No matter how much you plan, there will always be surprises and challenges that impact your nonprofit's budget. Many organizations are finding it hard to stay afloat, and when this happens, it's time to take a hard look at your financial planning.
Oliver Wyman released a report that revealed some shocking data on the financial health of nonprofits within the USA. This report found that:
- About 8% of nonprofits in the US have liabilities exceeding their assets
- 30% of organizations have lost money in the last 3 years
- About 50% of surveyed organizations have less than one month of operating reserves
These numbers are shocking and serve as an important reminder of how crucial financial planning is. So how can you improve the financial health of your nonprofit?
Start With A Strong Strategic Plan
A strategic plan, when used well, can be an excellent guide for your financial planning. It ensures everyone is moving in the same direction and can be a good indicator of when things begin to go astray. In order to make progress, you have to be sure of where you're going, which means meeting with your staff and key stakeholders and determining the steps you want to take within the next few years. Focusing on where you want to go can guide you on how to invest your time, money and resources.
If strategic planning intimidates you, we highly recommend listening to our interview with Bianca Crocker. She is the host of the Small but Mighty Podcast and works closely with smaller organizations to help reach their strategic goals. In Bianca's episode on strategic planning, she goes over how to create a plan that serves your organization and implement it into your day-to-day.
Focus On Data-Driven Decision Making
Data-driven decision-making is something we support strongly here at Driven. The data doesn't lie, and focusing on the numbers will help keep your natural bias out of your decision-making. When speaking with Alexandra Mannerings, founder of Merakinos, she explained that people often ask themselves how their data would support their theories rather than challenge them. Her suggestion is to analyze the numbers and ask yourself how it proves and disproves your ideas.
It can be hard to accept that a financial decision isn't reaping the rewards you wanted, but it also offers an opportunity to improve. Just because something feels right doesn't mean it's the best decision for your organization, and referring back to your data can help you make more informed decisions for the future.
Consider Your ROI
Your data is a great place to start, but another way to make better decisions is to look at the ROI (return on investment) of your programs and events to evaluate their effectiveness within your organization. When working with limited time and resources, you want to make sure that you're putting your energy into activities that will create some sort of benefit for your organization and how that affects your bottom line.
A 2018 Survey done by Nonprofit Standards found that more than 40% of organizations report that meeting the demand for their services is a challenge, and yet they respond to this by doubling down on their spending. By calculating your ROI you can avoid issues like this by understanding how to better manage time and resources to avoid a deficit. If you need more time to properly complete a service, consider investing in tools, software or staff training that can help get the job done more efficiently.
It is important to keep track of your data and analytics when it comes to financial planning. Referring back to your numbers is the best way to make sure that your time and resources are being well spent, and can help you find patterns to help plan ahead. If you're looking for software that can help you keep track of your fundraising success, we'd love to talk with you! Donor Driven has helped organizations save hundreds of hours allowing them to spend less time on admin, and more time on their cause. Our software seamlessly integrates with Quickbooks so you don't have to worry about bad (or no) data flowing through.