Effective organizational management is imperative for nonprofits to be successful in achieving their missions. Today, Jon Osterburg, Vice President of Sales and Marketing at Jitasa, lends the knowledge he’s gained helping over 100 nonprofits globally with their finances. He outlines several best practices nonprofits can implement in their accounting processes.
Fundraising is a vital part of your organization’s strategy. While we all wish that we could achieve our goals and pay no money to do so, that’s not always feasible. You need to raise money to effectively conduct the programming that helps you work toward your mission.
You know the old adage, “It takes money to make money.” Well, it’s the truth. The most impactful and effective fundraising campaigns will require your organization to spend some funds. Understandably, this also means that some organizations’ campaigns end up in the red, meaning they actually lose their hard-earned funds. That’s the last thing that you want. No matter how generous your donors are, fundraising results in the red is a bad sign that can lose their trust.
Establishing a well-thought-out and data-driven plan ahead of time is the best way to ensure your fundraising campaign is profitable, ending in the black.
In this guide, we’ll dive into four different accounting ideas to ensure your next fundraising campaign ends up in the black. These best practices include:
- Create a Detailed Campaign Budget
- Consider Your Campaign Audience
- Compiling the Resources You Need
- Analyze Your Campaign Results
Ready to dive deeper into profitable fundraising? Let’s get started.
Create a Detailed Campaign Budget
Your organization creates an annual budget to help determine your overarching financial health and goals. This living document includes both the yearly revenue that you anticipate making, the expenses you anticipate encountering, and notes on how you arrived at those figures. At the end of the day, your budget looks something like this example pulled from Jitasa’s budgeting guide:
In the same way, your organization should create a detailed budget that covers your anticipated revenue and expense sources for your campaign.
This budget will cover your overarching fundraising goal and spell out how you’ll hit those goals using a number of different fundraising sources. For example, let’s consider a nonprofit that’s hosting an annual fundraising fun run event. This organization will likely need to account for the following expenses:
- Renting the space where the fun run will take place.
- Purchasing t-shirts and other merchandise for each of the attendees.
- Investing in event registration software so attendees can easily sign up for the event.
- Purchasing bibs, safety pins, and labels for the racers.
- Hiring a DJ or other entertainment to make the event fun.
- Purchasing insurance for the event.
- Investing in marketing software and incurring advertisement costs.
- Providing refreshments and water for the racers at the event.
While these are just a few examples, showing that even a seemingly simple event like a fun run can add up with all sorts of costs! That’s why you also need to recognize your various forms of revenue and estimate how much will come from each source. In this fun run example, here are some of the revenue sources the nonprofit might encounter:
- Individual registrations to participate in the fun run.
- Additional donations made to the organization for the event.
- Matched gifts provided by employers of the event participants.
- Sponsorships from local businesses in the community.
- Merchandise sales that are made at the event.
For each campaign, make sure you know what fundraising data to track to keep an eye on your various revenue sources during the campaign. For instance, you may have different revenue goals associated with donations, merchandise sales, etc. You’ll, therefore, need to track each separately in addition to your overarching fundraising goal to ensure a successful campaign.
Consider Your Campaign Audience
A surefire way to raise less than what’s ideal is by targeting your fundraising campaign to the wrong crowd. Consider, for example, you’re hosting your annual fundraising gala and requiring a $300 ticket price per plate. Who would you approach to invite them to the event? Young adults who have historically given between $25 and $50 to your campaigns? Or major donors who typically give in the thousands? Probably the latter.
By nature, most fundraising galas are designed to entice major donors to attend an exclusive event and ultimately give a large contribution by the end of the night. Therefore, you’ll probably spend a bit more on this fundraising opportunity to ensure the venue is top notch, the food is delicious, and the atmosphere is exquisite.
As you design your own fundraising campaign, consider your audience and the campaign type to make sure they’re in line with one another.
Ask yourself the following questions to get started:
- What is your fundraising goal?
- Which supporters could best help you reach your goals?
- What demographic is this audience? Age? General interests?
- What is the average donation size for your chosen target audience?
- Which events have they attended in the past?
- What would the ideal turnout be for this particular event?
- What fundraising idea best suits your chosen audience?
- What has this audience responded to in terms of marketing in the past?
- How will you market to that particular audience?
The great news is that most of this information can be found in one convenient location— your donor database. Assuming your organization uses effective donor management practices, you should have information in your system regarding a number of audiences you’ve engaged with in the past.
From this information, you can pull average gift amounts, draw conclusions about the past events attended, and make assumptions about the amount of money your supporters are able to contribute to the campaign you’re planning.
For example: If your goal is to raise $50,000 for your next campaign, you might reach out to a large number of small to mid-sized supporters. You might decide to plan a dance-a-thon with your supporters, encouraging them to come out for a fun evening. This is a fun event idea for all ages and for supporters who can give in all amounts.
Gathering this intel before the campaign activities allows your organization to make the most accurate estimates about revenue possible to fill out your budget.
Compile the Resources You Need
Now that you’ve chosen your fundraising idea, start thinking about the resources you’ll need to make the campaign possible. There is an abundance of piecemeal solutions that can generally accomplish some of your needs. But if you want to create the best experience for the audience, choose software designed specifically for your chosen type of campaign.
Essentially, this is the difference between using donor management software and spreadsheets to manage your donor information. You know how much more valuable the former is.
Make a list of the resources you need to raise funds before you start investing left and right. Look back at your budget to see how much you’ve allocated to these resources to determine how much you can spend on each one.
When you conduct your research on each resource, consider the prices so you don’t overspend on this overhead expense.
For example, if you’re hosting the dance-a-thon from the last section, you will probably need to invest in registration software, donation pages, powerful sound system, and music platforms. Going through these solutions, you’d have to determine which options are:
- The best bang for their buck.
- Within your predetermined budget.
- Equipped with all of the features you need.
Once you’ve narrowed your list down, ask further about price, ensuring you reach out about hidden fees like implementation and training expenses. This will provide a holistic view of the actual overall cost of the resources you need.
Bloomerang’s fundraising software guide lists out a number of tech solutions that can help get you started on your research for these resources. And, they’re conveniently listed out by fundraising campaign type.
Analyze Your Campaign Results
When it comes to your fundraising strategy, your long-term goal is probably growth. Growing your fundraising campaigns over time is what also helps your organization grow its impact on the community. Not only should this campaign be profitable, but you should also be actively tracking campaign data to advise future opportunities and continue improving.
Consider the metrics that will best help your organization grow its fundraising over time. Then, track these metrics between each of your fundraising campaigns. For example, you should track analytics such as:
- Your donor retention rate. It’s more cost-efficient to retain your existing supporters than it is to acquire new support. Thanking donors, stewarding them, and otherwise showing appreciation will help this metric increase over time.
- Average donation size. Track the average gift size among your supporters and among your supporter segments. This will help you better understand your audience and reach them for each campaign you host in the future.
- Overhead expenses per campaign. Track your investments in resources, venues, and other costs of hosting fundraising campaigns. That way, you can find any gaps in your strategy and discover new opportunities to become more efficient with overhead costs. This decreases the ratio between overhead and donations raised for future campaigns, allowing you to do more with less.
All of these metrics will help your organization to grow over time, but there’s another reason to keep a close eye on campaign data. Tracking your financial results throughout the year helps when it comes to future financial audits.
After each campaign, consider which analytics and metrics you’ll need to add to the financial reports included in these audits. Tracking that information now and ensuring your records are organized will prevent your staff members from scrambling to find all of this information down the line.
As a professional fundraiser, you understand how challenging it can be to conduct the perfect campaign. It takes funds, patience, and perseverance for each campaign. If you raise $50,000 in a campaign, but spend $52,000 to set it up, you still end up in the red. Efficient budgeting and planning ahead of time is the key to fundraising in the black.
Be sure to work closely with your accounting team to make sure you’re in-line with your overarching budget and have effectively planned out each campaign for maximum profitability. Preferably, your accountants will be experts in nonprofit accounting (like those at Jitasa) so that they can help specifically with these types of campaigns.