Will we make the fundraising target this year?  How about next year?  What should we budget for donation revenue?  These are among the most difficult questions for fundraisers to answer.  Here are some tips and traps to help you answer them:

Good predictions need good data – Obviously, the more detailed your fundraising database, the better your ability to extrapolate will be, but there are some traps to watch out for:


Relationship changes – Anything that changes the way donors see your organization (positive or negative) will impact their future donations.

Database changes – If the way that donations are recorded has changed, it may impact the trends you see.  Check that the way Appeals and Campaigns are recorded consistently and are still relevant to the organization.  This is particularly important if there has been a change in fundraising staff.

State your constraints and assumptions – For me, the difference is that a constraint is something completely beyond your control, e.g. the rate of inflation or government spending cuts, as opposed to things you can influence which are the factors in your assumptions, e.g. the response rate to direct mail pieces.  Stating constraints and assumptions helps you and others check your reasoning.  The big traps in constraints and assumptions are the hidden assumptions, e.g. assuming that what has worked before will continue to work.

Use external sources – One of your constraints is how the charity sector as a whole is trending.  Is giving generally up or down?  Are people feeling optimistic or pessimistic about the economy?  Use industry wide statistics to support your reasoning.

 Analyze previous forecasts – Results never go as planned.  The previous forecast was likely wrong.  Even if it was right, it was probably right for the wrong reasons.  Still, the way to get better at forecasting is to look at what was done in the past in light of what actually happened.  You will find factors that should be considered in the future.  Be wary of these traps:

1. Missing the smaller trends – Hidden beneath an overall positive trend may be smaller negative ones (or vice versa).  For example, an annual campaign that met its goal because of a large, unexpected bequest.  Consider what the loss of a major donor will have, as well as what needs to be done to improve the annual fundraiser.
2. Overemphasizing One-Time Events – It can be difficult to tease out the impact of a single event, e.g. a major positive news story about the organization that just happened to coincide with a campaign.  You may want to include it in your list of assumptions.

Forecast early, forecast often – The budget may be an annual document that is “set in stone”, but forecasts are made to be updated as conditions change. It is a good idea to have a 12 month rolling forecast in addition to just forecasting to year end.  That way, you are always looking ahead, incorporating changes as they happen.  It also gives you a place to report donations planned for this year that get deferred until next year, whether due to donor or program changes.  The trap to avoid is inconsistency.  If your forecasts vary too much, you will lose credibility.

Write the forecast

It’s not just what you say, but how you say it that counts.  There are many ways to present a forecast, but watch out for the trap of hedging your bets with a lot of explanation.  People tend to ignore long paragraphs.  Presenting your forecast as a range can be problematic as well, particularly when your audience is looking for a single number.  The optimists will take the top number, the pessimists will use the bottom of the range and the accountants will average the two.  Your writing style is important too.  As you can see, I prefer an almost point form style that is easy to scan, with lots of sub headings, paragraph titles and lists, but you will need to adapt your style to your audience. 

Support from other staff

When presenting a fundraising forecast, the person in charge of Finance / Accounting should be an ally.  Discuss your report with them in advance.  It is a good practice to be sure that the fundraising forecast and the financial reports be consistent or any differences explained.  That will avoid unwelcome surprises at the meeting.

The Executive Director can also help by gearing program spending to fundraising.  A simple strategy is to delay spending until the associated funding has been received.  That way, if the donations are not received as expected, the spending can be reduced or delayed.  A section can be added to the report detailing what will happen if the anticipating funding is not received as expected, or it can be put in a positive light in the form of a wish list if the funding is received.

It may not feel like it, but even when preparing a fundraising forecast, you don’t have to be alone.

For a more detailed discussion of this issue or computerized systems to support your accounting and fundraising needs, contact Bill Kennedy, CPA, CA at http://EnergizedAccounting.ca .  Bill is a Certified Information Technology Professional and QuickBooks Online ProAdvisor who works with charities to produce clear financial reports and update computer systems.  

Photo by Garry Knight at https://www.flickr.com/photos/garryknight/