We’re in a period of volatile federal funding and delayed reimbursements right now. The current administration’s push to tighten purse strings and cut waste and fraud has led to a slowdown in available funds, some of which nonprofits rely upon for their work. Add to this the rising costs of everything, inflation, and the decline in donor giving, and you’ve got many organizations feeling nervous about their financial future.
Instead of feeling nervous, feel prepared and ready to face the future with a strong budget forecast that takes these factors into account. Forecasting is the bedrock upon which solid nonprofit organizations are built. How do you accomplish this? With scenario planning. By using what-if scenarios, you can build budget forecasts that take into consideration the most likely situations your organization can encounter.
What Is Scenario Planning?
Scenario planning goes by many names: worst-case scenario, tabletop exercises, and what-if planning. All of this means using an imaginary, possible situation to think through your organization’s response. When it comes to budgeting, consider the most likely situations, and build your what-if scenarios against them.
For example, an education nonprofit may face the following what-if scenarios:
What if …
- Our largest donor decides to give his money elsewhere?
- The grants that cover our programs are not funded next year?
- The large contract we have with the state is rebid, and we lose the RFP?
Other scenarios are possible, so brainstorm them with your team to identify the most likely your nonprofit may face. Perhaps it’s staff attrition or the need to move your operation to a new location. These and other scenarios all significantly impact budgeting and should be addressed as part of your what-if scenario budgeting.
For each of these scenarios, building a budget in response to “it happens” will help you anticipate and prepare for the worst-case scenario. If it doesn’t happen, you’ll have a rock-solid budget. If it does happen, you’ll be prepared and know what to do.
Budgeting Strategies to Address Uncertainty
Uncertainty is always with us. Smart budgeting strategies can make you feel more confident about navigating the future and what it holds for your organization.
Spend Less
It’s obvious, but something many organizations are reluctant to do is spend less. See where you can cut expenses. Ask managers to review their department budgets and find ways to reduce expenses. Even small efforts add up to a stronger financial position over time.
Adjust Staffing Levels
Some organizations find that they must adjust staffing levels to improve their financial health. Budgeting for the future may involve adjusting staffing levels, such as a temporary moratorium on adding new positions, or deciding not to fill vacancies if someone voluntarily leaves.
Shift Fundraising Efforts
Many organizations shift fundraising efforts to broaden visibility and donor engagement. Look for ways to move from uncertain funding to more certain opportunities, such as finding additional donors if your organization relies on one or two large donors, grants, or foundations.
Use Technology to Improve Forecasting
Nonprofit organizations can also tap into their existing technology to improve forecasting or look to new nonprofit accounting systems for better forecasting support. Integrating your donor relations (CRM) platform with your nonprofit accounting system ensures that data flows between the two systems, reducing manual errors and saving you time.
Many nonprofit accounting systems, such as Sage Intacct, offer AI-enabled shortcuts and time savers within the platform. You might not need to invest in new software. Explore how to get more from your existing platform.
Welter Consulting
Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.
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