Lesson 5 – Income, Expenses and Cash Flow

Revenue is hard to forecast. When attempting to predict fundraising income, take a look at multi-year trends. Try to estimate donations based on previous gifts and the quality of the relationships. Communicate with foundations and corporate donors to determine the likelihood of repeat gifts.

List expenses in the order of priority. Think about separating staff expenses. These usually make up about 60% to 90% of the budget. Differentiate between program and other expenses. Know the difference between fixed costs and variable expenses. Fixed costs include items like rent, loans and insurance. Variable costs are directly timed to fundraising events. This is where you will want to include a formula. You can use a rent calculator to calculate fixed costs on rent.

The cash flow projection is a key tool. You will need to know this and be prepared for times when expenses are due and revenue is not coming in. Plan for building cash reserves to prepare for low cash flow periods.

Budgeting for surplus and building cash reserves helps your organization support future growth and invest in staff. Stay away from the mentality of a nonprofit starvation cycle with an overhead that is too lean to run the organization. It is recommended to have a 3% – 5% reserve in the operating budget each year and 4 to 6 months of expenses in your operating reserves.

Below is an example of a multi-grant-funded-program budget prepared using FastFund Accounting. With FastFund Accounting you can create budgets for each of your grants, departments, programs and funds with automatic roll-up for funds and organizational totals. Export and import budgets from spreadsheets. You can create multiple budgets for a fiscal year to track major budget revisions. Lock-in budget amounts for strict internal controls. Automatically create new budgets from prior year’s actual amounts and prior year’s budget amounts. Generate budget comparison report for current period, year to date and across fiscal years.

Araize FastFund Accounting example budget - araize.com