Funding Pipeline Reports Are Essential in a Changing World
Predicting the unpredictable is becoming more of a mandatory task for nonprofit organizations. Adapting to rapidly changing conditions requires nonprofits to focus more of their tactical planning on future expectations and less on the current budget, history, and past performance. Preparing a funding pipeline report is an effective proactive step to help organizations grapple with uncertainty related to their near term, short term, and intermediate term future sources of funding.
Budgets by design are mostly rigid, based on a fixed set of settled-upon assumptions for a multitude of unstable factors that are hard to anticipate. Unique challenges arise when a mostly rigid nonprofit budget must be operational during periods of high funding volatility and uncertainty.
Moreover, predicting future funding for a nonprofit organization is inherently difficult because of ever-changing economic conditions, constituent needs, and the willingness and ability of supporters to provide financial resources. The difficulties compound as planning moves beyond just the near term (current year budget) and short term (next year’s budget) to include intermediate term (budget forecasts for the following two to three years). However, this intermediate term outlook is essential for strategic planning purposes and to protect an organization’s financial health. Planning must include a two-to-three-year outlook to be effective and to anticipate future funding risks as well as to be innovative and embrace opportunities for change as they may arise.
So, how does an organization solve the planning “riddle” of what future funding may look like?
The best answer is to commit to regular assessments (or even better, regular reassessments) of core elements of your organization’s funding.
This process can be daunting, and maybe even frightening. Many organizations resist considering a possible future in which funding declines through loss of financial resources that the organization has relied upon for many years. The first step to finding a solution is to visualize scenarios both good and bad (best-case and worst-case). Once these high/low parameters are set, risk mitigation and real solution-based problem solving can begin.
Using a funding pipeline worksheet will provide both a structured methodology and a straightforward visual tool to peer into the future and consider what changing funding patterns may look like. We suggest that you download our funding pipeline worksheet and related set of instructions to use as a visual guide.
There are four core benefits that come from funding pipeline assessments and reporting.
1. Real-Time Documentation for Actual Funding Changes
The funding pipeline worksheet provides a place to record actual funding changes as they occur. When notice is received that a source of budgeted funding is going to change (current budget or future year budgets) there usually is no immediate journal entry and no formal place to document the notice of change. The funding pipeline worksheet becomes the place to document funding changes as soon as the information becomes available.
2. Exploring the Range of Anticipated Funding Changes
The funding pipeline worksheet also provides a place to record funding changes that may occur in the future because of factors such as changing economic conditions, consumer confidence, and shifts in federal grant allocations, to name a few. The funding pipeline worksheet provides a place to explore best-case and worst-case scenario planning to help visualize a range of changes for a source of funding on a real-time basis. Often signals are received that lead to anticipation that change is coming. However, those signals are usually not clear enough to know the total amount and timing of the change. Using a best-case / worst-case approach allows us to explore in the funding pipeline worksheet the range of possible changes.
3. Helping You Assess Your Confidence in Funding Sources
After the range of possible changes has been determined, the funding pipeline worksheet should be used to document specific likely outcomes that can safely be counted on as a source of future funding. The word “safely” is chosen with great care, meaning an outcome that has a high degree of confidence for achievement.
Confidence levels for your specific funding sources should be assessed as follows:
If the likely case is close to the worst case, confidence in obtaining the funding is low.
If the likely case is near the best case, confidence in obtaining the funding is high.
If the likely case is exactly in the middle, the degree of confidence is neutral reflecting a “fifty-fifty” percentage chance that this funding will be received in the future.
4. Assessing Funding for Future Year Budgets
Finally, the funding pipeline worksheet provides a platform to chart additional years of expectations for funding. Expected funding in these forecast budgets (fiscal years 2026, 2027, and 2028 in this worksheet) is only for funding that is known and can be counted on to be received with a high degree of certainty. What results is an early picture of the percentage of future budgeted funding as compared to current budgeted funding that can be relied upon, and the percentage gap that needs to be closed before that fiscal year begins.
A funding pipeline worksheet can also be used to track future funding prospects along with assessments of low, medium, or high probability for future acquisition of these funds. Viewing the list of prospects alongside current funders and new funders provides an opportunity to view the total possible funding range for the future.
Planning Tip – A funding pipeline report can be a value-added planning tool that will help to assess future sources of funding. The details in the funding pipeline report will be specific to the funding source (grantor, donor, member, corporate sponsor, etc.) and will include a range of requested funding amounts with notes including comments about success. Because of the highly sensitive nature of this information, funding pipeline reports must be kept confidential with only summary totals shared outside of senior management. Accidentally sharing this sensitive information can damage both the trust of your funders as well as your prospects for collection.
Funding pipeline reports by design are not intended to be perfect. They are designed to reflect possibilities, working as a sketchpad and a planning enhancement tool to provide early warning signs, as well as a place to quickly park new information as it surfaces. For these reasons, it is best to commit to regular updates (adding new information as it becomes available) and periodic reassessments of current and expected future funding, watching closely for shifts in funding trends and patterns.
