For Tier 3 charities and not-for-profits, budgeting isn’t just about numbers - it’s about survival. With limited funding, volunteer-led teams, and unpredictable income streams, having a clear, flexible budget can make all the difference.
This post offers practical budgeting tips tailored to small charities in New Zealand, helping you plan ahead, stay accountable, and make the most of every dollar.
Why Budgeting Matters
A good budget helps your charity:
Stay financially sustainable
Make informed decisions about spending
Meet funder expectations
Avoid cash flow surprises
Align resources with your mission
Even if your team isn’t financially trained, a simple, well-structured budget can empower everyone to contribute to financial health.
1. Start with Realistic Income Projections
Don’t guess. Plan.
List all expected income sources, including:
Grants (confirmed and pending)
Donations (regular and one-off)
Fundraising events
Memberships or service fees
Tip: Be conservative with estimates. It’s better to under-predict and exceed expectations than to overestimate and fall short.
2. Prioritise Essential Expenses
Focus first on the costs that keep your charity running:
Rent or venue hire
Staff or contractor wages
Insurance
Programme delivery costs
Then consider discretionary spending like marketing, training, or new initiatives.
Tip: Use categories that match your chart of accounts in Xero to make tracking easier.
3. Use Xero’s Budget Manager
Using Xero’s built-in Budget Manager lets you:
Set monthly or annual budgets by account
Compare actuals vs budgeted amounts
Spot overspending early
Bonus: You can export budget reports to share with your board or funders.
4. Review and Adjust Quarterly (or as often as required)
Budgets aren’t static. They aren't just a box you tick off once a year and then don't look at again until next year. They are a critical tool to every business and charities success. They should evolve with your charity’s needs throughout the year.
Set a quarterly (minimum) review schedule to:
Compare actual income and expenses to your budget
Adjust projections based on new grants or unexpected costs
Reallocate funds if priorities shift
Tip: Involve your board or finance committee in reviews to build shared ownership.
5. Budget for Restricted vs Unrestricted Funds
If you receive restricted funding (e.g., grants for specific projects), make sure your budget reflects this.
Track:
What the funds can be used for
Timeframes for spending
Reporting obligations
Example: If you receive a grant for youth workshops, budget those costs separately from general operations.
6. Plan for a Buffer
Even small charities should aim to build a financial buffer.
Include a line in your budget for:
Emergency expenses
Unexpected drops in income
Strategic opportunities
Tip: A buffer doesn’t need to be large. Start with a goal of 5–10% of annual income.
Want Help Setting Up Xero for Tier 3 Reporting?
At Varntige, we help charities set up Xero in a way that aligns with reporting standards and that works for your day to day operations. This includes budgeting, tracking restricted funds, and preparing your Statement of Service Performance.
Get in touch to book a free consultation or learn more about our Xero setup and support services.
