Glossary
Budget & Forecasting

Operating Budget

By: Alec Hollingsworth
Updated:  
June 16, 2025

DEFINITION:

An operating budget forecasts a nonprofit’s expected income and expenses for a given fiscal year to guide financial planning.
An operating budget is a detailed projection of all estimated income and expenses for a nonprofit over a specific period, usually one fiscal year. It acts as a financial roadmap, outlining how resources will be allocated to support ongoing programs, administrative costs, and fundraising activities. The operating budget helps organizations set realistic goals, monitor spending, and ensure financial stability throughout the year. By comparing actual results to the budget, nonprofits can identify variances and adjust strategies as needed to stay on track with their mission and objectives.

Key Takeaways

  • Projects income and expenses for a set period
  • Guides daily financial decisions
  • Helps compare actuals to planned amounts
  • Supports accountability to funders and boards

Why It Matters

It ensures responsible resource allocation and helps maintain financial health.

Real World Example

A community food bank creates an annual operating budget estimating $500,000 in donations and grants as income. The budget allocates $350,000 for food purchases and distribution, $100,000 for staff salaries, and $50,000 for fundraising and administrative expenses. Throughout the year, the food bank tracks actual income and expenses against the budget using accounting software. When higher-than-expected food costs arise, the team reviews the budget to adjust spending elsewhere, ensuring they continue to meet community needs without overspending.

How Aplos Helps

Aplos makes it easy for nonprofits to create, manage, and track operating budgets. With Aplos, organizations can compare actual income and expenses to budgeted amounts in real time, helping leaders make informed decisions and stay accountable to stakeholders.
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Frequently Asked Questions

What is the purpose of an operating budget?

An operating budget helps nonprofits plan and control their finances by projecting expected income and expenses for a specific period.

How often should a nonprofit update its operating budget?

Most nonprofits create an operating budget annually, but it should be reviewed regularly and updated if significant changes occur.

Can operating budgets be changed mid-year?

Yes, operating budgets can be adjusted to reflect new information, unexpected expenses, or changes in funding.

Related Terms

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Expense Reimbursement
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Contra Account
Management & Discussion Analysis (MD&A)
Encumbrance

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