Practical Steps for Sustainability
Periods of uncertainty—such as the current status of government funding or concern about the ability of financial contributors to continue their support—can threaten the financial health of nonprofits. Effective resource management becomes essential for stability and continued impact.
There are no easy solutions at hand
While there are no easy solutions, nonprofits can take practical steps to better understand and monitor their financial condition. Begin by reviewing the organization’s financial status, focusing on cash flow, core costs, and key income sources. Prioritize the critical programs and key expenditures, such as costs related to core programs and team member compensation. Determine if any expenditure can be removed from the operating budget or delayed to a later point in the budgetary year. This will help the organization maintain its cash flow.
- Scenario planning
Prepare for varied financial outcomes by mapping best, worst, and likely scenarios. Use these to guide decisions and keep everyone informed. Read more about deepening board member engagement in your financial story. - Financial analysis and control
- Prioritize mission-driven activities.
- Negotiate with vendors or defer payments if needed.
- Engage with key contributors and volunteers for operational support.
- Engage with government contract managers to determine the status of current or future funding.
- Pause non-essential projects temporarily.
- Look into relief grants, line of credit, or special programs designed for nonprofits in crisis for short-term support.
- Focus on cash flows
The fewer days of cash on hand an organization possesses, the increased need for an ongoing analysis of cash flow. Mapping out expected receipts and expenditures helps the organization identify risks early, allowing for timely planning to meet financial obligations like rent and payroll. If the cash flow analysis indicates the organization will not be able to meet its obligations, prompt action must be taken to preserve as much of the mission as possible. This may include difficult conversations regarding staffing levels. Delaying action may threaten the organization’s ability to continue.
Conclusion
By focusing on sound financial practices and open communication, nonprofits can be better prepared to weather uncertainty and continue to meet its mission imperatives.
As a nonprofit leader, you already know much of this information and what needs to be done. What may help you is to have a conversation with a financial leader outside of your organization and talk over your organization’s situation. Nonprofit Financial Acumen is here to assist you. Contact us to schedule a conversation.
