Animal shelters have come a long way since their inception. Early animal control efforts in the U.S. began with the founding of the American Society for the Prevention of Cruelty to Animals in 1866. Then, the function of animal control was primarily threat prevention, with the goal of removing animals from the streets to reduce the spread of rabies. Today, animal sheltering has developed into an industry concerned with compassionate care and rehabilitation for shelter dogs and cats.

A lot has changed for the better, but financial resources have largely failed to keep up. Today, animal shelters have a higher level of need, a broader range of services provided, and increased public scrutiny, but budgets have not grown to reflect this. This means that animal shelter financial planning and budgeting is unique when compared to other industries–you’ve got to be crafty with limited resources, to anticipate market trends and contributed revenue streams, and to be transparent with stakeholders to maintain public support. Let’s talk about some budgeting best practices tailored to the animal sheltering industry.

Why Does Financial Planning Matter?

The answer to this question may seem simple: financial planning is necessary to maintain a viable business and stay in good standing with the IRS. As a tax-exempt organization, an animal shelter needs to have well-maintained finances to keep up with documentation and filing of 990, 990-EZ, or 990-N tax documents.

Here’s the not-so-simple answer: financial planning is essential to making the biggest possible impact on the animals and people that you serve. Financial planning impacts everything from the well-being of your staff members to the types of programming you’re able to provide for the animals in your care. Good financial sense can save a shelter from constant staff turnover, poor behavioral outcomes, and higher euthanasia rates.

So, we’ve established that financial planning is important. Now, where should you start? Let’s talk through our steps toward a better financial future today.

Creating a business plan will help you get clear on your mission, sort out your finances, and provide purpose for your staff. Here’s Laurie with the team at Wayside Waifs in Kansas City.

Step 1: Create a Business Plan

Maybe you’re looking to open a brand-new startup, or maybe you’re running an already existing shelter that lacks clear vision. Whatever the case, the first step toward maintaining your finances is having a clear idea of your organization’s mission, goals, and plans for growth. A solid business plan will help you to decide where to focus funding and give you a roadmap for growth.

If you’re struggling with where to start, HumanePro offers a helpful sample business plan to get the ball rolling. In collaboration with your board and staff, tailor this plan to fit your shelter’s unique needs.

Step 2: Create Your Budget

Once you’ve come up with a clear business plan, you’re ready to begin creating your budget. If you’re looking to create a startup, you’ll likely need to rely on market research to complete some aspects of your budget, whereas already established shelters can utilize past performance as a benchmark for budget creation.

Who Creates the Budget?

Your budget should be made in collaboration with animal shelter staff and your board. Depending on the unique structure of your organization, the process for creating a budget might go a little like this:

High-level discussion with your board: The first step to creating your budget is often to engage in a facilitated discussion with your board. Topics discussed might include strategic goals, financial objectives, and programming priorities. The contents of this discussion will shape the creation of your budget.
Senior staff create the budget: High-level staff members–often your program directors or executive director–will draft the budget. Ideally, senior staff will consult with boots-on-the-ground staff, who can offer well-rounded insights into what did and did not work in the previous fiscal year.
Board approves the final budget: Once your budget has been drafted by shelter staff, your board will need to approve the budget annually.

When Should You Begin the Budgeting Process?

Based on the brief overview above, you can probably tell that budgeting is a time-consuming process. You’ll need to give yourself plenty of time to thoughtfully and intentionally consult with your board, involve your staff, conduct market research, and review past performance before even beginning to draft your budget. That’s why we recommend getting started about 3 to 6 months prior to the end of your fiscal year.

What Information Should You Have Before Drafting Your Budget?

Before beginning to draft your budget, you’ll want to make sure you have your ducks in a row. A little preparation on the front end will ensure that your budget drafting process is as smooth as possible. With that in mind, be sure you have the following items handy in an organized, concise format:

A dark-brown medium-haired dog runs forward in a fenced, grassy area with a wooden bench to the left. — Before beginning to draft your budget, it can also help to get clear on what it costs to care for the animals housed in your shelter.

Your Business Plan

Remember that very first step we discussed? Here’s a place where it comes in handy. Having a copy of your business plan will help you to keep your mission, goals, and original plans for growth in mind as you budget.

2. Your Strategic Plan

Next, you’ll want to have a copy of your strategic plan. This document should be the result of the high-level conversations you’ve had with your board, and it should include information on new business goals, programming expansions, hiring initiatives, etc.

3. Current Financial Reports

Next, you’ll want to have copies of all of your current financial reports. Again, if you’re opening a new startup, this will likely need to be supplemented with market research, but existing shelters should have records of past financial performance, including:

Your current budget: If you’ve been running your shelter for a few years, this likely isn’t your first rodeo with budgeting. Have a copy of your current fiscal year’s budget before beginning to budget for next year.
Profit and loss statement: Also known as a P&L statement, this document outlines the end operating results of your last completed fiscal year.
6-month results: This one is optional, but very helpful. Drafting a 6-month P&L statement that outlines where you were at midway through your current fiscal year can give you a more accurate picture of your current financial health.
Funder information: This document should outline each of your large funders, giving you an idea of their current intention for the next fiscal year. Stay tuned to read more on forecasting funder intentions in future blogs.
Current financial forecast: If you aren’t new to running a shelter, you’ve probably created a forecast to anticipate your financial future. If not, no worries–we’ll discuss how to create one in future blogs.

Building Your Budget

Okay, so that’s a lot of work… and the budget isn’t even drafted yet! This sample budget should help to get the ball rolling, and here’s a brief overview of what you should include in your budget:

Revenue

You won’t know what you have to work with if you don’t know your revenue, so this is a good place to start. Revenue should be split into high-level categories, including (but not limited to):

Earned revenue: Revenue earned from adoptions, merchandise, etc.
Donations: Funds gifted by individual donors
Fundraising events: Revenue earned from special events
Grants: Financial gifts from foundations or corporations
Capital campaigns: Revenue earned from planned campaigns

Two women place linens in a clear, plastic bin. The women both have dark skin and hair, and they talk to two white men with dark hair and mustaches. The group all wear green t-shirts and white lanyards. — Keep track of funds raised in fundraisers and community events. This helps to build your budget, but can also inform future fundraising endeavors.

2. Expenses

Next, you’ll need to know the typical cost of your expenses to know how much revenue will be left over for new initiatives and goals. Expenses should be split into high-level categories, including (but not limited to):

Personnel: The cost of employing staff
Contractors: The cost of contracting outside providers
Occupancy: The cost of maintaining and operating the property where your shelter is located. This can include: rent, property taxes, utilities, insurance, maintenance, etc.
Animal care costs: Variable and fixed costs of caring for the animals housed in– and-out of shelter. This Q&A with Dr. Nicole Widmar of Maddie’s Fund offers extensive ideas of what these costs might include, as well as other helpful budgeting insights to supplement this article.

3. Operating Surplus/Deficit Line

By subtracting expenses from revenue, you’ll be able to learn whether your revenue exceeds expenses (surplus) or if your expenses exceed your revenue (deficit).

4. Projected 12-Month Results

Using the previous three steps, you’ll be able to project your financials to predict where you will most likely end your fiscal year. As stated above, we’ll talk more about forecasting your finances in future blogs.

5. Variance

This is where you’ll compare last fiscal year’s predicted budget to the actual amount earned by the end of the year. Calculating variance can help you to identify errors in your original budget, giving you valuable insights for the new fiscal year.

If you find yourself struggling to build your budget yourself, especially if you are a new shelter relying on market research, consider utilizing the HAAS Budget Calculator. Created by Human Animal Support Services (HASS), this calculator was created to help animal shelters to understand and estimate their costs in an easy, straightforward format.

Communicating Your Budget

Building your budget is half the battle; communicating your budget to stakeholders is the other half. To ensure your budget is easy to understand, make sure to:

Keep it to one page in length
Give adequate detail, but don’t overwhelm
Include notes, explanations of significant operational changes, and graphs to illustrate figures

Laurie, wearing a dark sweatshirt and pants, trains shelter staff members in her playgroup intensive. — Laurie Lawless, founder of SBI, does it all. Between staff training, admin support, playgroup intensives, and more, she has the solution that your shelter needs.

Step 3: Rinse and Repeat

As you might have noticed, the work of creating and maintaining your budget is never really done. You’ll need to be constantly adjusting, reflecting, and discussing as the market changes, funding adjusts, or life throws you little bumps in the road. And really, isn’t that just the nature of being a human?

Still, it’s a lot to do when you’ve got a shelter to run. If you find yourself needing a bit of extra support, Shelter Behavior Integrations (SBI) has you covered. Laurie Lawless, the brilliant mind behind SBI, has years of experience in the sheltering space, and her remote admit support services are the perfect fit for bogged-down business owners. Check out the SBI website to learn more about Laurie’s services, access educational resources, and read our blog!

Planning for the Future: A Guide to Animal Shelter Budgeting