Almost all funders will want to see a budget. Usually this will be a budget for your project not your organisation as a whole.
To prepare a budget for funders you'll need to work out what your project will cost. You do this by asking yourself three questions about the project.
Here’s a starter list of the things you might need to consider.
How do you work out what your costs will be? There is no perfect way and it's ok to estimate. But you need to base your estimates on something solid so you can be confident. You can ask to change the budget later if something unexpected happens. You don't want to have to change because of bad estimates.
Here are some methods people often use.
Once you have your costs you need to group them. If your organisation already has groupings in its accounts start by using those. But for many application forms you'll need to group your costs by the categories the funder uses. If you're a new organisation, start by using the groupings your first application needs.
You can skip this section if:
Core costs are the running costs of your organisation. This is the money you need to make its work happen. These are also called overheads, running costs or operating costs. Most organisations need to try and bring some money in from project grants to cover core costs or overheads. But you're not always free to do that. You must follow the rules and you must be clear about it in your budget.
New Lives is a charity that helps women move on after experiencing abuse. They want to start a support group for survivors of same-sex relationships. One of their existing part-time staff will run this project. The funder only allows 10% of core costs included in the budget. New Lives worry because the cost of staffing these sessions is 80% of their budget. Then they realise they are extending the staff member’s hours to take on the new project. This counts as a direct project cost.
Revenue costs are the costs of making things happen. They occur during the project, for that project. Capital costs are for items which last beyond the project. There are more technical definitions used in accounting.
This simpler distinction is important in two ways in grant funding.
Leap Forward is running a digital skills project for teenagers. They want to inspire them to develop coding skills. They need to buy some VR headsets and laptops that they can teach coding on as well as funding the sessions. They discover a small local fund that supports small capital bids for equipment. This pays for the headsets and laptops. They raise the rest of the money from another funder.
When you submit your budget you have to show how you expect to raise the money you need to match your expenditure. The funder will often give you different categories of funding to use. Use their categories or this list which many funders use.
You don’t need to have income in all the categories. Most grant funders will want you to have some income from at least one other source.
You need to estimate as you do with expenditure. Once again you want those estimates to be good enough to count on.
It's always better to predict low rather than high on the income side of a budget. Often grant funders will ask to see proof that you've raised the other income that you predicted. They won’t mind if you've raised too much.
You can only spend restricted funds on the activity that you agreed with the funder. Most public funding, other grants and most sponsorships are restricted funds. Earned income and donations are usually unrestricted.
This means that if you raise more earned income or donations than you planned, you don’t need to tell anyone.
If you raise extra restricted funds, you may need to have a conversation with the people you raised it from. But this should not stop you applying for more grant funding than you need. Remember success rates are low. If you raise extra funding you'll have options.
First you can reduce the amount of earned income and donations that you put towards the project. Then you can use more of the restricted funds towards the total. Check that the funder doesn't need to see a certain percentage of earned income before you do this.
If you do have to keep a certain percentage of earned income, you may end up with more income than expenditure. In that situation:
‘Hear us’ is an organisation run by people with disabilities. They earn income by training companies in disability rights. They need £6,000 to help them move their activities online. They apply to three emergency funds and run an open-ended crowdfunding campaign. They raise £7,000 restricted funds from grants and £2,000 unrestricted from donations. One of the grant funders agrees their money can go towards extra marketing of the new training offer. Together with the donations, this creates a new part-time paid role.
Most grant funders will expect you to raise some funding from other sources. This is often called match funding. You should follow each grant’s rules.
Thinking about match funding for one grant can help you get started thinking about your whole funding mix. How do you plan to make your activities sustainable over time?
In-kind funding is the phrase the grant sector uses for non-monetary contributions. It covers support from other sources and contributions your organisation makes.
Sometimes you include in-kind funding on both sides of your budget. Sometimes you provide information about it separately to the budget.
Some examples of in kind funding:
Different grant funds have different rules about what you can count and how you count it.
Your cash flow is your forecast of when you will receive money into your organisation. Your reserves are the money that you have that can be freely spent on your charitable purposes.
Grant funders will often want to know about your reserves policy. For larger grants they will sometimes ask you to provide a cash flow.
This page was last reviewed for accuracy on 18 November 2020
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