Cut Budgets without Cutting Marketing

Many organizations are feeling the pressure to cut membership marketing budgets these days. I have argued on this blog with that mind set, but today I want to give a very practical tip on how to cut your budget and not cut any of your marketing activities.

Here is how.

When a member joins or renews with an organization, the cash payment is typically not realized at the time of payment. Instead, most organizations accrue the payment over the year the member will be served. So one twelfth of the dues are realized each month.

However, almost all non-profits that I know realize the marketing cost at the time the expense is incurred. The impact of this is if you spend $120,000 the last month of your fiscal year on a membership marketing campaign, all those costs are typically realized in that month even thought the resulting revenue is spread over 12 months.

So here is the opportunity to save money. There is a little know AICPA Accounting Standards, SOP 93-7, on Advertising Costs that allows for direct response advertising to be spread over the time of the delivery of the member benefits from a promotion.

The standard says, “The amounts of direct-response advertising reported as assets should be amortized over the estimated period of the benefits, based on the proportion of current period revenue from the advertisement to probable future revenue, subject to a net realizable value test.”

By the way, as a disclaimer, I am not an accountant. So please work with a financial professional on putting this practice into place.

So what are the implications of this standard?

Going back to our example, using this accounting practice, you would only have realized $10,000 of your marketing budget for your acquisition campaign instead of $120,000 effectively cutting your marketing budget without cutting the program. The remainder of the project costs would be spread over the next 11 months in your upcoming fiscal year.

In times when every penny counts, linking membership marketing costs to when membership dues revenue is realized is a smart way to stretch your budget.