Topic 2: Steps to do a budget

In this section, we will outline the essential steps to guide you through the process of creating a budget for your project proposal.

Step 1: Set a Timetable

  • Gather information together
  • Discuss activities with staff and beneficiaries
  • Estimate costs
  • Negotiate with funders
  • See how different team budgets fit together across the organisation
  • Have the budget approved by senior staff or donors

Step 2: Be organised


  • Objectives of the project
  • Activities needed to achieve objectives
  • Resources to perform these activities
  • Cost of Resources
  • Funding Source

Step 3: Notes and assumptions

Before embarking on the budgeting journey, it’s crucial to establish a solid foundation by gathering input from relevant stakeholders and engaging in transparent discussions about the assumptions that underpin the budget. Here are a few tips.

  • Gather Input: Start by gathering input from relevant stakeholders, including project team members, finance personnel, and subject matter experts. Each individual may bring unique insights and perspectives that can inform the budgeting process.
  • Discuss Assumptions: Engage in open and transparent discussions about the assumptions underlying the budget. This includes assumptions about costs, revenues, inflation rates, exchange rates, and any other relevant factors that may impact the financial projections.
  • Disclose all calculations

Step 4: Consistent Budget Headings

Consistency is key in budgeting, and before diving into the details, it’s essential to ensure that budget headings align with your organization’s financial accounts and reports, providing clarity and coherence in the budgeting process. Below are a few things to remember.

  • Budget items also appear in your NGO’s financial accounts and reports
  • Prepare a budget outline
  • This could list all of the main types of income and expenditure

Step 5: Estimate costs

  • Make a list of all the things needed for each specific activity
  • Work out the number and unit cost of each item
  • From this, it is simple to produce a summarised budget for each budget heading
  • It’s also easy to update if quantities or unit costs change

Step 6: Watch those Contingencies

  • Avoid adding a ‘bottom line’ percentage for so-called ‘contingencies’ on the overall budget.
  • Donors don’t like this and it’s not an accurate way of calculating a budget.
  • If needed, calculate a contingency amount for separate items in the budget. E.g. a salaries contingency or fuel contingency
  • Every item in your budget must be justifiable – bottom line percentages are difficult to justify or monitor.

What have we forgotten?

  • Staff related costs (e.g. recruitment costs, training, benefits and statutory payments)
  • Start-up costs (e.g. publicity)
  • Communication and visibility
  • Overhead and direct administrative costs (e.g. rent, insurance, utilities)
  • Travels and transport costs (e.g., goods / supplies)
  • Vehicle operating costs
  • Equipment maintenance (e.g. for photocopiers and computers)
  • Governance costs (e.g. board meetings)
  • External evaluation costs and audit fees
  • Cash flow over the planned project period

NOTE: If you don’t include them in the budget, then you may not have enough funds to pay for them!



  • Reflect on the project idea you have been developing throughout this course.
  • Utilising the steps outlined in the budgeting process, including setting a timetable, being organised, considering notes and assumptions, establishing consistent budget headings, estimating costs, and watching contingencies, begin drafting your project budget.
  • Take into account all necessary expenses and potential funding sources for your project.
  • Consider staff-related costs, start-up costs, communication and visibility expenses, overhead and administrative costs, travel and transport expenses, vehicle operating costs, equipment maintenance, governance costs, external evaluation costs, and cash flow projections over the planned project period.
  • Ensure that each budget item is justifiable and aligns with the objectives and activities of your project.
  • Pay attention to detail and accuracy in your calculations.
  • Once completed, review your draft budget to ensure it is realistic and comprehensive.
  • If possible, seek feedback from peers, instructors, or mentors to refine and improve your budget.
  • Make any necessary adjustments based on feedback and finalise your project budget.