This is very important to donors. No one wants to fund a “black hole” so donors are very nervous about funding a deficit. After all, there is no mission without a margin.
Include the latest audited financial report on your website. It is also helpful to include a few paragraphs on the website that explain the financial performance and pre-empt any concerns. For example, if there is a significant reserve over and above employee entitlements, then this may be necessary to fund a future major program or building. Alternatively, if there is a poor financial result compared with previous years, an explanation should be given that includes a plan for improving the financial results in the coming years. There is no mission without a margin!
Be clear in financial reporting and include pie graphs to clearly show expenditure and income sources.
Don’t get hung up on the percentage of expenditure to attract income. Most people now realise that organisations need to invest and pay for professionals to raise funds.
However there is unease when it comes to paying for “chuggers”, other “face-to-face” fundraising methods and lotteries. These methods of fundraising are notorious for the small percentage in raised income that actually ends up supporting the cause.
Significant donors and decision makers of charitable trusts don’t like receiving multiple letters or emails asking for donations. Make sure that you segment the database and treat the major donors with courtesy and respect and not approach them for general donations or send them standardised letters. This can be seen as wasteful and an example of poor management.
Another thing that donors analyse is how much it costs to administer the organisation. They would prefer to see funds spent on addressing the “cause” rather than funding the administration team unnecessarily. Sometimes it might make more sense to “outsource” bookkeeping, payroll and administration than manage all of this “in-house”. It is definitely worth investigating.