Many charitable organizations have a fiscal year-end of December 31. To say that 2020 has been a year of unpredictability and uncharted territory is an understatement. But, as all organizations must, you need to report on 2020 and budget appropriately for 2021.
In a year that saw most events furloughed, doors potentially closed and staff laid off, how does one go about the herculean task of creating a budget for 2021 that doesn’t start “once upon a time….”?
I am a strong advocate for evidence-based decisions. Information is always better than gut instincts when it comes to budgeting. The only definitive part of budgeting is that you will not end 2021 with the exact budget you planned for — it may be more, or it may be less. A budget is merely a tool that needs to be addressed (and re-addressed) throughout the business year.
Budget Using Rolling Averages
The more information you can have on past performance, the more educated you are about future performance. I would look at a 5-year rolling average for all the fundraising modalities other than events and start with that number for 2021. I would not weigh all years equally. Maybe it would look like this:
This could certainly be a good starting point for your calculations. However, these budgeted amounts can not be entered as random numbers based on a formula — there needs to be a business plan to achieve these targets. If in a normal course of a year, your organization does ten Direct Mail solicitations and you have now cut that to five in the COVID-era, it is reasonable to assume that the Direct Mail will be soft for 2021 and you should budget accordingly.
Budget for Events
Everyone is likely concerned with the $64,000 questions — what about events? I have seen many organizations pivot and have virtual events. Some have even surpassed their in-person achievement over last year. I know many donors who would be pleased to donate more money if they didn’t have to attend an event. Are there plans for virtual events next year? I believe that we will still see a reluctance on people to be in a room with thousands of others any time soon. Some really amazing organizations have embraced this “new world” and put on some spectacular virtual events. Do your research and work on best practices.
Budget for Expenses
Your expenses will be a challenge to forecast properly. It is quite likely that some of your staff will not fully return post-COVID (either by design or by choice), and the organization will be faced with the difficult decision as to whether to restaff or reorganize. Consultants may be used and one-time expenses may be incurred.
Furthermore, a strong web presence with the ability to donate online will be a must for 2021. If you haven’t updated your website in the last nine months, shame on you! This may be the time to double down and augment your marketing and communications department. How will you differentiate your organizations from the thousands of other worthy charities out there?
As I mentioned earlier, a budget is just a best guess with the information you had when creating the document. Life changes. I would suggest that the budget include some discretionary expenses for unforeseen items. What happens in the new year will likely set a new stage for fundraising for the short term. Donors and organizations are clamoring to get back to normal, but we all know that the normal will be a new experience for all.
Until next week.