As we pass the midyear mark, many nonprofit leaders are pausing to take stock of the current economic and business climate. The turbulence of the last few months has left many pondering ways to mitigate uncertainty. With federal funds shifting, grants changing, and donors’ pocketbooks shrinking, nonprofit leaders must face the future with calm, deep determination, and a sound plan to guide them.
Three essentials form their plan:
- Diversifying revenue streams
- Delaying or reducing expenses
- Accelerating automation
Nonprofit leaders who focus on these three essentials can weather the storm of uncertainty and lead their organizations to a successful future.
Diversify Revenue Streams
Diversification is the secret to managing uncertainty. There’s an old saying, “Don’t put all your eggs in one basket.” Nonprofits that put all their income “eggs” into one basket—relying on federal funds, for example, or heavily relying on a single grant or donor—may find themselves struggling if something unexpected happens. Federal funds can be cut or put on hold; grants may be awarded to someone else; donors may choose to give their money elsewhere.
To mitigate against this risk, it is vital to ensure that your nonprofit has multiple, diverse income streams. Examine the current revenue patterns; what are the risks? Even something that seems sure, like an annual fundraiser, can be risky if your organization relies on it for its sole source of funding.
Look for small but meaningful ways donors can contribute. Add new events, fundraising campaigns, and resources. Explore alternative grants and program revenues for additional funding. But above all, make sure you aren’t relying on a single revenue stream to support the entire organization.
Reduce or Delay Expenses
Look for ways in which you can reduce current expenses or delay new ones. Some ideas include reviewing recurring expenses and subscriptions and cutting back on duplicative services. Does the marketing department really need two graphic design programs, or can they use only one? You’d be surprised at how expenses can creep up over time. Comparison shop for major expenses, such as rebidding insurance policies and gathering competitive bids for contracted work, to ensure you are getting the best value for your money.
Delaying expenses is another tactic to improve financial stability during times of uncertainty. Can you wait to add new staff or launch a program? Examine upcoming budgets and expenses and identify ways to delay or defer major expenses.
Accelerate Automation
Accelerating automation means using technology to automate as much as possible, reducing manual work for your existing staff. AI is a good example of automation. Many nonprofit accounting systems now include AI components that can schedule invoicing and payment reminders, send documents for approval, and run and email reports to stakeholders without requiring people to key in requests. These rule-based systems save considerable time by performing common tasks without prompting. Explore the automations already built into your existing software.
Or consider adopting a new cloud-based nonprofit accounting system. Sage Intacct and MIP Fund Accounting both offer excellent nonprofit accounting platforms that can help you better manage your finances. These and other accounting and financial management systems can make it much easier to budget, forecast, and prepare for the future.
Navigating the Future
We can’t control the future, but we can take steps today to prepare for anything that comes up. Preparing for financial uncertainties includes diversifying income streams, reducing expenses, and automating as much as possible to free up staff time. When taken together, these three steps can go a long way toward laying the foundation for a solid financial foundation.
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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