Last fall, the Board of Directors and Chairpersons for your organization’s committees began planning mission-based activities for 2018. The plans include both standard program and fundraising activities, along with one or two new expansion-focused projects.
You are on the correct track. However, many small, solo-advocates and small organizations miss a crucial step in annual planning; 1) figuring out how to cover the expense for the proposed activities; 2) how to generate steady income to support overall operating expenses and contingencies.
Be very clear on one thing, although your entity is registered as a “nonprofit,” it should be managed like a business. There are rules and regulations that all charitable organizations must adhere. Not-for-profit does not mean that the charity cannot make large sums of revenue (profit). Nonprofit means that the individuals involved managing the entity cannot profit personally. Thinking of and operating your organization as a business will bring enormous rewards.
Take for example private, public and corporate foundations with millions of dollars in assets that support operational and program-related costs. Because of strategic planning, these organizations can allocate funds received as unrestricted contributions to investments. More on this later.
Creating a financial plan for your charity reduces the risk of insufficient program funding due to shortfalls in fundraising goals. I have seen members of many organizations come out of pocket to cover gaps in fundraising efforts. Braking even is as bad as losing money due to overspending.
Steps to Successful Financial Planning for Nonprofits
1. Budgeting
Creating a budget for program and project activities, plus contingencies is mandatory. Calculate overhead expenses (rent, utilities, salaries, stipends, etc. Next figure out what it will cost to develop and run the program. For startups and small organizations, this takes research. Charities working missions for more than five years can conduct forensic analysis of previous expenses to estimate expenses. Be sure to allow for annual operating expense increases.
2. Set the Fundraising Goal
After calculating all operational and program expenses. Add 25 percent for contingencies (there will always be unexpected cash outflows).
3. Diversify the Methods for Raising Funds
Hosting an annual luncheon or dinner is not enough. Establish funding activities that appeal to all of the stakeholders, as well as specific interests groups:
Types of Fundraising Activities
A. Passive Fundraising
B. Active Fundraising
About unrestricted funds. These are valuable contributions given by donors who know and trust an organization to use at its discretion. Unrestricted funds are utilized where they are needed most to support the mission or to support long-term operational needs.
Directors and development officers, if you have not done it yet, I suggest you take the time to read and become acquainted with the Sarbanes-Oxley Act p>. The Sarbanes-Oxley Law was established in 2002, to end egregious mismanagement of nonprofit funds. This act is mandatory for all nonprofit institutions. Use it as the guide for all fundraising activities, budget allocations, and spending.
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Best of luck!
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