The income budget is usually more sensitive than the expenditure budget and subject to fluctuations and change. The organisation will need to make assumption in order to make estimates of future income and these should be noted down an the most important ones provided with the budget. The estimates will not make sense to anyone without explanation of the basis. Different types of income will need slightly different techniques for forecasting, but it should be possible to group income into categories of:
This income will be when the source is known and the funds may have already been received. For example a grant or contract may have been awarded over a three-year period, so the income for future years is certain. In budgeting it may be useful to include income in the budget that has already been received, for example as restricted funds, but remains unspent. This makes sense when the organisation is trying to match income and expenditure into the same budget period.
This will describe sources such as committed and direct debit donations, subscription and some grants and donations where the funder has indicated that the funds will be forthcoming. Some calculation may be necessary to arrive at a sensible forecast figure for the budget. For example, one has to assume that only a certain percentage of regular income from subscriptions or direct debit giving will be received, because people may cancel or move banks. Past experience may help the organisation to arrive at the percentage, which may be quite high (say 95% of the amount of current subscribers), but the organisation should also take into account activities to increase membership or regular giving.
The organisation may also be using fundraising techniques such as raffles, direct mail, or applications to companies and charitable trusts. If the charity has experience of the method of fundraising, then the organisation may well be reasonable to include an estimate of such income under the category of probable. If the organisation has no experience, then it would be wiser to decrease the amount expected and push the income source down into a lower category of €˜possible or €˜hope for.
This may include new sources of funds, or new funds from existing sources. So it may be that the organisation is trying a new form of fundraising and it will have to estimate the amount it may receive. It usually takes some time to establish a new fundraising method, so the estimate in early budgets should be low. New fundraising methods can be included in this category, where the plans have been made and it is definite that the fundraising effort will take place. This category can also include the income from new members or new gift aids where there is planned activity to recruit new members or new donors.
This would be appropriate for the as yet unknown sources of income, where it is clear that the organisation will need to find further funds. This may also include new or untried fundraising methods or fundraising for which there is no detailed plan.Obviously, the organisation should not have too much income in this category!
Income budget should be rooted in the fundraising plan, which should give full details of the costs and forecast income for each method of fundraising. The fundraising plan has to be achievable and should include reasonable estimates of forecast income. The targets set for fundraisers may not be suitable as the source for the income budget. It is more prudent to include a lower estimate of forecast income in the budget, to ensure that there is not a deficit.
The timing of fundraising will be crucial to the financial stability of the organisation.Some organisations adopt a policy whereby they raise the funds first and then start the spending plan. This may not be possible for organisations, which are fundraising to fund current spending, but it is worth considering as a policy for the uncertain income in the fundraising plan.