Budgeting for Non-Profit Organization

Budget for Non-Profit organizations will be straightforward as we do not plan to make any profit. It is the expense budget of the entity.

Non-profit organization is continually struggling to maintain and fight for operational improvement especially during the economic crisis. In order to maintain sustainability, proper budgeting must be prepared.

Good budgeting will tell top management the required fund to operate next year, next five years, and more. They know their target requires for the survival and risk of rely on a few sources. If the funds are limited, management can revise the plan by eliminating unnecessary expenses from the budget and focus on the primary goals of entity.

Why budget is important for NGO?

The importance of budgets for NGO
Transparency to donor	Every Non-Profit organization is relying on the fund from donors, keep a proper accounting policy, report and budget will ensure transparency to the donors. We need to show funds are used for the right objective.
Future plan	With a proper budget, management can see the future of the entity. He will know the available resource and the period in which it can operate.
Fraud and thief	The detailed budget will show the utilization of the entity’s resources in each activity. Any unusual and overspend will be noted during the review. During implementation, any variance between actual and budget will be strictly reviewed too. There will be less chance of fraud and thief.
Effective decision	The management will be able to review all activities in the budget, and he will approve only the activities that are important and comply with the entity’s objective. The resource will use very useful when non-value-added activities are excluded.
To complete the entity’s objective	The entity will operate base on the plan, which only achieves certain goals.
More fundraising	The proper plan and effective usage of donor funds will increase the credibility of the entity. It will strengthen the ability to raise more funds in the future.

What is the process of the budget for NGO?

Process of budget for NGO
Define objective	The entity must define a specific objective which they want to achieve. Those objectives must be supported by the activities which can be separated into steps.
Role and responsibility	We need to select the right people to operate the project. Each person has specific tasks which enough time frame.
Calculate resource require	The management and the responsible person need to calculate the required resource (cash) for each activity. The usage of funds needs to spread over the cause of action; not all funds are required at the beginning of the project.
Source of fund	The next step is to look for funds. The management needs to set the potential donors whose objective is similar to our project. Then managements need to apply for a grant from those donors.
Finalize	The budget will complete after the management and board approved.
Implement	After receiving funds from the donor, entity will implement project as the plan.
Review	Every month and quarterly, we need to compare the actual result with the budget. Any significant variance needs to review.