Carol Leister, Managing Partner & COO

All the years I worked in nonprofit organizations—and in my current consulting role—I’ve always looked forward to budgeting season.  I know what you’re thinking…spreadsheets and stress…but trust me and keep reading!

To me, budgeting season signals a new beginning, a time to re-evaluate goals—a puzzle that I could put together piece-by-piece with the satisfaction that when it was done, there would be a clear path forward for the next year.

When learning how to manage budgets, I had great teachers and—with them in mind—I’d like to share some of the wisdom that has helped me to build successful budgets for organizations large and small, across sectors and markets.

Here are just the broad brushstrokes of how to think about budgeting—a refresher for some, new tools for others, and some general guidelines as we continue to navigate the impacts of the COVID-19 pandemic on non-profit organizations and the world around us.

Budgets Reflect Your Priorities (Values and Goals)

Your budget, once approved, will guide how you spend and raise money for the next 12 to 18 months. If you are lucky, it will also show where and how to invest in new efforts.

The decisions you make as you allocate your budget (revenue and expense) will reflect where your (organization’s) priorities are.

What are your top priorities?
Do you want to attract more monthly donors, build giving through digital channels, re-engage lapsed donors, add new donors to your file? Your budget should reflect where you are putting the emphasis on your program in the coming year and serve as the first step to reaching your goals.

Which comes first, the plan or the budget?
As you begin developing your plan for the next year and mapping out your budget, the reality is that you are dealing with “chickens and eggs.” Your plan will inform your budget but your budget (how much you can raise and spend) will inform your plan:

  • If you would like to invest in a new unproven online fundraising effort but you can’t get budget approval, you’ll have to change your plan…
  • If you plan to focus on lapsed re-engagement, this should be reflected in how you are allocating expenses in your budget…

Make sure your plan and budget are aligned…what you say you want to do should be seen in your annual revenue and expenses. Budgeting is a balancing act, but also a right brain / left brain exercise: do the math but also carve out time to be creative and identify new audiences, opportunities, and investments.

Budgeting is a Negotiation Process

Anyone who has experience budgeting knows it is a process of give and take through stages of negotiation. Inevitably, whatever you submit, there is a good chance there will be pressure to raise more revenue while reducing expenses.

And so the budget dance begins…
If you anticipate the possibility of pushback from leadership, why wouldn’t you plan accordingly? It’s helpful to create a (1) conservative budget, an (2) attainable budget and a (3) stretch budget. If you know ahead of time you’ll need to make adjustments, you should take this into account with how you build and submit your budget(s).

2020: A Year Like No Other

On a cautionary note, when budgeting, most people use prior year information to help plan for the future. When you have a year that is out of the ordinary that impacts the success of your fundraising efforts (an unexpected disaster, a recession, a controversy), trying to build a budget using the past year’s results as a guide is foolhardy.

It can be challenging to predict if donors will support you in the same way under different conditions. For organizations across the country and across sectors, the COVID-19 pandemic has had an undeniable impact on fundraising. Since we don’t yet know how donors will be giving as the year progresses, this would be a year to budget as conservatively as possible with the knowledge that adjusting to increase revenue is far easier than making future cuts.

Crunching the Numbers

With the above framework in mind, I’ll have to leave the actual number crunching up to you. How you structure your spreadsheet and calculate the numbers—whether ROI or cost-per-dollar raised—varies from one organization to the next. That’s why my team at NextGen works closely with each client to ensure budgets are aligned to priorities and, working together, we create a path to follow for the next fiscal year.