How Fundraising and Finance Work Together

To successfully run a nonprofit organization, each staff member and volunteer needs to be on the same page about how they work together to further the organization’s mission. At many nonprofits, however, fundraising and finance departments often find themselves at odds with one another.

Misunderstands generally come from the differences in financial reporting and goal setting between the two departments. Accounting and finance teams can only report on the money that’s there, while fundraising teams report pledges as revenue for the organization. Fundraisers primarily focus on obtaining as much revenue as possible, while finance departments ensure that money can be allocated according to the budget’s greatest need.

How can you help integrate your finance and fundraising departments successfully despite their differences? We’ll discuss these five strategies: 

1. Use your fundraising data to craft your budget.
2. Create sustainable revenue sources. 
3. Sync up between your fundraising and finance teams.
4. Review financial information on a regular basis.
5. Leverage financial information for better donor relationships.

Especially as the end of the year approaches, a time of increased stress on both teams, it’s essential that you understand how fundraising and finance teams overlap and can work better together. 

1. Use your fundraising data to craft your budget. 

Toward the end of the year, your fundraising team will be busy crafting a case for support to maximize donors’ year-end generosity. Meanwhile, your finance team will make sure everything is in order for tax season, create the budget for next year, and ensure enough money is allocated to cover both overhead expenses and programs. 

For each team to accomplish its respective objectives, there needs to be an open line of communication between them. Encourage your fundraising team to provide the finance team with reports on information such as:

• • Amount of sustainable revenue from monthly recurring donations. These tend to be more sustainable and predictable, helping the accounting team create more accurate budgets.
  • Historical year-end giving numbers. This will help the finance team predict the revenue during the year-end giving season.
  • Unfulfilled pledges throughout the year. Because fundraising and accounting teams record pledges differently, open communication about which ones are unfulfilled will help both teams understand any discrepancies in their reporting. 

With these reports, the finance team can develop a more accurate budget by basing it on the likelihood of receiving donations throughout the following year. 

For example, monthly giving programs have higher retention rates—around 80% for the first year and 95% after five years. Whereas the average first-time donor retention rate is only around 20%. Understanding these differences in retention rates will allow the finance team to more effectively plan for revenue in the next year.

2. Create sustainable revenue sources.

As we touched on in the last section, recurring donations are much more likely to be retained throughout and over the years. Therefore, your finance team can count on them as a sustainable source of revenue as they plan for future revenue generation.

Fundraising teams can help further the organization’s financial growth and success by promoting more sustainable revenue streams like recurring donations. To do so, fundraising teams can:

• Push for more monthly donations from donors. Fundraising teams can leverage multi-channel marketing to promote a monthly giving campaign, showing supporters the value of consistent giving over time. They can also push for more recurring donations simply by adding an option to turn a one-time donation into a monthly gift directly on your nonprofit’s donation page. 
• Focus on stewardship and appreciation. Better relationships with donors will encourage higher average retention rates overall. Develop intentional donor stewardship strategies to make supporters feel involved and appreciated, and they’re much more likely to become longtime supporters of your organization.
• Develop relationships with local businesses. Seek out businesses that already have established corporate giving and philanthropy initiatives that your mission can benefit from. Then, work on building strong partnerships with those businesses that will continue to provide sponsorships and support through the years.  

These revenue streams will be especially helpful if they are given as unrestricted revenue. Unrestricted revenue provides more flexibility for the organization to allocate the funding as they see fit rather than in accordance with restrictions and limitations imposed by the donor. As you’re developing relationships with supporters and businesses, explain the importance of unrestricted revenue for your organization and encourage them to give without restrictions. 

3. Sync up between your fundraising and finance teams. 

To better understand one another’s goals and initiatives, your fundraising and finance teams should have meetings to sync up on a regular basis. This provides a chance to reconcile data and address any discrepancies, ensuring everyone is on the same page about current revenue for the organization.

Often, discrepancies between fundraising and financial information simply come down to reporting. When going over reports, make sure both teams understand the key differences in reporting for various revenue sources including: 

• Grant types. For accounting, different types of grants are recorded in different ways. But for the fundraising team, grant funding may be recorded all at once as soon as it’s won.
• Pledges. Fundraising teams record pledges as revenue, while your finance team needs to wait for those pledges to be fulfilled in order to record them in the system.

Donately’s guide to online donation tools explains how easy it is to record revenue when you raise money online through a donation platform. If your fundraising team has high-quality fundraising software, the process is almost fully automated! However, it becomes more complex for your accounting team as they managet the various restrictions, installations, and unfulfilled promises. Your fundraising and finance teams need to understand each other’s reporting practices to minimize confusion.

Imagine you’re a fundraising professional and you report a revenue number to your executive director, but your finance director provides a different number. This could make both departments look bad! Syncing up and coming prepared to explain any discrepancies is the best way to ensure everyone is on the same page. 

4. Review financial information on a regular basis.

Everyone at your nonprofit should have some sense of the organization’s financial standing at any given time. To keep everyone updated, set standing meetings to occur every quarter to sync up with the entire team about how the organization is doing financially. It’s especially important to compare actual expenses with the budget for the year during these check-in meetings. 

Complete a check on your finances on a quarterly basis, and perform an annual review where your organization can go over the information that needs to be provided to the IRS in your Form 990. If any staff member is unclear on the details of this process, you can provide them with resources like File 990’s explanation of IRS Form 990 EZ. 

If anything in your finance check looks off, you can dig deeper into individual data points to see where things are going askew. Some underlying possibilities for discrepancies could include:

• Paying unplanned overtime to employees (easily identify this with time tracking software) 
• Programs that are more expensive than initially anticipated
• Campaigns that may not be performing as well as anticipated
• Unexpected fees associated with your business bank account

Once you identify the source, you can take action to bring your organization back on track. For example, if you find that campaigns aren’t performing as well as you thought they would, you might look at your online donation page conversions and make sure you’ve optimized the page well.

5. Leverage financial information for better donor relationships. 

It’s easy to find ways that your fundraising team can support your finance team. But what about the other way around? 

The information your finance team collects can actually help your fundraising team develop stronger relationships with your donors. Leverage financial information to support relationship development in these two ways:

• Follow up after campaigns. Providing financial updates to donors is essential for any fundraising campaign. For example, you can provide updates to volunteer fundraisers during a peer-to-peer campaign to motivate them to continue raising funds. But you should also follow up after the campaign, telling them how much you raised and how that money will be used in your budget to drive your mission forward. This allows them to see the real impact on your nonprofit’s finances.
• Provide annual reports to donors. Annual reports summarize your organization’s financial information specifically for donors. These updates create a more transparent relationship between donors and nonprofits by showing donors exactly where their contributions go.

Essentially, the more transparent financial information you can provide to your donors, the stronger the relationships you can build. 

Despite frequent opportunities for misunderstandings between departments, fundraising and finance work together in a number of important ways to ensure your nonprofit runs smoothly. Use these strategies to help both teams understand the various ways their two departments benefit one another and work together to support your cause.