Nonprofit finances are truly unique. While for-profit organizations provide a product or service to the community in order to make money, nonprofits ask for money to fund a mission towards the greater good of the world.
There are so many tips and tricks out there about how to build up your annual fund and earn the money your nonprofit needs to work towards your mission. However, there are fewer resources available about how to make the most of these funds and use them responsibly. That’s why we’ve put together this list of top tips that will help your nonprofit stay on budget once you’ve compiled funds for your mission. We’re here to help you save those resources as much as possible so they can be allocated towards what really matters. These top tips for nonprofit budgeting include:
Maintain your tax-exempt status.
Keep accurate records.
Use effective budgeting templates.
Determine overlapping timelines.
Prioritize your goals.
Ask for help.
Ready to meet and even exceed your financial goals? Let’s get started with your nonprofit’s budget!
1. Maintain Your Tax-Exempt Status
Consider your personal budget. You likely factor in some extra funds around April and May to help you pay any taxes you owe. However, your nonprofit doesn’t need to worry about these taxes. As a 501(c)(3), your nonprofit qualifies as a tax-exempt organization. Instead of paying taxes, each year your nonprofit must file a Form 990 to maintain this exempt status.
Depending on your nonprofit and varying circumstances, these repercussions could look slightly different:
If your nonprofit’s gross receipts are less than $100,000 and you’re late filing your 990, you’ll see a $20 penalty each day the 990 is late. If you continue to not file, this penalty will continue to grow until you’ve reached $10,000 or 5% of your income.
If your nonprofit’s gross receipts equal more than $100,000 and you’re late to file your 990, the daily penalty jumps to $100 per day with a maximum charge of $50,000.
If your nonprofit, no matter its size, fails to file your Form 990 three years in a row, your organization will lose its tax-exempt status. This means you’ll need to reapply for tax exemption and pay filing fees again.
Whether your nonprofit is filing a Form 990 postcard or a traditional Form 990, it’s important that you do so on time and accurately.Your Form 990 will be due at one of two times depending on your nonprofit’s fiscal year. If you follow the calendar tax year, it’s due May 15th. If you don’t follow the calendar fiscal year, the Form 990 is due on the 15th day of the 5th month after the conclusion of your fiscal year.
This may seem like a lot of information that you need to remember for tax season. The good news is that there is software available to remind you to file on time and helps make filing easier. If you want more information about tax filing software or to learn more about tax forms, check out this Form 990 software article by re:Charity.
2. Keep Accurate Records
Accurate budgets are built from data-informed estimates, generally built from records from previous years’ budgets and expenses.