Video Transcript Creating Your Budget Welcome to Module Four creating your budget. If you're uncomfortable with numbers, just stick with me. I'm going to do my best to make this simple. Although there T h is a certain amount of complexity inherent in the budgeting process. But if you have e B questions, ask away so I can answer away at the weekly Q&A sessions. And remember u d if you have a question, it's a pretty good bet that others in the course have similar g e questions. As a learning strategy, I'm using a somewhat simplified budget without too t many line items. This is a basic format that can be expanded or shrunk to fit your needs. I hope you follow along with the Do Good Society budget throughout this section to see exactly what I'm talking about. Let's start at the beginning. What is the purpose of a budget? The purpose of budgeting is to create a model of how your fundraising program might perform, if you carry out the four elements of fundraising's enabling ecology: strategies, infrastructure, culture, and guiding principles. It helps you organize your thoughts and strategies from a financial perspective. It's a projection or prediction of your revenues and expenses. Your goal is for your revenue to be higher than your expenses, so the difference or net revenue, can be invested in carrying out the mission of your organization. I want to reinforce this piece because I sometimes see groups that cannot accurately confirm how much their fundraising programs contribute to the mission. That is, they don't necessarily know what their net revenue is or how much the fundraising program contributes to the operations of the organization. In addition to the basic purpose of creating a budget, to project how much you'll raise, what it will cost you to raise that, and how much money you'll contribute to help your organization deliver its mission, it's also a communication tool for your board and boss. A budget with the right amount of high level information in conjunction with your fundraising plan will demonstrate to your board what activities you do to raise money and what it costs to raise that money. Many board members are unfamiliar with the various elements of the fundraising program, so the budget can be a useful tool to help share what you're doing at a high level. It's also a tool to inspire confidence in the board that you can raise what you've projected at the costs you've estimated when you consider all of those things. Budgets are pretty darn important. © Cathy Mann and Associates and The Fundraising Lab. ALL RIGHTS RESERVED. Video Transcript Creating Your Budget So just like we did with the fundraising plan, let's walk through the fundraising budget, starting at the top. You have access to Do Goods budget in the download section, so you now have a template you can use that has formulas already calculated T h for you. There's also a blank version of this budget so you can use it to build your own e B budget. Like the fundraising plan, you have your organizations name, the title of the u d document, that is fundraising budget, the time period that it's covering, in this case, the g e 12 months X to Y and you want to include which draft of the document it is. You may t well go through many iterations of this document, so you want to make sure you're working from or showing the latest. Over in the top right hand corner. I've included a note about the date that the board of directors approve the budget. It's a useful piece of information to have on your document, so you're always assured that you're reviewing the approved budget. Now let's go and look at the first row. You've got budget, got projected to December 31st, difference, and difference percentage. The budget column is what you're projecting for the coming fiscal year. Just a quick reminder, fiscal year is any 12 month period that an organization uses to track its financial activity. The next column, projected or actual, this going to be one of two things. You can include projected revenue. So here's what that means. If you're developing your budget close to the year end and you're able to project with some certainty how much money you're going to raise by year end, I like to use this real time data because it's a better comparison between what you've raised in the current year and what you hope to raise next year. So let me give you an example. Let's say you're developing your budget in October for the fiscal year. That starts in January. If you can estimate how much you're going to raise in the next three months to the end of this fiscal year, you'll be able to compare what you hope to raise next year to a relatively accurate prediction of what you think you'll raise by this year's end. If on the other hand, you compare it to the last year for which you have complete data, that is the previous year's financial statements, you'll be comparing your budget revenue to data that's 10 months old. You have a lot more up to date information to help you forecast what the following year is going to look like. Alternatively, if you're in the position of developing your budget at the beginning of the fiscal year, you can compare your budgeted revenue to your actual revenue for last year. Here's the thing, you want to get into a routine where you are developing your budget before the end of the fiscal year. I've seen it happen that groups don't get their budgets done until the new fiscal year, but it's not great practice and it means your board doesn't require that budgets get reviewed and approved on a schedule. If you're © Cathy Mann and Associates and The Fundraising Lab. ALL RIGHTS RESERVED. Video Transcript Creating Your Budget the fundraiser, you may have limited influence to change this. If you're the executive director, you may want to move the organization to a more robust budgeting process. T h e B u Now as a reminder, the first column of numbers is the budget, your estimate or d projection or forecast of what you're going to raise and spend next year. The projected g e column is your projection of how much you're going to raise to the end of your current t fiscal year. The next column, difference, is literally the difference between your budget and your projected revenue in dollars. The following column is the difference in percentages. You want to be able to easily show yourself, your boss and your board how you're performing compared to earlier years. You may recall earlier I said that a budget is a communication tool that both demonstrates the many ways you raise money, but it's also a tool to inspire confidence. These columns showing the difference between budgeted revenue and projected revenue is a key part of inspiring confidence because it quickly shows those reviewing the budget if you're on an upward, downward or stable trend of growth. The column on the furthest right hand side of the document is what I call the rationale. In this section, you briefly answer common questions that you anticipate leadership will have about the budget. Why is there a big increase or decrease? Provide brief context to the numbers. This is also a piece of the budget that is about inspiring confidence. Without context, the leadership team will be left asking a lot of questions. While they may still have questions and you can bet your bottom dollar they will ask you questions when you present this, offering up brief answers to anticipated questions is a good way to show leadership that you're on top of things. I won't be going through the rationale line by line. You can review it if for when you look at Do Goods fundraising plan to help you as you develop yours. The last thing to review is the second tab on the bottom of the budget document that is called probabilities. Take a quick peak there now and we'll go into more detail when we get to the foundation giving revenue. Leadership really likes to know what the probability is that you're going to achieve your budget. Of course, you'd like to say that you'll achieve your budget with a 100% certainty, but the truth is that there are lots of moving parts to a fundraising budget and you can never know what unforeseen © Cathy Mann and Associates and The Fundraising Lab. ALL RIGHTS RESERVED. Video Transcript Creating Your Budget circumstances may arise. For instance, maybe there'll be a postal strike that derails your direct marketing campaign or maybe a major donor changes fundraising priorities or T special event revenue suffers because of the weather. Maybe unanticipated staffing h e changes leave you less able to submit the number of proposals you had planned to do. B u Not withstanding our inability to predict the future, it is useful to identify any known risks d g and let the board know what you've anticipated.