When discussing nonprofits, the term “financial sustainability” typically refers to the organization’s capacity to sustain itself financially to meet its primary objectives. Leaders of financially stable non-profits know how to balance the costs of providing quality programs and services with the money they get in via donations. However, pulling off a financially sustainable nonprofit is easier said than done.
According to credible reports, almost 8% of American nonprofits have more debts than assets. In addition, 50% of NGOs have less than one month’s worth of cash on hand. These bleak statistics should serve as a wake-up call for everyone in charge of a nonprofit. But you do not need to lose heart, though! By sticking to the following measures, you can set the tone for a financially sustainable nonprofit organization for years to come:
- Spread Your Fundraising Wings
Fundraising is widely recognized as the most important source of a nonprofit’s ability to expand its services. Expenses for running an NGO and tapping into different initiatives will rise as it expands, just as they do for any other business. Therefore, it is not a good idea for a nonprofit to rely on a single funding stream to ensure its long-term viability. You must develop a multifaceted approach to raising money. It will prevent your funds from dwindling and enable you to better prepare for events beyond your control.
To diversify your fundraising, try applying for grants, donor-advised funds, substantial contributions, or corporate sponsorships as part of CSR activities. You may also educate your donors to start a DAF with Crewe Foundation, which serves a key objective in providing financial support to a donor’s favorite charitable organization. Donors can fund a DAF with various assets, including cash, publicly traded shares, real estate, and more.
An efficient way to approach potential donors is to compile broad information regarding individuals most likely to contribute to a specific cause. Let’s assume you run a charity that caters to people of faith. In that case, it would be helpful to campaign in communities where the residents regularly attend worship sessions. This is more like cultivating a group of people who care about the same thing as you do and involving them in the donation cycle on an ongoing basis than asking for a one-time donation.
- Recruit And Utilize Volunteers Efficiently
The proper management of volunteers is essential to developing a successful nonprofit and subscribing to financial stability. After all, there will be one fewer job that needs to be delegated to a paid employee if it can be handled by a volunteer. Having committed volunteers is a boon, but only if their time is put to good use.
Volunteer recruitment and utilization may look quite different for a while as more nonprofits adopt remote labor models. Nonetheless, this is a perfect opportunity to launch online volunteer programs and find committed supporters eager to assist virtually in some capacity.
- Monitor Your Cash Flow
The failure of many nonprofits can be attributed to poor cash flow. This highlights the importance of maintaining a year-over-year cost-income parity. However, this alone is not sufficient to ensure a seamless operation.
Consider capital spending as an illustration. Even if the effects and allocation of the SoFA (Statement of Financial Activities) are spread out over several years, this can still eat into available funds. As a result, grants may be paid late, and the commissioners take too long to pay invoices. This has the potential to severely impair cash flow, leading to the insolvency of a non-profit organization. In order to ensure an adequate cash inflow, it is important to create and adhere to a detailed financial plan.
- Assess Your Impact
You need to bring in cash for financial sustainability, but that is not all! You also have to ensure the amount and funding avenues fit in with your nonprofit’s mission statement. Determine whether or not the direction your work is heading is in congruence with the way things are progressing in the nonprofit domain. Do your actions enhance and advance what other organizations are doing?
If your efforts do not make a big enough splash, you probably will not be able to bring in enough money to keep your nonprofit running. Therefore, it is essential to gauge and emphasize this impact through comprehensive reporting.
- Leverage Technology
Relying on outdated practices and tools leads to squandering financial resources big time. That is where the latest technology can win the day for you! Investing now inefficient nonprofit software will pay you in spades down the road. To get started, consider incorporating the following tools into your operations:
- Online donation platform: Using an efficient online donation platform, donors can make donations at their convenience, regardless of their location. As a result, donations can be processed promptly and efficiently, ensuring that your fundraising efforts continue to be successful. Additionally, with the right software, donors will have the option to pay the processing charge themselves. This means that 100% of their contribution will go to your cause.
- CRM: If you want to keep track of your donors’ information, a constituent relationship management (CRM) solution is the way to go. Doing this will nurture a loyal donor base who will keep giving to your cause.
- Time Tracking Tools: Time tracking tools are critical in facilitating efficient employee workflows. Besides, they are ideal for maintaining organizational cohesion and precise budgeting.
Numerous problems plague the nonprofit industry. Most of these problems, however, can be traced back to a shortage of the resources necessary for maintenance and expansion. But the good news is that you can pave the way for the financial sustainability of your NPO by taking the actions covered in this post.