Stress budgeting

A Stress Anecdote this Budgeting Season: The Role of Technology in Nonprofit Sustainability

Posted in: Blog
By: Greg Rideout

Technology Bridges the Gap Between Revenue and Expense for FY 24

For many of us, spring is a very positive time of year, filled with warmer weather, more hours of daylight, and plans for a myriad of outdoor activities.  For nonprofit executives, the time is also marked by planning and executing the agency budgeting process for what is typically a new fiscal year beginning July 1.  Through this process, however, an Executive Director or CEO’s positive, hopeful spring thoughts are often replaced with significant stress and perhaps even dread.  The fiscal year budgeting process often feels daunting, as multiple programmatic and organizational priorities clash with each other and then again with revenue realities.  

This guide discusses these fiscal challenges and the role technology can play in helping nonprofit organizations have greater confidence in their ability to raise the funds necessary to bridge the gap between expenses and current revenue realities, versus exacting budget cuts.  Data-rich organizations can focus on increasing the probability of winning grants, projecting specific increases in individual donations and fee for service revenue, and ultimately achieving sustainability.

Programmatic Priorities: Programs will want to meet what is usually a never-ending increase in demand for the organization’s services or perhaps even more comprehensively serve the individuals and families currently enrolled in programs.  To this end, proposed program budgets will likely reflect new staff positions and perhaps suggest additional program space and/or new subcontracting partners.  Of course, program leadership will also likely push for salary increases to support morale and minimize turnover.  Today, the pressure on organizations to pay competitively is intense, as turnover is not only financially costly but generally has a negative impact on service delivery and meeting funder expectations due to disruptions in service relationships.  

Organizational Priorities:  An organization’s Executive will also hear from the likes of the CFO, COO, as well as Human Resources and Development offices during this budgeting process.  Administrative divisions will express concern with increasing capacity, as nonprofit infrastructure generally pales in comparison to the demands.  Further, there are the normal inflationary increases to the cost of doing business – everything from office equipment and supplies to insurance costs, and if the organization supports physical spaces, the COO will likely present a list of capital improvements that can no longer be put off. 

Revenue Realities:  So, in light of all these demands, what are the likely revenue realities? While an Executive may have found listening to all the plans and demands program leaders may have for the new year stressful, especially when combined with the concerns over the organization’s infrastructure capacity and capital challenges, the need for a powerful stress anecdote really presents itself when an Executive reviews the coming fiscal year’s revenue realities.  While most organizations enjoy some multi-year commitments from government, private philanthropy, and perhaps even some individual donors or board members, the majority of an organization’s annual budget must be earned each and every fiscal year.  This presents two additional, inter-related stresses.  First, this financial reality almost always causes a significant gap between revenue and expense in the overall agency budget, even with tempered demands for growth and expansion.  Second, in order to present a balanced budget for the organization, the mandate for any well-managed nonprofit, the Executive will have to either make budget cuts and/or predict how the shortfall will be fundraised before June, 2024.  

Executives naturally will want to avert having to make cuts.  So, in lieu of a crystal ball, Executives typically meet with the CFO, Senior Director of Development, and perhaps other key organization leaders, identify potential revenue sources for the new fiscal year, and then plug these sources into categories, such as: a long shot, a maybe, and an almost sure thing.  For example, revenue projections for fee for service programs, individual giving, and special events may each be increased in such a graded fashion, especially if the organization saw success in these categories in the present fiscal year and economic forecasting suggested stability or even growth over the next twelve to sixteen months. In most instances, however, agency executives will need to look to possible private and corporate foundation grants to help close budget gaps.  An Executive once told me, foundation grantmaking is the “mortar” between the “bricks” – revenue sources such as service fees and government contracts – at a nonprofit organization.  Indeed, in so many nonprofits of all sizes, foundation grants tend to be that glue, allowing an organization to serve more clients, offer new and necessary services to the community, or in special cases, support a capital project or offer unrestricted funds for critical infrastructure development.  In a 2017 article entitled, “How to Predict Grant Revenue”, ELEVATE Grant Writing Services offered a similar mathematical formula as mentioned above for predicting potential grant revenue, along with some helpful, additional guidance.  The authors recommended sliding scale percentages be assigned to potential sources based on four key determinants: 

  • the organization’s history with the foundation; 
  • how large an amount is requested; 
  • the length of time an Executive Director has been with the organization and their networking skills; and 
  • the extent to which the proposal focuses on a current public priority area.

The result percentage, based on the answers to these four determinants, is then multiplied by the grant amount requested, and the answer is then plugged into the organization’s annual budget.  Prediction by prediction, the Executive and leadership team begin to chip away at the organization’s projected operating deficit.

According to A Beginner’s Guide to Winning More Grants for your Nonprofit, there are more than 87,000 foundations currently in operation, having to give away at least 5% of the average market value of their net investment assets every year. So, increasing an organization’s win percentage could have a tremendous impact on agency budget deficits.  While the mathematical formulation recommended by ELEVATE Grant Writing Services in 2017 seems well-tested, what if there was a way to substantially increase the probability of winning grants, as well as confidently projecting specific increases in individual donations and fee for service revenue? Is such a stress anecdote out there for nonprofit executives spending their spring days mired in dread?

Agencies that make an investment in a quality case management solution will find that they are able to have greater confidence in predicting future revenue generation, because they can speak to program impact in quantitative terms that many foundations, individual donors, and potential customers require.  

Perhaps more so than government agencies that are primarily concerned about an organization’s capacity to enroll participants and deliver services, private and corporate foundations are additionally concerned about an organization’s capacity to create impact.  To what extent can the organization speak to its impact – the way in which participants’ lives change for the better as a result of program participation?  Serendipitously, such qualitative impact data could also be a game changer at speaking engagements with potential individual donors as well as for online donors whose giving tends to be based on data relative to impact that is shared on the organization’s website, other social media platforms, as well as resources like Charity Navigator.  Such data on an organization’s website could also generate many new customers for an organization’s fee for service programs, even in or perhaps even more likely in tighter economic conditions.  

A Powerful Fundraising Tool: A quality case management solution provides development teams with all the data they need in one place to:

  • answer the questions posed by individual donors; 
  • produce annual reports that provide a 360° view of the organization that not only speaks to service numbers but impact; 
  • continuously and easily update social media statistics; 
  • speak to organizational experience in government RFPs; and 
  • elevate program impact to private and corporate foundations.  

Imagine what impression a potential major donor might have of an organization that is able to provide answers to questions within 24 hours.  Imagine how being able to speak to utilization and impact in real time on the agency website might drive increases in online donations.  According to Ilma Ibrisevic in her blog, “15 Techniques to Boost Donor Acquisition, “More than ever, millennials and Gen Z seek out information about which nonprofits to donate to on social media. Although these young generations still do not make the biggest donations, their impact and donor value is increasing every day.”  Over and over in philanthropy research, foundations responded that the number one reason they deny a grant request is that it does not match the foundation’s priorities.  Imagine being able to send targeted outreach and proposals out for specifically those areas with projected fiscal year shortfalls.  According to numerous research studies in philanthropic giving, the number one reason a foundation denies a grant application is due to the lack of alignment with the foundation’s priorities.  Knowing exactly the programs that need additional funding can guide targeted research into the foundations funding similar programs.  Even further, with all the organization’s data in one place, development teams are not slowed down waiting for calculations and reporting from program staff and as a result, can generate significantly more philanthropic requests and reports to secured foundations.  

Beyond measuring impact, a quality case management solution will also afford organizations the opportunity to not only secure additional funding from the aforementioned sources but also increase the changes for coveted multi-year funding by demonstrating an exceptional ability to be great stewards of the money awarded.

A Powerful Quality Assurance Tool: A quality case management solution provides leadership teams with real time dashboards that reflect the success of agency programs.  Such data in real time is a critical tool for individual and team supervision, as well as ensuring audit and site visit preparedness.  Dashboards also support continuous quality improvement via strategic conversations around how a program model may be tweaked to influence everything from better enrollment and utilization to more significant positive change or impact on those who participate.  When these “mid-flight adjustments” do not produce the change in outcome data, organizations do not need to dread a mid-year call to the funder.  Contrary to perhaps popular opinion, foundations are not opposed to hearing mid-year bad news relative to program performance.  It demonstrates the organization is keeping its eye on the ball, is invested in impact, is a good steward of the funds provided, and sees the foundation as a thought partner.  Ultimately, whether the model is tweaked or replaced, such regular, ongoing conversations can better ensure positive year-end reporting and definitely keeps these philanthropists impressed and therefore consistently generous. 

A Powerful Fiscal Management Tool: A quality case management solution not only provides real time dashboards that inform leaders relative to programmatic success, but can also layer in data relative to fundraising performance and fiscal data such as fee for service revenue.  Perhaps this spring, a nonprofit leader can take a higher level of risk relative to revenue projections knowing that the dashboard will allow for timely corrective action, if necessary.  Additionally, a shortfall on monthly or quarterly fundraising goals might be offset by better than expected revenue generation in fee for service programs or vice versa.  A leader will have this data in real time in order to continuously plot a timely fiscal course.  Finally, amongst key findings in a Donor Loyalty Study was the fact that individual donors are most likely to give to nonprofits they can trust and that trust is defined by a sense that the nonprofit spends donated money wisely.  Even better news is that these donors tend to evenly divide their giving between restricted and unrestricted gifts.  Finally, and equally important to both individual donors and foundations, a quality CRM will support an organization in keeping infrastructure costs down by automating many formerly time-intensive job functions.  Lower infrastructure costs means that an organization can maximize the percentage of every donated or granted dollar spent on programs, and from there make some meaningful ROI calculations.

At Exponent Partners, we’re passionate about building information systems that empower nonprofits to create radically better impact. Our outcomes-focused approach leverages the full potential of people and technology to achieve its goals. Our flagship product, Exponent Case Management, is a customizable and user-friendly system that provides real-time data insights to program and agency leadership. 

Our team of industry experts is committed to delivering exceptional results by leveraging their expertise in implementing various case management functionalities on the Salesforce platform, such as NCCM, PMM, and the new Nonprofit Cloud Case Management. With our team of experts, you can be assured that your nonprofit will have the necessary support to take your impact to the next level.

Moreover, we can implement fundraising systems on Salesforce, providing nonprofits with an all-in-one system that streamlines agency and impact management. As your partner, we understand the unique challenges that nonprofits face and are here to provide support and guidance in taking your organization to the next level.

Don’t hesitate to contact us today to learn more about how Exponent Partners can empower your nonprofit to create a lasting impact on your community. Our team is always ready to assist you in achieving your goals.