted to each strategy (direct mail, email, paid advertising, media relations, etc.), each of which should be broken down further (consulting, evaluation, printing, postage, etc.).
5 Nonprofit Budget Best Practices
A strong nonprofit budget serves as a clear framework for your decision-making and a powerful tool for getting the marketing dollars you need to meet agreed-upon goals.
To make the most of your budget, direct and prioritize your focus. Knowing what you are working towards and making the best decisions on how to get there will lead to leadership buy-in and ongoing support.
Take control of your nonprofit’s finances and start building your budgeting skills with these best practices.
Determine a budgeting approach.
Misunderstanding which type of budget is best for your organization can sabotage far more than your financial plan. It can mean the downfall of your nonprofit. With the right budget approach, you can advocate for what you really need to move your mission forward.
No one-size-fits-all budget exists. Communicate financial information in a way that works for your organization. Consider the following strategies when building your nonprofit budget:
- Income-Based Approach: As the name suggests, an income-based approach prioritizes income. Determine how much income you can realistically count on and include only reliable revenue in your budget. Don’t include income projections to simply fill gaps. If your organization doesn’t meet these income targets, it will create a budget deficit.
- Incremental Approach: The incremental approach builds upon your budget from the previous fiscal year. While this is a quick and easy method to prepare a budget, it’s more difficult to find funding for new campaigns or projects since unspent funds may have been reallocated to another campaign.
- Zero-Based Approach: The current fiscal year’s budget is prepared from scratch, without consideration for income or expenses from the previous year. Although this method is accurate and efficient, it’s time-consuming. Your organization will have to test several assumptions about where money will come from and how it will be spent.
- Percentage Approach: Break down marketing, communications, and fundraising by percentages of the total budget. This approach is favored by those who believe that marketing and communications expenditures should directly reflect a nonprofit’s evolution and the size of its budget. If done correctly, you could see communications spending grow as your organization does.
- Flat Dollar Approach: Some experts in the field consider a flat dollar approach to be more relevant and safer than the percentage approach since your total budget has to cover costs like utilities, rent, taxes, health insurance. Give special campaigns, marketing, communications, and fundraising efforts a set dollar amount based on past expenditures. This method simplifies projections and gives you a clear baseline budget.
Each approach has benefits and limitations. That’s why most nonprofits implement a combination of these strategies. Whichever approach you take, you’ll find that a formal budget is a great aid in decision making. You’ll clearly see how much you have to spend to reach your goals and, by tracking results, will gain a sense of which strategies work best.
Now that you have solidified a budget approach, share your strategies and goals with leadership and staff.
Develop a budget with your entire team.
Team-based financial planning is the most effective way to ensure your budget aligns with your organization’s goals and mission. Involve staff and board members in the budgeting process to create a comprehensive strategy that relies on a variety of perspectives. This will enhance your team’s ability to communicate your organization’s financial story to other key stakeholders.
Consider these steps to running a budget meeting:
- Determine a timeline. From preliminary drafts to approvals, the entire budgeting process can take weeks to months. Set deadlines and milestones to track progress against measurable benchmarks.
- Agree on goals. Calculate how much revenue is needed to cover your campaign and marketing goals. How do you plan to raise these funds? Make a plan of attack with your team.
- Review past data. Examine financial statements from previous years for areas of growth and improvement. Then, problem solve! If you notice a slump in revenue, work with your team to revise past financial strategies.
- Draft the budget. Find a template with expense line items that work for your team’s organizational skills. Then, build out anticipated costs and expenses according to your research.
- Present findings to your board. Before the start of the fiscal year, hand your budget over to board members for review. They will assess the effectiveness of resources, evaluate administrative systems, and measure progress towards goals.
- Debrief. Budget planning takes a lot of time and energy. After you complete your budget, get with your team to discuss what went well and what needs to improve before the next fiscal year.
Once you develop your budget and align it with your marketing goals, you will have a clear plan for moving forward, shaped by concrete data and strategies. A budget that your entire team agreed on can increase the probability of getting more marketing dollars. As a result, it will be comforting for your leadership to have these plans readily available.
Include non-monetary contributions.
If your organization is fortunate enough to attract in-kind donations, record these contributions to express your gratitude and abide by legal standards. When documented in your budget’s revenue, non-monetary contributions show what it truly takes to drive your mission.
In-kind donations are donated goods, services, and time. Consider the following examples to determine which donations you need to budget for:
- Tangible goods: Equipment, office furniture, clothing, food, supplies, etc.
- Intangible goods: Advertisements, patents, copyrights, etc.
- Services: Accounting, printing, catering, consulting, photography, security, etc.
In-kind donations should be recorded at fair market value. The Financial Accounting Standards Board (FASB) defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” To determine the value of your in-kind donation:
- Calculate what your organization would have paid for donated goods on the open market.
- Track the hours of professional services donated to your organization.
- Contact your donors and ask them to price their own in-kind services.
Volunteer hours do not need to be reported in a budget. However, your organization can still acknowledge the impact of volunteers in your audit or in a short narrative included with your budget.
Conduct regular checks of your budget.
Set regular team meetings to monitor your budget’s progress. Whether you hold these meetings monthly, quarterly, or annually, ensure that your entire team is involved. This will improve communications and management between departments.
Consider the following topics in your meeting:
- Assess the “why” behind budgetary issues.
- Determine which campaigns need more financial attention.
- Review past finances to determine if your budget is on track or not.
- Compare your budgeted revenue and expenses to actual amounts.
- Inspect balance sheets for discrepancies.
- Account for any unusual circumstances that may arise (such as the pandemic).
Monitoring your budget throughout the year is the key to financial success, along with setting aside enough funds for marketing.
Apply for a Google Ad Grant.
The average small business using Google Ads spends between $5,000 and $12,000 per month on Google paid search campaigns. That’s $60,000 to $150,000 of marketing expenses spent solely on ad-clicks per year. Thankfully, Google Ads created a grant to help nonprofits budget for marketing.
Google Ad Grants provide eligible nonprofits with a $10,000 monthly stipend to spend on paid search ads. While regular Google Ad accounts have to pay per ad-click, Google Grant participants can display their advertisements for free. These ads enable your nonprofit to appear on Google when it matters— when someone searches for topics related to your mission.
The ideal Google Ad Grant candidate has a website that effectively serves their audience and promotes their mission. With the Google Ad Grant program for nonprofits, organizations can:
- Increase online conversions.
- Reach out to new donors.
- Recruit volunteers.
- Market multiple ad campaigns.
- Analyze and track performance.
As long as your organization complies with the eligibility requirements, the allotment renews monthly without a time constraint. That means, your nonprofit will be relieved of Google Ad expenses indefinitely. We recommend setting a daily budget of $329 to run as many campaigns as possible and take full advantage of your grant.
For more information on Google Ad Grants, read this article or contact our team at Getting Attention.
Our Final Tip: Work with a team of Google Ad Grant Experts.
It’s no secret that budgeting can fuel your nonprofit’s impact. When you manage a Google Ad Grant with a Google Ad Grant professional like Getting Attention, we’ll make sure you have a strong digital marketing strategy that works for your budget. Our team of experts offer free consultations and resources to help your organization plan a successful strategy.
Getting Attention is a fully certified agency ready to guide your organization through the Google Ad Grant process. Our services include Google Grant application, Google Grant hygiene, Google Grant reactivation, keyword research, and Google Grant Management. Maintaining your data and keeping it clean can be a pain point for many nonprofits. We’re here to champion your nonprofit digital campaigns.
Since your nonprofit’s budget is a critical component of your overall success, make sure you do your research. If you want to continue learning more about nonprofit budgets and how to optimize your strategy, check out these additional resources:
- How to Create Your New Nonprofit’s First Budget Your nonprofit’s first budget is a critical tool for both planning and managing cash flow. Learn how to set your budget up right with this guide.
- The Small Nonprofits Guide to Budgeting Too many small nonprofits operate without a budget. Learn how to fund your mission with this quick guide.
- Understanding Your Finances: A Quick Guide for Nonprofits Understanding your nonprofit’s finances will help you make smarter decisions both now and in the future. Learn how to get started with this article.
- Where can I find examples of nonprofit budgets? Review these examples of nonprofit budgets to find the one that’s right for you.