This template outlines the main headings for a funding proposal, and briefly describes what information should be included under each heading.

Cover Page

Newtown Signposting Project

Proposal for funding

 

Submitted to:
National Tourism Funding Agency – For attention: Mr P Dlamini

From:
Newtown Route Forum

Date:
6 July 2014

Contact details:
Ms J Mkhize
Financial Manager
Newtown Route Forum
PO Box 1, Newtown, 2000

Email: jmkhize@newtownroute.co.za
Tel: 011 123 4567
Cell: 083 456 7890
Website: www.newtownroute.co.za

Contents

Executive summary (project overview) – page 3

Background information and statement of the problem – page 4

Project detail – page 6                                             

Evaluation plan – page 9

Conclusion – page 10

Appendices – page 11

Executive summary (project overview)

This section should include a brief summary of the context (problem statement), aims and main elements of your project. Also highlight the benefits and beneficiaries. It should ‘grab the interest’ of the funder by exciting them about the positive impact that your project will have on your community.

Background information and statement of the problem

This section should give more detail (statistics if possible) on the problem you are trying to solve, or the context (environment) you are trying to improve.

Project detail

This section should go into more detail about your project’s:

a.         Objectives

b.         Beneficiaries or clients

c.         Methods

d.         Staff and administration to do the work

e.         Available Resources

f.          Needed Resources (personnel, facilities, equipment, supplies, communication, etc)

g.         Budget

 

Evaluation plan

This section should explain how you are going to monitor the project (keep an eye on each aspect as it is implemented) and assess how well it achieved its aims. This is important, because the funder needs to know how whether their money was well-spent; even if the project was not a complete success, the evaluation process must ensure that you can learn some lessons for next time.

 

Conclusion

The conclusion is also a brief summary of what you want to do, but use it to re-state what you are asking for (in Rands) and what the direct and indirect benefits will be. This is the end of the main body of the report.

 

Appendices

This section will contain documents and other information that you think will reinforce your proposal. It could include:

• Your organisation’s most recent annual report, or newsletters
• Detailed budget of the organisation and/or project
• Most recent audited statements for your organisation
• Photographs of context and/or project
• More detailed technical description of the project
• Detailed timeline for implementation of the project

Organisations that rely on donations or sponsorships need to become experts in writing good funding proposals – they are your life-blood. It is easy to assume that everyone understands and appreciates the importance of your work, but routes need to explain this again and again to donors and sponsors so that the message is clear.

It is a message that you will have to repeat time and time again – so make sure you get good at it. A funding proposal is the ideal place for you to sharpen your value statement to society, so that you build your profile with every fundraising effort. It is also a vital, early step in building relationships with other stakeholders whose support could be life-changing for the members of your route.

This Guide will explain what information and tone needs to go into a funding proposal, and how it should be structured so that it tells the funder what they need to know to make an informed decision on whether or not to fund your project or route.

The main message of this Guide is that, while the proposal and its contents are important, it is also vital that you have identified the right kind of funder for your organisation. In fact, identifying the right funders is the first step in the process; once you have found a funder whose aims and mandate fit in with yours, then you can start to craft the proposal.

Also look at the Guides on How To Identify Grant-Givers and Funders, How To Develop A Project Budget, and How To Develop A Project Idea.

Why is a proper funding proposal important?

A funding proposal is like an advertisement for your route. In it, you are trying to convince a funder to buy into your concept, services and products. So it is very important that the proposal shows you in a good light: professional, well-researched, clear and passionate.

The way you write the proposal can indeed do this. It can show that you understand your mission clearly, and that you are embarking upon projects that fit in well with that mission. The proposal can also show that you are well organised, that you have planned ahead, and that you know how you will turn this plan into action. Ideally, you will also be able to show that your organisation has experience in this field, and has the right people and skills to do it well.

A good funding proposal will also be clear about what the funder will get out of this project – in other words, what outputs or benefits they will be able to see and record. Remember that they will need to justify their decision to fund you, so they will be looking for evidence of your success. That is why a good proposal always includes how you will assess the impact of what you have done.

What is a funding proposal and how do you write one?

A funding proposal is simply a document that asks for funds for a specific project or organisation, so that it can perform certain activities and achieve certain goals. The proposal needs to detail what these activities will be, what they will cost to implement, who will carry them out (and when), and what the benefits will be.

First find the right funders

Each funding proposal needs to be targeted at a particular funder. If possible, don’t send the same proposal to different funders. Rather, examine the focus of each funder (they will all have their own special mandate that guides who they give funding to), and then tailor your argument accordingly. This does not mean that you divert from your own focus to suit that of the funder. It simply means that you need to emphasise those aspects of your project that most interest the funder.

So start with some careful research on the funders available. Choose those whose goals and areas of interest look most in line with your own. Then, in your proposal, make it clear why your needs fit in with their agenda; the funder must understand clearly why you are targeting them. Also find out:

• The name, address, telephone number, e-mail address and title of the right person to talk to at the funding organisation.
• Their specific funding criteria – does the funder only deal with certain countries, provinces or geographical areas; do they have a gender focus (women only?) or age restriction (youth only?).
• Limitations on the size (amount in rand) of grants that the funder usually gives? Do you need more than this?
• The donor’s decision-making process – how long does it take, and do you need to follow up regularly?
• Deadlines for proposals, and dates when proposals are considered.

How should your proposal be structured?

The proposal has to do many things. It must establish your credentials, passion and past performance. It must show how you will make a difference and how you will measure this. It must also show the human side of your project and the impact it will have. So, when you are writing it, remember that you need to not just describe – you need to persuade!

After you have read the information below, we have also provided a Template For A Funding Proposal into which you can insert your own text.

Start with a neat cover page, including your route’s name and contact details, your name (as the writer) and position in the Route Forum, the project’s name, the funding organisation and the person (if relevant) at the funder who must receive the document.

Executive summary

The first part of the proposal needs to summarise everything you’re going to say, so that the funder gets a quick overview before getting into the detail. This helps to create a good first impression and assures the funder that the project is indeed of interest and relevance to their funding mandate.

Briefly describe the project and its aims, outlining quickly the problem or opportunity that the project is addressing. Use this part to make it clear what your vision is and how your strategy works to achieve that vision. Discuss the community that you serve and how you are linked to this community.

Outline your governance structures, so that the funder can see that you are rooted in your constituency and governed by that constituency in an organised way. Say what impact you have already had along your route (or project), and how your organisation manages its finances to continue contributing to the goals and objectives of the route (or project) in a sustainable manner.

The route and its members

Now you can go into more detail about your route’s mission and goals; explain why it exists, who benefits (and how), and give more information on your links to your community. Say who is on the board or council (this is to reinforce the governance issue), and give a short biography of each board member – emphasising their experience, ability and community links. Photographs also help bring a reader closer to the organisation.

If your route has patrons, list them too (these are usually well-respected and well-known people who are willing to lend their name and support to your work, but are not able to be involved very often). Write about your key Route Forum members and volunteers, with brief biographies of each.

The aim of all this is to present a sound, accountable and competent organisation.

The project and its context

Now describe the project in more detail, including a discussion about the context – in other words, the problem to be solved. This usually needs you to discuss the region you are in, with details about its location and its demographics (how many people live in your area, what are their ages, gender, race, schooling, income, etc.) – where relevant.

Provide as much information as you can on the issue that your project addresses. For instance, if your project is about bringing more visitors to your area, then find as much information as you can on how many visitors you currently get and what they do in your area. Perhaps compare this information to other areas to highlight the point that more can be attracted – and predict what the effect of more visitors may be on the route and its members.

Describe in detail what you want your project to achieve; use some targets (actual figures) if you can – such as, 1 000 new visitors by the end of the year. Base your targets on something (such as the number of beds your whole route offers) and ensure that they are realistic. It is not a disaster if you do not quite reach your target, but funders will want to know that your target figure at least represents a substantial improvement and that every effort was taken to reach the target.

As noted, emphasise here how your aims match those of the funder.

Talk about your strategy in achieving your goals. In the next section, you will write about your actual plans, but here you can highlight your approach to the problem. For instance, if the quality of life in your town is declining because it gets fewer visitors, then your strategy may be to: (a) attracts more tourists from a particular highway that now passes by your town, (b) upgrades the quality of accommodation that is available to them, and (c) creates new attractions for them to stay longer and spend more money during their visit.

Again, use supporting information (even statistics) to support what you say, so that you can demonstrate that the targets or proposed plans are realistic and achievable.

Discuss in detail who the beneficiaries of the project will be (include numbers if you can), where they live, how they will benefit, and what the overall impact of this will be for the community.

The plan

Now comes the detailed plan of how you will turn this strategy into action. This should cover:

• What will you do? Prepare a project plan that summarises everything that needs to be done, in order of when it must happen.
• Where will you do this? (Places)
• How will you do it? (Resources)
• Who will be involved? (People)
• What will the outputs be? Describe the actual activities or products that will result – such as training, workshops, publications, reports.
• When will the activities and outputs happen? (Timeframe)
• How will progress be monitored? Explain how you will keep track of all the activities to ensure they are done according to plan.
• How will the project be evaluated? In this process, you will look at the activities and their impact, and judge whether they have achieved what you hoped; you need a plan of how you will do this evaluation.
• What resources will be needed to carry out the activities? The resources are mainly about the money you will need, so use the information in the project plan to prepare a budget – that is, how much needs to be spent, when, and on what.

Your request

By now, you will have described all the activities and what they will cost to implement. Now summarise exactly how much (in rand) you are asking the funder to contribute.

Then summarise again what it will be spent on and what the result will be (who it will benefit).

If you can show that the funding will lead to longer-term sustainability (that is, the route or project may become more self-sufficient), then explain this here. Depending on your area and your focus, funders may want to see that their funding is making your less dependent on donations and more self-supporting.

This concludes the main body of your proposal.

Appendices

There is plenty of other information that a funder may be interested in seeing, but too much detail in the main body of your proposal will make it harder to read and will disturb the flow of your argument. So put it at the back of your proposal, as appendices.

Here are a few of the items that you can include as appendices, if you have them:

• Your route’s most recent annual report or newsletters
• Detailed budget of your organisation and, if possible, the most recent audited statements
• Photographs of the context and/or project
• A more detailed technical description of the project
• A detailed timeline
• Past evaluation reports.

Who is involved with writing the funding proposal?

The Route Forum will usually supervise any funding proposal that comes out of the organisation, but the task of writing it will usually be delegated to one or more people. If there is a project manager in charge of the proposed project, they may be central to the process of finding funds for it. The treasurer and administrator will also play a role, with the close involvement of the chairperson – especially if the project is a large one.

It might even be a good idea for the forum to appoint a subcommittee or project committee from among the forum members and the broader members of the route. Wherever there are relevant skills, they should be brought in, but one or two people need to manage the proposal to ensure that all contributions are coordinated and that the proposal is ready on time. It will be important for the Route Forum to sign off on the proposal (officially authorise it) before it goes to the funder.

How does a funding proposal affect the route?

A funding proposal needs to be carefully controlled and managed by the Route Forum, since it contains written statements about what the route claims to be, what it does, and what it plans (indeed, what it promises!) to do. While any well-managed and well-written proposal can bring life-changing funds to a route and its projects, a proposal that is misleading or overambitious can lead to a breakdown in the trust relationship with stakeholders – and can cause great distress and conflict within the organisation.

So a Route Forum really needs to decide how it will process any funding proposals, so that it can have full control over what is said and proposed at every step – and can stop or change the direction of a proposal if necessary. This process should also ensure that those writing the proposals are given some support (training if necessary) and expert guidance.

Practical tips

• Write simply and avoid jargon, using short sentences
• Check for spelling and grammar errors, and get someone else to edit and check it
• Do not exaggerate
• Use consistent headings and subheadings to keep your layout neat and easy to follow
• Include a contents page at the beginning, and number your pages
• Use white space, have wide margins, and don’t crowd the text
• Include photos or visuals if you can
• Explain any abbreviations or acronyms that you use
• Keep it short – not more than 10 pages for the main body.

Use of this Guide

Route Forum members can use this guide, since the operations of the route itself often need funding when it starts up. It can also be used by other route members who are managing or involved in a project that may need funding.

Other Resources

There are plenty of otherResources that relate to funding; these include:

• Guide: How To Identify And Approach Potential Grant-Givers And Funders
• Template: Funding Proposal
• Guide: How To Identify Income Streams For The Route
• Guide: How To Unite Your Route Behind A Shared Purpose or Vision
• Guide: How To Compile Your Annual Route Plan
• Guide: How To Develop A Project Idea
• Guide: How To Develop A Project Plan For a Short-Term Project
• Guide: How To Manage A Short-Term Project
• Guide: How To Develop A Project Budget

Further resources to use

Inyathelo, the South African Institute for Advancement, works to build democracy in South Africa by strengthening civil society organisations and higher education institutions, and to develop a philanthropic movement rooted in the African cultural heritage of sharing.

Website: www.philanthropy.org.za
E-mail: info@inyathelo.org.za
Tel: 021 465 6981
Fax: 021 465 695

When looking for funding, it is vital that your route is able to find grant-givers or funders who have a focus on tourism, local economic development, enterprise support or a related field that includes the kind of work that the route is wanting to raise funds for. It is also important that you approach them in the right way and are able to present a funding application or proposal that matches their mandate and is convincing in its own right.

This guide will describe the kind of funders you should be looking for and suggest where you can look for the ones that will suit your route or project.

The main message of this guide is that you need to do your research very well so that you target only those who have an interest in your field of work (or perhaps your geographic area); this will ensure that you don’t waste time and money chasing potential donors who have no interest in funding you.

It also emphasises that you need to network as much as possible – talking to your contacts about which funders they recommend and also talking directly to those organisations about exactly what they offer and whether your project stands a chance of getting funded by them.

You will also find it useful to read the guide How To Write A Funding Proposal.

Why is identifying the right funder important?

Every funding agency is guided by certain priorities – for instance, they may fund health or education or HIV/Aids, etc. They also usually have a geographic focus (a certain country, province, region or town), and may even have a gender (such as a dealing only with women’s projects) or age focus (wanting to target youth, for instance). Each will have a limit on the size (rand amount) of the grant that they give. These priorities will lead the funder to set certain strict conditions or criteria that you must meet before your project can be considered.

So your research needs to examine all of these aspects, and find funders whose criteria your route will meet. Then you can tailor your application so that it prioritises all the things that the funder wants to know about you.

What is a grant-giver or funder, and how do you find them?

Understanding what a funding agency is and how it does things will help you to succeed with your application. There are generally four kinds of funder:

• Government
• Church
• Private (mainly wealthy family foundations)
• Corporate.

Each has their own style, advantages and disadvantages for the fund-seeker such as your route. The table below summarises the pros and cons of each type.

Type of funder	Advantages	Disadvantages
Government	Often have a lot of money. May be useful on issues of policy, access, etc. If project fits government strategy, this increases the possibility of meaningful impact.	Process of application is often bureaucratic and takes a long time. Payment is often delayed and there is very little flexibility. Application requirements can be complex.
Churches	Often share the development and ethical agendas of progressive civil society organisations. Usually have quite a lot of flexibility in what and how they fund.	Usually rely on own constituency to raise money, which means that funds may be limited and/or subject to fluctuations. Sometimes get allocations from governments and are subject to changes in government policy.
Family foundations (large)	Have large sums of money to give. Staff is usually professional and understand the issues and civil society concerns. Clear guidelines on what is funded and the process for getting funding usually provided. Willing to share international experience.	Process for application can be lengthy. Requirements for applications can be complex. Priorities may change.
Family foundations (small)	Often form close relationships and have a personal commitment to an organisation. More flexible on format and process. More flexible on what they fund.	Staff is not always as professional as that of bigger foundations. May not have much money. Personal contacts very important (this can also be an advantage).
Corporate funding (big companies)	Have large sums of money to give. Often have professional, accessible staff. Usually clear on what they want from the arrangement. No hidden agenda.	Change priorities quite often. Sometimes want direct representation on the board. Often very sensitive to anything that might alienate other stakeholders.
Corporate funding (small companies)	Informal approach. Interested in local projects. Personal connections very helpful. Agenda is usually clear.	Not that much money. Interests limited. If no personal connections, no funding!

Acknowledgement: Civicus (www.civicus.org).

Finding grant-givers or funders

Government: Most routes will be able to begin their search for funding at the local level, talking to municipalities and local businesses for financial support and sponsorship. In theory, both stakeholders have good reasons to support a tourism route:

• Municipalities have a mandate to encourage local economic development (many even have an LED officer) and help create jobs through this process; and
• Most local businesses will get some positive spin-off (new customers, for instance) if more tourists visit the area.

In practice, however, there are often places where funding is not easily available at local level, for various reasons, so routes may have to look further afield.

At provincial level, there are provincial tourism authorities (also called boards or agencies) that are mandated to support tourism in their region. Other provincial government departments (not just tourism) are also possible sources of grants and funding.

National government departments and agencies offer grants of various sorts.

Church: International church or faith-based funders, for instance CAFOD, International Aid and Dignity International are also concerned with socio-economic issues, so they could be relevant to your route and projects. However, since these funders are often based overseas, you will need to start by seeing if they have a local office you can talk to. If not, you may have to liaise with them almost entirely by e-mail.

Private foundations: Foundations are funding agencies with a particular focus on social needs or problems that are not being fully solved by the market (private sector services or products such as nutritious food may be unaffordable) or by government (services such as clean water and health care may not be up to scratch). Many foundations were started by wealthy families (for instance, the Carnegie Foundation and the Ford Foundation), while others were set up by large companies (such as the Eskom Foundation).

The larger foundations are better known, but explore the smaller foundations too, since it may be easier to develop a long-term relationship with a smaller entity if they are focused on your area of work. It is sometimes easier to forge closer links with a group that is more accessible and less bureaucratic.

Corporate: The private sector (profit-making companies) is a good source of sponsorship, varying from large multinational corporations to those smaller companies that may only operate in South Africa or even just in one province or town. While approaching the big companies, make sure you also build relationships with those smaller companies in your region. If a company is profitable and committed to local development, it could still make a substantial financial contribution to your work.

Narrowing your search

Before you get to the stage of phoning or writing to a potential funder, take these steps:

• Carefully research their focus or mandate – check that your route or project will fit into this focus.
• Check the amount of their grants (for instance, the size range may be R50 000 to R250 000) suits your project.
• Check if there are any criteria (region, gender, legal format, etc.) that exclude you from applying.
• Check what the process is for applying, the closing date(s) for applications, and any special format or forms that your application must use.

First approach

If there is no clear application process (some smaller companies, for instance, rely on proposals from fund-seekers and do not have a formal process for applicants), then make some phone calls to find the right person to talk to about a proposal. Explain on the phone briefly what you are looking for and request a meeting to pursue the idea further; if they are interested, they will meet with you.

Take a written overview or proposal to that meeting so that you can present the project verbally (you can even prepare a PowerPoint presentation on your laptop to take and present) as well as give the funder a written proposal when you leave. The written document is important because:

• It shows how much thought and planning you have already put into the idea – giving the funder confidence in your ability to actually implement the plan.
• It gives the person a document to share with their colleagues or superiors – who will usually have to be involved in deciding whether or not to allow the funding.

If you can, include some senior people from your Route Forum in the meeting. In addition to the project manager or funding coordinator (who finds the funders and sets up the meetings with them), you could include the Chairperson and the Treasurer – or any of the members who add weight to your argument that this is a worthwhile, community-based initiative.

Follow up

At the end of the first meeting, ask the funder for some follow-up dates when you can phone to check on progress with the application, or meet again to discuss anything else they would like to clarify. After your initial meeting with one person in the organisation, the funder may want to bring in others from their organisation to ask other questions and take the application to the next step.

It is vital that you give yourself the opportunity to reconnect with the funder after this first meeting; they will most likely have many applications to deal with and (especially if they are not well organised), and you often need to ‘chase’ them to get a decision. Even if they are not able to fund this particular proposal, you have already taken a valuable step towards building a relationship; don’t waste this time and energy by letting the link evaporate through inaction.

This organisation that you have approached should now become one of your route’s stakeholders and should be included on your publicity list to receive your newsletters, brochures, annual reports and other public information you send out to raise your profile.

Who is involved with grant-givers and funders?

As mentioned in the Guide How to Write A Funding Proposal, it is important for the route to have some clear guidelines on how it raises funds; a fundraising policy is a good idea. The aim here is to ensure that the route does not ruin its reputation by having any member going around to potential funders, looking for money for things that the route has not decided upon – or making ‘deals’ with funders on projects that are unrealistic, undeliverable or unknown to the route’s management.

So the Route Forum must nominate people who need to oversee what projects need funding, how much funding must be sought, and who will be approached. This could include the Chairperson, the Treasurer and any others whose role is linked with either the general finances of the route or the particular project being pursued. Perhaps you already have a finance subcommittee that could do this, or maybe you would prefer to set up a fundraising subcommittee with this special task.

If there is a project manager tasked with raising funds, they need to liaise closely with this subcommittee before they rush off to approach stakeholders for support.

How should your route manage its relationships with funders?

There are two main ways that your route needs to stay close to grant-givers and funders. The first, and most important, is the relationship with those who do give you funding; these relationships need to be closely and carefully managed, so that (a) your route abides by the contractual terms in the funding agreement. and (b) the link with the funder is strengthened, making it more likely to get funding again.

The second kind of relationship is with those who you have approached but who are not currently funding you. Consider grant-givers and funders as your stakeholders. In other words, don’t only communicate with them when you are receiving their money. Rather, treat them as part of your extended family who need to be kept informed of your activities and plans. This is a vital part of building relationships that will support the work and growth of your route.

Once your route has decided who is going to take overall responsibility for fundraising, this group (or person) needs to work out who can approach funders and where a record will be kept of what takes place at every approach. Meet every month to assess the progress and to adjust the fundraising plans if necessary.

As part of Open Africa, your route can learn from the experience of other routes around southern Africa – including the most likely sources of funding for various kinds of tourism projects. So stay in touch with other routes and read how they are getting things done.

Practical tips

• Keep a file of all proposals sent out, as well as a printed copy of each funder’s response.
• Nominate one person (treasurer, office administrator or fundraising manager) to consolidate all information about possible funders.
• Prepare a brief route profile that you can send to or leave with potential funders when you first meet them – just to give them a ‘flavour’ of what you do. The more detailed proposals can then be tailor-made.
• Prepare a PowerPoint presentation (with pictures) and show it to the Route Forum so they can sign it off (authorise it), then use this as the basis for presentations at meetings with funders. Slides can be added or removed, depending on the time available to present.

Use of this Guide

The Route Forum can use this Guide as well as anyone in the group tasked with fundraising responsibilities. It’s important for the Route Forum members to know that they need to oversee and control fundraising efforts, but they also need to support this. Funders are usually needed both for the route management (office, staff, daily activities, etc.) and for special projects from time to time.

Routes should take advantage of Open Africa’s links with training organisations – to get their staff and members trained in how to prepare proposals and find funders.

Other Guides

Here are some other Guides on the topic of funding and finances:

• Guide: How To Write A Funding Proposal
• Guide: How To Develop A Project Budget
• Guide: How To Develop And Manage A Route Budget

Contacts and other support

Greater Good SA is a knowledge hub for civil society that  has information on funding your NGO.

www.greatergoodsa.co.za/funding

Setting up, managing and promoting a route all takes money, so each route needs to find ways to pay for this important marketing function. These methods can include:

• Raising funds from the route members (after all, it is the members who should be benefiting directly from route activities).
• Applying for grants from government and private sector funding agencies.
• Getting sponsorship from companies who have a brand, product or service that they would like to publicise along your route.

The important thing about an income stream is that it should be regular and reliable. Sadly, grants are not generally regular or reliable, since they depend on what the funder thinks of your project and whether they have the budget to support it.

Sponsorships can be more reliable, as they represent real value that a sponsor hopes to gain by exposing their brand to the community associated with your project or route.

But what the route should be looking for is using its own resources, expertise, products, services, people, community, ideas, connections and uniqueness to generate cash – from members, the broader community, visitors, government and other stakeholders.

This Guide will describe some of the ways that Open Africa routes have raised money for their operations and projects. It will also suggest other income streams that can be considered by Route Forums, and how these can be implemented.

The main message of this Guide is sustainability: every route needs to aim at self-sufficiency, since this is the only guarantee that the work that the members’ hopes and plans can be realised. It is great to get assistance from outside funders, especially at startup stage – before a route’s activity has started to bear fruit through extra income for members. But if the route is really serious about the plans it wants to implement, it cannot always be waiting for outside help to make these things happen.

Why is it important to identify income streams?

The main reasons for trying to find different income streams is to put the route on a solid financial footing, so that it can plan ahead and know that the money will be there to meet the basic costs of running the route. It is disheartening to make plans and raise members’ expectations about what the route will do, only to have everything come to a halt when your funding proposal is turned down.

Rather keep your plans more modest so that they can be internally funded by members; then grow this income as the route’s work starts to bear fruit.

What is an income stream, and how do we generate them?

An income stream is simply the flow of money that a business can generate; your route is essentially a business – although it does not aim to make a profit, it does have costs so it needs an income to meet them. As noted, grants are not a very reliable or sustainable income – so this Guide will look at income streams that can make the route more independent and self-reliant. This will allow it to do things that the members want to do, rather than what funders think you should do.

Open Africa routes have already put the following ideas into action, and they can work well under the right conditions:

Membership fees

A number of routes charge its members (the businesses or participants on the route) a membership fee, in return for some valuable benefits. Every route needs to be clear about what benefits it will offer, and then deliver these! Don’t overpromise, but make sure that there is value to be found in the fee, or you will struggle to keep and grow your membership base.

Start off by minimising the costs of running the route, so that the fee can be kept small. Raise the fee only when you can show that the benefits are real and that the route can deliver more value if it is better resourced.

Route levies

Some routes charge their members a route levy – a percentage of each sale that they make. For instance, accommodation providers would pay a levy per room; the levy may even appear on the customer’s account, and may be added to the accommodation, food and drink items. (The provider would have to show the total fee per night when advertising so that it is not an ‘extra item’ that the customer is not aware of.)

Activity operators would pay a levy per activity, and a similar arrangement could be made for crafters, restaurants and other members.

Competitions

A number of routes have been successful at raising funds through competitions. The se competitions raise money from people paying to enter and can be run in local media or further afield to draw new visitors to the route. Route members are then asked to sponsor accommodation and activities as prizes.

Marketing projects

Many of the route’s management activities will be marketing projects that aim to raise the profile of the route and its members. While these can be funded by member contributions, they can also become income streams – if you think creatively.

• Can you charge customers for the material? The Drakensberg Experience route, for instance, wanted to produce and distribute 10 000 brochures with an area map and information on its members for circulation at selected points on the N3 highway. They charged R10 per brochure, ensuring that they covered their cost and had a surplus towards the next print campaign.

• Can sponsors be brought into your marketing material? If there are larger stakeholders in your area that are also looking for publicity, they could sponsor the production costs in return for branding on the brochure. For instance, your local/district municipality, the franchisor of petrol stations on your route (Shell, Engen, Caltex, etc.), or the owners of mines in your area could be approached.

• By charging a sponsorship fee that covers more than just the costs of the design and printing, the route can earn a surplus that can be ploughed back into its operations.  

Other possible income stream ideas

• The route’s members are each involved in specialised areas of activity. The route – through its links with stakeholders such as government and big business – may be able to facilitate contracts to larger customers on behalf of its members (for instance, a provincial government department may require craft items for a special event). If the member is unable to negotiate the contract itself, and the route management makes it possible, then the route should be able to earn a commission or some portion of the income for arranging this.

• Arrange special events for the towns in your route (harvest festivals, fruit-picking, children’s activities, historical tours, etc.), and look for ways that visitors could pay an entry fee or members could earn extra income that can be levied by the route.

• Trade shows add value to your members by exposing them to possible customers in new markets. The route can arrange these on a regular basis, and can add a small management fee to be paid by each attending member. These will add up, especially if you can grow the number of members in your delegation and make it a regular event.

Who is involved with identifying income streams?

The Route Forum’s Treasurer is usually responsible for managing the route’s finances, but this is mainly a control function, and the person doing this might not be the sort of person who is good at fundraising or developing income streams. The Route Forum may therefore want a separate portfolio for fundraising, which would require someone skilled in sales and marketing. That person could also drive the search for income streams that generate regular cash flow for the route.

This person would need to work closely with the Route Forum’s Treasurer and Chairperson and may require a subcommittee to help with the workload. When trying out various projects that could earn an income, the fundraising portfolio could even appoint a project manager (perhaps a route member) for each project. This would help spread the workload and ensure regular involvement by members.

How should your route manage its income streams?

The Route Forum needs to keep a close eye on how it earns income. Whether it is the Treasurer, the fundraiser or a project manager that is running an income-generating project, they need to present clear plans to the Route Forum and have those plans approved before embarking on the work. The Route Forum should also present a financial summary at each AGM (or general meeting). 

A timetable should be in place to show what will be done when, and by whom; importantly, the plan must show how much a project expects to earn, and when that income should reach the route’s bank account. The route administration needs to help manage the invoicing and control of cash flow as this will help the Route Forum to check that money is being properly handled (especially if there is cash involved in the transactions). Similarly, this should be presented and approved at the AGM (or general meeting). 

Practical tips

• Encourage members to come up with ideas that could lead to income for the route.
• Keep members involved in this process, so that they can offer their services or products from time to time.
• Task the treasurer to keep track of costs and benefits of each income stream. Those running the project might not be fully aware of what the full costs are to the route; it is vital to know that income is more than expenditure.
• Make full use of the visual beauty of your area – while you may take it for granted, the images you see around you every day may be regarded as spectacular, unusual or special by potential customers elsewhere. Consider calendars, posters and cards as products your route can sell at retail outlets throughout your region (as long as the route is not competing with a member!).

Use of this Guide

The Route Forum can use this Guide as a thought-starter, as it explores ways of making money to cover its running costs and activities. In particular, the Route Forum’s fundraising portfolio can use it to help brainstorm possible income stream ideas; this can be done by bringing enthusiastic and creative members of the route together on a regular basis – to share ideas and begin the process of trying out various options.

Routes should also talk to their stakeholders to see what services and products they regularly require, and assess whether the route and its members are able to supply any of those as an income-generating activity.

Other Guides

Here are some other Guides that will help you on the topic of income and finances:

• Guide: How To Write A Funding Proposal
• Guide: How To Develop A Project Budget
• Guide: How To Develop And Manage A Route Budget
• Guide: How To Develop A Marketing Plan
• Guide: How To Attend Travel Shows

Every organisation needs money to run its operations and projects. It needs a bank account to receive deposits and to make payments. And while many organisations and small businesses operate in a mainly cash environment, it is good financial practice (especially for a nonprofit organisation serving its members) for all cash to be put into a bank account before it is used. This makes it easier to keep track of income and expenditure.

With the advent of internet banking, most bank accounts now come with many time-saving advantages and features that help manage and monitor your route’s finances more easily.

A bank account is more than just a place to keep cash for the organisation, it is also an important tool for keeping financial records of income and expenditure, and for complying with company and tax laws. Like any system in your organisation, however, it must be well managed and well controlled. In any matter related to money, there must be strict control over who has access to the bank account and for what purposes.

This Guide will explain how to find a bank account that suits the needs of your organisation, and will provide some ideas about how to make the most of your banking facilities.

The Open Africa Toolkit describes how to constitute your route as a legal entity, and this entity is the legal person in whose name the bank account will be opened.

The Guide emphasises that using your bank account in an efficient and responsible way will help to keep your organisation compliant and well managed. This starts with the election of the Route Forum, and within this committee, a financial manager, who will generally have most to do with the money and bank account, but only in conjunction with other specified members of the committee – usually the Chairperson and the Administrator.

There are other Guides you will find useful on matters related to banking and finance, such as managing a route budget and route finances, as well as how to report on route finances and how to remain compliant with the law.

Why it is important to have a bank account

A bank account allows the route to keep track of is income and expenditure, especially if the bank provides you with a monthly statement. With internet banking, it is also easy to generate statements at any time, to monitor deposits and payments, to check on activity in the bank account, and to make electronic payments.

All this makes it easier for your accountant to audit your financial affairs and produce an annual financial statement for the SA Revenue Services; the latter is a requirement for the route to comply with tax law. Without such compliance, SARS will not issue your route the Tax Clearance Certificate you will require to do business with any government department or agency or any large corporation.

Your bank statements will also be primary documents for the Route Forum to inspect in its role as monitor of the organisation’s good governance.

How to open a suitable bank account

When choosing a bank, consider the following things:

• Geographic location: Choose a bank that is close to where your route office is based. Although you can do much banking online, there are some things you will have to go into the bank to do, especially when you are first setting up your organisation.
• Banking fees: Banks charge differently for their services. Once you know which banks are close to you, visit each one and request a schedule of fees or a pricing list. If there is anything on this document you don’t understand, ask someone to explain it to you. You can then compare the fees to find out which bank will cost you less. What kind of transactions will you be doing most?
• Service: You might decide that good service is more important than a small difference in costs. How many tellers are open and how slow is the queue? Is the person at the information desk helpful? Are your questions answered to your satisfaction? What kind of service do you get from the person who answers the phone?
• Reputation: Ask your colleagues and other local organisations how they feel about their bank and branch. This is a good way to find a particular branch that has a good reputation. Listen to what people say about their bank and then research the branch yourself.

How to choose the right kind of account

Depending on the bank you choose, you should be able to open one of the following accounts:

• Business savings account: This is a basic transaction account for deposits, withdrawals and transfers. You can get an auto-teller machine (ATM) card, and you will be able to apply for internet and telephone banking.
• Business cheque account: This account will provide you with a cheque book. Some banks also provide you with a cheque card, which works like a debit card. A business cheque account will allow you to apply for an overdraft, but probably only after the account has been open for between three and six months (depending on the bank). If your business has been open for some time already and you are able to show a regular flow of cash, some banks might consider giving you an overdraft. This would depend on the financial history of your business.
• Investment account: If the organisation receives income or funding in lump sums, you can consider opening one of a range of investment accounts – such as a seven-day or 30-day call account, or a money market account – which will earn you some interest on the money held there.

When you are choosing an account, think about whether you will need the following services:

• Overdraft or other credit facilities. If you are likely to apply for credit at any stage in the future, you want to be sure that your business transactions until then give you a positive profile at the bank. There are some business accounts that do not qualify you for credit, and these can be difficult, costly and time-consuming to change at a later stage.
• Internet or electronic banking. Banks may or may not charge a fee for internet and electronic banking services, but using these is often cheaper than visiting the branch to do your banking. Electronic banking includes self-service terminals (which are open 24 hours to do deposits, transfers, get statements and pay accounts), cellphone and telephone banking.
• Point-of-sale (credit and debit card) machines. If you require point-of-sale (POS) facilities, make sure that the bank can provide these with the account you are opening. POS facilities are usually managed by a different department at the bank, but the business banker who helps you open your account will be able to put you in contact with the right people.
• A cheque book. Although cheques are becoming an expensive and outdated method of payment, you might decide that it is easier to control payments if the organisation issues cheques. Some banks offer cheque cards, which work like debit cards, and these are often useful for retailers that won’t accept cheques. Remember that there is the risk of cheques being used fraudulently, which is why they are often refused. They also usually cost much more than electronic transactions, if they are not included in a package of services.
• Credit or garage cards. Some accounts will provide you with these cards, but remember that these services require credit, and you may have to wait a few months (to develop a good credit record) before applying for them.

How to open an account

The process of opening an account is different from bank to bank, but you are likely to need the following:

• If your route is registered as a company with the Companies and Intellectual Property Commission (CIPC), you will need to show the bank the CIPC registration documents. If there have been changes made to the business since startup, you will also need to show the relevant CIPC documents.
• Identity documents for all directors of the company.
• Proof of residence for yourself (if you are a sole proprietor), or for all company directors. This can be an account, such as electricity or phone bill, addressed to you. It should not be older than three months.
• Proof of the physical address of the organisation. This can be a business letterhead, for example.

Depending on the bank, either all company directors or a minimum of two directors need to be present to sign when the account is opened. If the bank doesn’t require all directors to be present, you should ensure that the directors have all signed a resolution nominating the chosen director to act as signatories on the account. Have this on hand to present to the bank if they ask for it.

You will probably need to have an opening balance (that is, money in the account) of between R200 and R500, depending on the bank and the account.

Who is involved with the bank account

The Route Forum must manage the finances of the organisation; particularly, the people on the committee dealing with money and the bank account will be the Financial Manager, the Chairperson and the Administrator. It is important to have at least two or three signatories, and at least two must authorise each payment that is made from the account; this is a basic requirement of good financial governance. It makes sense to have about four members of the committee authorised by the bank to be signatories, so that if one or two of them are not available, there will still be two people who can authorise a payment or other bank function.

How to apply good banking practice to the route

As part of the route’s governance procedures, it needs a financial policy to outline how the organisation will manage its money. This will include clear guidelines on who is authorised to carry out banking activities, and puts in place controls to limit the likelihood of abuse of funds.

Practical tips

• Before you go in to open an account, try and get a written checklist of all the documentation they will require then leave yourself plenty of time – it can be a time-consuming process.
• Remember that you have not committed to any account or other facilities before you have signed an agreement. If you begin an application with one bank and change your mind before signing, you are free to choose another bank.
• Service charges are usually not negotiable. The branch you bank with charges for services according to corporate policy, which is set by their head office.
• Check on the bank’s turnaround time for opening a bank account. It is unlikely that you will be able to shorten this, and it would be unfair to expect your banker to try.
• Not all banks can help you if you just walk into the branch. A business banker might only be able to see you if you have made an appointment. Phone first to check the procedure.

Use of this Guide

The members of the Route Forum can use this Guide – particularly those in administration and financial portfolios on the forum – to check on how the organisation’s bank account should be opened and operated.

The Route Forum must keep a close eye on the bank account and banking activities – not just to ensure that it has enough money to carry out its activities, but to guard against anything that might suggest a lack of financial discipline. The Open Africa Charter emphasises “integrity, honesty and complete transparency in maintaining impeccable credibility” as one of its core values. This applies very strongly to how the organisation manages its finances, which helps protect the route’s survival. Also, suspicion of financial mismanagement would make it very difficult to apply for funding from donors or government.

Other Guides and Resources

Several Guides will assist you in making your route compliant. These include:

• Guide: How To Remain Compliant With The Law
• Guide: How To Serve As Route Treasurer
• Guide: How And When To Register For Tax
• Guide: How To Develop And Manage A Route Budget
• Guide: How To Adopt A Constitution As A Voluntary Association
• Resource: Template: Constitution Of A Voluntary Association

Other resources

This is a useful website for comparing banks, bank accounts, features and pricing:
www.justmoney.co.za