Though it is labeled as a "nonprofit," being a 501c3 tax exempt nonprofit organization is in fact a business venture. Because of this fact, creating a fantastic formal budget is vital to the success of this business. There are many ways in which it is important to have a formal budget for your nonprofit organization, including that it will keep it out of financial ruin, help you deal with the IRS and keep your organization running successfully. Understanding these benefits can be a great motivation to begin plotting your formal budget.

Keeping out of Financial Ruin
One of the biggest problems with startup nonprofit organizations is that they often quickly meet financial ruin due to poor budgeting. A formal budget will help you avoid financial ruin and meet with success. Budgeting your resources, including employees, profits and supplies, will help you stay afloat during a difficult economical period and in times of economic prosperity.

Dealing with the IRS
As far as the IRS is concerned, there are strict limitations on how much your organization can technically earn as a "profit" without having to put it back into the company. Keeping a formal budget for your 501c3 nonprofit is a great way to keep track of your profits, expenses and taxes so that you can remain tax exempt as an organization. Losing your tax exempt status is one of the fastest ways to head into financial ruin, so it is important to keep this budget. The budget helps you communicate and prove your dealings to the IRS, which can clear up any misunderstandings now and in the future of your group.

Keeping Your Organization Running
The whole purpose of your 501c3 nonprofit organization is, of course, to help the world in some way. You've written a mission statement, hired a board of directors, incorporated and filed for exempt status - keeping a budget of your business is just as important as these other steps because it will keep your organization doing what it's meant to do. Without being able to stay on top of your finances you won't be able to function properly as an organization with resources to help people or communities.

Keeping a formal budget can be both a tiresome activity and take away time from what you're really passionate about - helping others. If this is the case for you, try hiring a professional records keeper. Otherwise you could end up with the above issues to deal with, potentially fatal issues for a nonprofit.