How Much Budget Should Your Nonprofit Carry Forward?

How much budget should your nonprofit carry forward from one year to the next? The short answer is: it depends. For some nonprofit groups, a small reserve is enough to cover startup costs and early events. Others might need to hang onto a larger balance for long-term projects or unexpected expenses.

Here are a few common situations that can help you figure out the carry-forward strategy that makes sense for your group.

If Your Group Has Major Expenses Before Fundraising Starts

This is a classic problem for lots of volunteer groups: you need to spend money before you’ve raised it. PTAs and PTOs know this dance well, along with youth sports leagues and booster clubs.

These groups typically need enough cash on hand to cover startup costs like insurance premiums, facility permits, uniforms, and kickoff events. Without adequate reserves, you might find yourself asking board members to front expenses, or end up delaying important activities.

To figure out how much you need to carry forward, look at last year’s budget and identify what expenses happen in the first few months of your fiscal year. Add up these early expenses, then add a 10-15% buffer to cover any unexpected costs delays.

Tip: MoneyMinder’s budget tools let you filter by date ranges, so you can easily spot those early-year expenses that need to be covered by whatever you’re carrying forward. For more help creating your budget, check out our nonprofit budgeting guide.

If You Fundraise for Specific Long-Term Projects

Some groups like neighborhood associations or organizations working on capital improvements raise money for projects that span multiple years. If this is your situation, you’ll need to carry over any funds that have been earmarked for specific purposes.

The important thing here is keeping clear records about which funds are restricted for specific projects versus unrestricted for general operations. This distinction affects both your budgeting decisions and your financial reporting.

For example, a parent group might raise money for new playground shade structures but needs to wait for district approval before installation can begin. Those fundraised dollars need to be carefully tracked and carried forward until the project can move ahead.

Tip: Track restricted funds as separate line items in your budget to avoid confusion and ensure these designated funds don’t get accidentally spent on other activities.

If Your Group Operates on a “Use It or Lose It” Budget

Some organizations, particularly those affiliated with schools or larger institutions, may be expected to spend most or all of their funds annually. This is common for student activity funds, some school-affiliated parent groups, and certain grant-funded programs.

Even if this is true for your group, you may still be able to carry over some of your budget—there are often exceptions for funds designated for specific future uses. Talk with your board or supervising organization to clarify what’s expected. Are you required to spend absolutely everything, or is there flexibility for reasonable reserves?

Tip: Even if you’re expected to spend down your budget annually, try to reserve enough to start next year smoothly. A modest amount for basic startup costs can prevent significant stress and administrative burden.

If You Need a Rainy Day Fund

Arts organizations, community groups, and nonprofits that rely heavily on grants or public funding often benefit from maintaining larger reserves. After experiencing funding disruptions around the Covid-19 pandemic, many groups have intentionally carried over more funds as a financial cushion.

A reserve fund helps absorb unexpected costs like emergency repairs, revenue shortfalls, or opportunities that require quick action. The appropriate size depends on your organization’s risk profile and how quickly you could adjust expenses if needed.

It’s become much more acceptable for nonprofits to maintain reasonable reserves rather than operating with minimal cash flow. However, being transparent about it is still important.

Tip: Communicate clearly with your board and membership about your reserve fund so everyone understands its purpose. Document the reasoning behind your reserve target in your financial policies.

If Your Group’s Bank Has a Minimum Balance

Most nonprofit bank accounts require you to maintain a certain balance to avoid monthly fees or other penalties. This baseline amount should be factored into your carry-forward planning since it’s essentially unavailable for spending.

Always keep the required minimum balance in your account, and consider adding a buffer so you don’t accidentally dip below the minimum during slower months. Bank fees add up quickly and that’s money that could be better spent on your mission.

Tip: If your current account has a high minimum balance requirement, it might be worth shopping around. Many banks offer nonprofit accounts with lower minimums or fee waivers for qualifying organizations.

Finding the Right Balance for Your Organization

The right nonprofit carry-forward amount balances financial stability with effective use of funds. Too little, and you risk cash flow problems or missed opportunities. Too much, and stakeholders might question whether you’re making good use of donated or raised funds.

Start by looking at your organization’s cash flow patterns, upcoming obligations, and potential risks. Document your reasoning and review it annually as circumstances change. Your carry-forward strategy should evolve with your organization’s needs. MoneyMinder’s budgeting and reporting tools can help you track these patterns over time, making it easier to make smart decisions about reserves and cash flow management.

Whether you’re dealing with seasonal fluctuations in cash flow or planning ahead for year-end financial tasks, by having clear visibility into your organization’s financial rhythms, you can plan with confidence and focus more energy on your mission.