Your institution most likely will have set procedures for the preparation and management of budgets. You probably will be allocated an initial budget to get things started whilst you submit a request for future investment.
Devising an accurate, realistic budget is important. By examining your costs in relation to the income you generate, you will be able to measure your performance – i.e., your return on investment (ROI). Generally speaking, the newer the office, the higher its costs; but as an office matures, its ROI will improve.
How to prepare Your budget
Developing a budget is an integral part of strategic planning and should not be viewed in isolation. Your finance office will be a good source of help as you prepare your budget. When preparing:
- List all the unavoidable costs and try to estimate them as accurately as possible based on research, historical and comparable information. These costs might include items such as postage, stationery and space overheads
- Revisit your fundraising strategy plan and list all the costs associated with the activities you are proposing. Your budget should reflect the priorities of your strategy and should not undermine the credibility of your fundraising targets
- If you have events planned, estimate their costs and what proportion of these might be defrayed by ticket sales, sponsorships and other generated funds
- Assess whether you have capital expenditure requirements and when these might happen. For example, do you need to purchase new information technology?
- Build in some contingency funding
- If you have staff with specific areas of responsibility, ensure that they assist in devising the budget for their activities so that nothing is missed
Possible budget headings
Every set of circumstances will be different, but possible budget line headings include:
- Staff pay
- Temporary staff
- Staff training or conferences
- IT support
- Design and print
- Data services (cleaning, analysis, etc.)
- Consultant fees
- Professional fees (legal, accountancy, etc.)
- Catering and hospitality
- Database support (helpline charges)
- Event management
- Website maintenance
- Space overheads
Conduct a reality check
Determine your recurrent operating budget, factoring out any one-off start-up costs such as office furniture, new computers, a database solution, etc. Divide your costs into staff and non-staff costs.
A rule of thumb identified by fundraising consultant Bill McGoldrick is that you should aim for a ratio of approximately 3:1 – i.e., you should be spending approximately 75 percent of your budget on staff. Spending significantly more than this will result in an office full of inefficient and ineffective staff lacking the resources to get their jobs done. Spending significantly less will result in an office of overworked staff lacking the ability to achieve everything that is asked of them. However, this is not an exact science, and the ratio is context specific.
Justify your case for funding
You will probably be asked to justify your budget request and to defend the figures that you are proposing during a process of scrutiny from your institution’s finance office and senior colleagues.
It is essential that you understand and can explain how you have reached your figures and that you can justify your requests for future investment. The links between your budget request and your strategy should be evident, and the potential ROI (short- and long-term) clearly explained.
It is likely that elements of your budget, such as high-level entertaining, may be unusual for a traditional university setting, so you must be prepared to explain why they are important to your fundraising efforts.
Often an initial increase or allocation of resource may be given. Dependent on your success in delivering the anticipated ROI, further resources will be made available. Building the trust and understanding of the head of the finance office is often the key to unlocking additional resources. (This may be difficult to do if there have been prior failed attempts to support development activity by the institution. Be aware of historical context.)
Managing your budget
It is your responsibility to manage your budget effectively. Keep careful track of expenditures and regularly review your expenditure-to-date and projected future expenditure in each of your budget headings.
You may find as the year progresses that you need to transfer money between budget headings to reflect levels of expenditure that differ slightly from those you projected. An unexpected cost (e.g., having to cancel an event or reprint a publication) can mean reassessing your budget, cutting back in other areas or even asking for further investment from your institution.
Effective budget management is achieved through maintaining accurate records, reviewing the budget on a regular basis, having systems in place to ensure expenses are authorised and integrating your budget management into the strategic and operational plans of the development office.