Donor-Centric Budgeting & Reporting: Top 6 Tips

Article Highlights:

• Six tips to help you connect with donors in a more authentic, mission-driven way.

Six tips to help you connect with donors in a more authentic, mission-driven way.

“Pledge now and get an attractive station tote bag!” Sound familiar? The nonprofit industry I’ve been immersed in for nearly my entire career—public media—is among the most famous for taking a relatively transactional approach to fundraising. While everyone loves a nice tote bag (or so I’m told) and it’s a model that’s served public media for decades, at Greater Public we have embarked on an ambitious multi-year major giving pilot program to strengthen and sustain development efforts beyond the bi-annual membership drive. And while I appreciate many community-led, grassroots nonprofits may not focus their fundraising on major donors, I believe strongly that nonprofits of all sizes can benefit from building stronger relationships with key supporters.

Our pilot has been an enlightening process, with lessons that apply across nonprofit sectors. After all, if the traditionally transactional public media industry can make progress toward cultivating more sustainable relationships with major donors in our space, your nonprofit sector should be able to follow suit.

With the support of major gift consulting agency Veritus Group, we’ve developed a program to analyze donor behavior, find the donors who want to have a relationship with our nonprofit, develop objectives and a plan, then hold our fundraising team accountable. The program is built on this truth: Donors give more when they know their money is going to something about which they’re particularly passionate.

I speak from very immediate experience when I say this: if your nonprofit’s fundraising efforts have hit a wall, or worse, taken a nosedive, now may be the perfect time to renew your efforts to connect with donors in a more authentic, mission-driven way. Here are six things to keep in mind as you transform your fundraising process to boost your relationships with major donors.

1. Mission Categories Beat Financial Categories

In most nonprofit sectors, organizations focus on creating an unrestricted case statement, including a budget, and then asking all their donors to contribute to their wonderful cause in general. Too often, though, the budget is presented in terms of financial categories, and that’s a missed opportunity. Instead, think of the budget as an expression of the mission of the nonprofit; repackage and present the budget to donors in mission categories, not financial categories. Clearly lay out all the programs and services provided by your nonprofit along with a “price tag” for delivering each. Include different price levels donors can consider, often referred to as “Fund a Need.” Whether they want to donate $1,000 or $100,000, find a specific project or impact they’re passionate about funding. We’ve included a checklist at the end of this article to walk you through the most important steps to shift to this model.

2. Donors Won’t Cover Overhead, Right? Wrong.

While reorganizing your budget to highlight programs and services can resonate with donors, that’s not to say that asking for funds to cover overhead is verboten. One of the main myths around major giving is that donors won’t cover overhead. In reality, donors understand that it actually takes staff, electricity, and office space for your organization to get the job done. “There’s absolutely no reason to keep overhead out of conversations with donors,” says Richard Perry, founding partner at Veritus Group. “Look at the commercial world—overhead is always accounted for in the cost of a product. Many major donors are businesspeople and entrepreneurs. They know that overhead is needed to make things work.” As with our new model, take your total budget and allocate it to your nonprofit’s program categories, helping donors understand the connection between overhead and impact.

3. Be Prepared for Internal Hesitation

We found the hardest part of shifting toward mission-driven accounting is getting everybody on board. Initially, the CFOs of the stations we’re working with had an issue with how much time and energy it takes to make the shift. Or a program person realized that the shift comes with a greater level of accountability, and the process can uncover inefficiencies in program categories, causing them to put on the brakes. Rally everyone around the fact that these changes are designed to deepen relationships with donors—a long game that’s worth the initial effort.

4. Shift Reporting to Reflect the New Approach

Once you identify a program or project that aligns with a donor’s passions and they fund it, it’s critical to report back to them in a very personalized way. Instead of creating a big, numbers-based report, focus on what matters. Donors want to taste, hear, and see their investment in action. “A bottom-line figure in an outdated annual report, some accounting mumbo jumbo, a glossy marketing brochure, or some program description that is too general doesn’t get the job done anymore,” says Perry. “Nor does it tell the donor what he or she wants or needs to know.” Sure, you may always be required to assemble and send an annual report, but in addition throughout the year you should send major donors handwritten thank you notes, brief reports on the progress and especially the impact of the specific programs they helped fund, and pictures of their donations in action.

5. Understand Donor Priorities

If you have the luxury of a major giving staff, you’ll see the best results when you afford them the time and energy to fully focus on donors and best practices. Don’t have that luxury? You can still see tremendous improvement if you get to know your potential major donors as individuals and understand what they’re passionate about, even if your nonprofit is tiny. Until you understand where donors’ priorities lay, there’s really no reason to repackage your budget. You can also approach this in stages. Say you don’t have the capacity to totally redesign your budget—if you’re able to identify what a potential donor is passionate about, you can do a back-of-the-napkin calculation to tell them what their investment would support.

6. Don’t Become Donor-Driven

It’s possible to go overboard and move past being donor-centric into a dangerous area: becoming donor-driven. You need to understand what a donor would like to fund, but it still needs to fall within your nonprofit’s mission and the current year’s budget. It can be difficult to turn down a donation, but if it’s to fund something that’s out of your scope it often does more harm than good. While some donors may close their checkbook and walk away if they’re rebuffed, most are generally open to being guided in a different direction. That’s why it’s important to get to know as many donors as you can so you’re not dependent on just a few people with deep pockets.

To remain relevant and accessible to current and future audiences, today’s philanthropic environment demands new, sustainable strategies. Repackaging your budgets and reports can be a huge step in the right direction. And as I mentioned earlier, if those of us in the public media industry can find ways to do so, alongside our tote bag-filled pledge drives, I’m confident you can, too.

Ready to dig in? Here’s a checklist developed by Perry and his colleagues at Veritus Group:

❏ Create a master list of program categories and sub-categories that represents everything your nonprofit does for a full financial period.

❏ Write brief definitions of each program category and sub-category so that anyone who reads it can easily understand the objective of the work defined by the category.

❏ Assign as much of the current operating budget as possible to each category and sub-category and assign any known overhead to a specific program if possible.

❏ Allocate remaining overhead proportionately to all the program categories and sub-categories.

❏ Add up all the expense items by program category and sub-category. The total should agree with the total expenses outlined in your overall budget.

❏ Identify known sources of revenue that are already committed and assign them to the related program category or sub-category. This would be sources like grants or firm multi-year commitments.

❏ Identify known sources of gifts in kind that are already committed and are also in the expense budget and assign them to the related program category or sub-category.

❏ Identify previous financial year surpluses and assign them to the related program category or sub-category.

❏ Add up all the income items by program category and sub-category.

❏ For each program category and sub-category subtract the revenue total from the expense total. The resulting number will be what needs to be raised for each program category or sub-category.

You might also like:

• Treasurers of All-Volunteer Organizations: Eight Key Responsibilities
• The Ultimate Guide to Nonprofit Fundraising in 2025
• An Easy-to-Use Accounting Procedures Manual Template
• A Guide for Private Foundations: Tax Exemption and 990-PF Filing Requirements
• Why is it Hard to Give My Money Away? A Donor’s Perspective

 

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