5 tips for your next annual giving budget cycle

January marks a pivotal period for Advancement leaders, where focus must extend beyond meeting revenue goals for the current fiscal year to initiating the budgeting process for the next one. In a time of constant change, the traditional mindset of “this is how we’ve always done it” is no longer enough to ensure you will reach your fundraising goals.

Embracing new strategies is crucial for a modern successful annual giving program. But new strategies call for new budgeting practices. How can insights from external and institutional data, emerging technologies, and current advancement trends influence the allocation of resources in your budget? Explore this blog for our tips as you start budgeting for your next fiscal year.

5 Tips for budgeting in 2024:

1. Start conversations with your CFO early in the process

Initiating conversations with your CFO is an important first step. If you are taking a new approach to your budget this year, it’s imperative to communicate your intention to depart from the traditional approach. Even before conducing a program review, express to your CFO that you plan to focus on higher return-on-investment (ROI) activities, which will require more changes to the budget than in past years.

CFOs are accustomed to making decisions based on data, so framing your proposal in this context helps build a common understanding and more buy-in from executive leadership. By approaching them early in the process, you set the stage for collaboration and ensure that your budgeting strategies align with the financial goals and expectations of the institution.

2. Conduct a program review

Embarking on a new budgeting process requires a comprehensive review of your existing programs. Assess each program’s respective costs, channels, staff time needed, donor engagement metrics, etc. For each program, establish clear ROI metrics, comparing direct budget line expenses, vendor fees, and staff salaries to the total revenue generated. Through this process you will be able to identify where your fundraising initiatives performed well and where they fell flat, as well as areas for optimization, reallocation, and strategic enhancement in the year ahead.

3. Find areas for optimization

Next, begin re-allocating dollars to prioritize programs with higher ROI. Consider the channels and initiatives that you have found success in. Redirect your budget to initiatives with proven success or in areas that you want to innovate. After eliminating low-ROI programs from your budget, shift your attention to optimizing existing initiatives.

For traditional programs with dedicated audiences that you want to retain but aren’t yielding the desired ROI, consider integrating digital components. For instance, if a phonathon program engages a consistent audience but struggles to maximize its potential, infusing targeted digital outreach can rejuvenate established strategies. This approach enhances the effectiveness of longstanding initiatives while adapting to the changing behaviors of your donor base.

4. Consolidate vendors

Improve the efficiency of your budget by streamlining the number of vendors your office works with. This can free up your staff’s bandwidth by not having to manage as many relationships and ultimately lead to more long-term savings. Use the insights from your program review to identify areas where you can optimize and consolidate vendor work, keeping in mind when each vendor contract expires. Moving towards consolidating multiple vendors into one or two strategic partnerships not only simplifies vendor management but also enhances the overall effectiveness of your program, creating a more seamless experience for donors.

5. Foster staff resilience and development

It is critical to acknowledge the direct impact of staff turnover on both financial and operational aspects during budgeting. More than just an HR concern, frequent turnover can lead to inconsistent budgeting, operational disruptions, and increased training costs. This is why investing in staff resilience and development is a strategic financial decision. A happy, skilled team not only ensures smoother budget execution but also lays the groundwork for reliable and consistent annual giving efforts, minimizing unforeseen financial hiccups associated with high staff turnover.

As you move through the budgeting process, remember these two things: prioritize your team’s focus on the highest ROI programs and ensure your office’s data is consistently and accurately updated. Keeping these things in mind will not just facilitate a more efficient allocation of resources but will also keep you well-equipped to keep up with your donors evolving behaviors.