pexels-photo-1043506Funding is a critical need for every nonprofit. Without enough backing, it becomes impossible to advance your cause forward and make a lasting impact. That’s why fundraising is such an important activity for most NFPs. One of the keys to successful fundraising is the ability to create realistic budgets and knowing how to use them to get everyone aligned on reaching your fundraising target and achieving your mission’s core goals.

Knowledge is Power

The volunteer treasurer is most often tasked with either directly creating or overseeing the creation of the general budget. They also generally supervise the creation of specific, targeted reports such as the projection of cash flows and fundraising budgets, although it generally takes input from multiple people and teams to create a good one. That’s why it’s essential for your NFP’s staff and volunteers to have a good understanding of finance, fundraising practices, and reporting requirements.

Ideally, your nonprofit’s executive director,  board members, your finance and development officers, and their staff will all have a solid grasp of finance and the budgeting process. Each should understand the importance of making realistic projections for income and expenses. They should also be able to identify trends and understand their impact on your budget estimates.

When everyone involved in the process has this level of expertise, it greatly contributes to both the oversight and governance process and makes it easier for your organisation to stick to the budget. Even your staff directly involved with your programs should have a good grasp of your overall budget, and how their duties and role in the organisation impacts it and the mission.

Training is one of the best ways to bring all your members up to speed on best practices and industry standards for the budgeting process, fundraising, and basic financial management.

Empower Your Team and the Public

Increase transparency to make it easier for everyone to understand the budget, and how their work affects it. This also makes it easier for the public to understand your organisation’s work and how it uses public funds, increasing accountability.  Your general budget, along with its notes, should be open and available for your staff and the public to read and inspect. One of the easiest ways to do this is to publish it online on your NFP website, along with your other financial statements.

Always include clarifying notes to your budget and other statements that help explain your projections, estimates and assumptions so that everyone has a clear picture of your results and can easily understand the return on investment (ROI) received from your various sources of funding, and the campaigns that you used to raise these funds.

Create a Realistic Budget for Your Fundraising Activities

Accurate projections for income and expenses are crucial when creating your fundraising budget. It’s also important to have a good grasp on your nonprofit’s cash flows, and how they are likely to impact income and expenses and your specific fundraising campaigns.

Another area that you will need to pay close attention to is your ROI. How much does it cost your organisation to secure specific sources of funding? How costly is it to host special events and other fundraising campaigns? Are particular contribution amounts truly “worth” the investment that you are making to secure them?

When making your projections, it’s important to keep in mind that it takes about ten times as much funding when you recruit a new donor as it does to build and maintain relationships with existing donors.

Past trends are an important part of your future projections for your fundraising budget. When creating your budget, it’s helpful to separate your funds by the source of income. For example, you might wish to have a category for individual donations, major gifts, endowments, grants, trusts, corporate contributions and any other major sources of giving that your organisation receives.

Important estimates and measurements to keep in mind for these segments include retention rates, communication effectiveness, donor satisfaction, the likelihood of repeat gifts from specific sources of funding, the lifetime value of gifts received from specific donors and other sources of funding, and the lifetime costs to build and maintain relationships.

When you use these types of measurements to look at your past fundraising efforts, you gain the information that you need to determine which types of fundraising campaigns are giving you a good ROI and which ones you might want to consider scaling back or eliminating altogether to improve your long-term financial stability.

Most importantly, tying your fundraising efforts to the budget also helps everyone in your organisation to be more aware of just how their work and performance impacts donor relationships and satisfaction. Ultimately, your NFP’s ability to raise the funds that it needs to make a difference in your community comes down to the links that you and your team build with your supporters!