Building and maintaining a budget is an important step for every nonprofit organization to master. Your budget sets your organization’s financial goals at the beginning of the year, and allows you to track your progress over time. While it’s critical to have a general operating budget, it can be valuable to break your budget down by program as well. This allows you to monitor the progress of each program and analyze the use of your resources.
If your nonprofit uses QuickBooks Online, you can easily create budgets and run reports to help keep your organization accountable for these goals and make decisions throughout the year.
How To Create a General Operating Budget
1. In QuickBooks Online, open your Settings menu by selecting the gear icon in the top-right corner. Choose the “Budgeting” tool.
2. Click the green “Add Budget” button in the top-right corner.
3. Name your budget, select the appropriate fiscal year, and choose the interval in which you want to enter the amounts (either monthly, quarterly or yearly).
If your budget is consistent from month to month, you can choose the “yearly” option; QuickBooks will simply divide your budget amounts evenly across all twelve months. If your income and expenses fluctuate significantly on a seasonal or monthly basis, you may want to choose the “monthly” or “quarterly” options instead.
If you have not already determined your budget numbers, you may choose to pre-fill this budget with actual amounts from a prior year. Otherwise, choose “No” on the “Pre-fill Data” option to manually enter your own budget numbers.
Under the “Subdivide By” option, choose “Don’t subdivide.” For a general operating budget, do not subdivide your data.
4. Once your budget options are set, click the green “Next” button in the bottom-right corner.
5. Enter the budgeted amounts for each income and expense account. After all budget numbers are completely entered, click the green “Save” button to finish creating your general operating budget.
How To Create Program Budgets
In order to create individual program budgets, you first need to have your programs set up as Classes in QuickBooks Online. If you are not yet using Classes for your programs, follow these instructions to get started.
1. Follow the steps above for creating a general operating budget. When you reach the “Subdivide By” option, choose “Class.”
2. From the drop-down list of Classes, select all programs for which you want to add a budget.
3. Click the green “Next” button, then enter the budgeted amounts for each program. To switch between programs, select an option from the “View budget for” drop-down menu. Be sure to save each program budget before moving on to the next one.
How To Analyze Budget Reports
Once your budgets are entered into QuickBooks Online, you can run reports to analyze this data. There are two reports that are most useful for analyzing your organization’s budget:
Budget Overview Report
This report shows an overview of your budget, which is helpful for reviewing and confirming your budget numbers. This is a great report to share with your board of directors for feedback, adjustments, and approval before the beginning of the fiscal year.
To run the Budget Overview report:
In QuickBooks Online, go to “Reports.”
Under the “Business Overview” category, select “Budget Overview.”
Select your budget from the drop-down menu at the top of the screen.
Budget vs. Actuals Report
This report is beneficial in tracking how well your organization is following the budget throughout the year. You can easily compare your budgeted amounts to actual income and expenses, which will help with decision-making and spending adjustments.
To run the Budget vs. Actuals report:
In QuickBooks Online, go to “Reports.”
Under the “Business Overview” category, select “Budget vs. Actuals.”
Select your budget from the drop-down menu at the top of the screen.
It’s important to note that the amounts shown in the “Actual” columns on the Budget vs. Actual Report will show the year-to-date amounts, while the amounts in the “Budget” columns will show the totals for the entire fiscal year. You can review the “Total % of Budget” column to analyze how each income and expense account is performing based on how far the organization currently is into its fiscal year.
Towards the end of the year, the Budget vs. Actuals report can be a convenient way to help set goals for the upcoming year and create your next annual budget. This report makes it easy to view the income and expenses for each program and see if any budgetary adjustments are necessary.