Guest Post By Jon Osterburg, Jitasa
Many nonprofits are struggling with their financial status and well-being due to the current global pandemic and pending national recession. A lot of organizations are fighting to make payroll and keep their doors open during these troubled economic times. This is especially true for smaller and mid-sized nonprofits who may have tight budgets to begin with.
One of the biggest and most prominent questions nonprofits are facing is how to maintain financial health during these difficult times. Nonprofit accounting and bookkeeping services firm Jitasa has worked with nonprofits to stabilize financials through both good and bad economic situations. Here are the tips Jitasa has found work with many organizations:
- Refer to your past financial documentation.
- Ensure you have effective bookkeeping processes.
- Practice maximizing your fundraising initiatives.
- Utilize your available financial resources.
As we dive deeper into each of these financial tips for nonprofits, remember that all organizations are a little bit different. Personalized attention from a nonprofit accountant can help your organization craft a financial strategy that’s specific to your individual organization’s needs. But, if you decide to go at it alone, these tips should help your nonprofit better stabilize your finances, even during a turbulent economy.
1. Refer to Past Documentation
One of the best and most informative resources available to your nonprofit is your historic financial documentation. By analyzing your past financial records, you can make estimations for the future and better prioritize your financial expenses.
Documentation can provide a starting point to help you effectively navigate the unexpected changes presented by the virus.
If your nonprofit has been around a while, you may consider looking back at your financial documentation from the last economic recession. This can provide insight into what strategic changes the organization made to adhere to the changing environment, what was successful, and what should be changed this time around.
Some of the elements you should analyze when going through past documentation include:
- Fundraising successes. Consider your fundraising strategies from past fiscal years. If you’ve tried various fundraising strategies with your supporters, what seems to be the most effective? For example, if you’ve hosted a peer-to-peer fundraising campaign and a text-to-give campaign in the lead-up to an event, which one did your supporters seem to prefer? Taking note of these successes can help you make sure you choose the best fundraising strategies going forward.
- Fixed costs. As you sift through your past documentation, you’ll find that your fixed costs remain relatively constant from month to month. These costs include things like rent, utilities, and payroll. No matter how the economic conditions change, these costs will also remain fixed— hence the name. These fixed costs tend to be important for keeping your doors open, so they should be prioritized moving forward.
- Average variable expenses. Your variable costs are those expenses that change from month to month, which can make them slightly more difficult to predict. However, examining averages is another good starting point to plan for these costs in the future. For example, if your nonprofit provides meals to the homeless, the expense of a weekly meal may differ depending on what you serve, the number of guests you have, and other factors. You can often find a little wiggle room in these expenses and choose less expensive options if you’re trying to save for a month.
- Past budgets. Past budgets can be incredibly insightful for nonprofits who are looking to plan for future financial health. Analyze your past budgets and see how effectively your nonprofit was able to stay on track with those plans. If you were close to the mark, you can use that past budget to plan for the future. However, if your estimates were off, take note of the missed estimates and try to correct them for future budgets.
When examining and using this past documentation for the future, remember that the changing economy may have impacted various aspects of your plans. For example, you may have some trouble raising as much money with your fundraising initiatives as you did last year. Take this into consideration and remain modest in your estimations to leave wiggle room.
2. Ensure Effective Bookkeeping
Just as it’s important to examine past documentation, your nonprofit should ensure you have effective bookkeeping practices in place to ensure accurate record-keeping in the moment. The first step to ensuring you have effective records is to choose a bookkeeper familiar with your particular industry.
If you’re a part of a charity, you should make sure your bookkeeping staff has a background in fundraising or fund accounting. If you’re working with a church or religious organization, consider a church accounting and bookkeeping firm to ensure they understand the ins and outs of tithing and other generous support from your congregation.
Industry specificity is key for bookkeeping success, especially when your organization uses fund accounting practices. Bookkeeping standards are those that set up your accountants for success, so effective accounting starts with effective bookkeeping. When you have industry-specific bookkeeping and accounting professionals on your side, your nonprofit will set itself up for accurate records and effective finances.
Your bookkeeper will need to understand and accurately record information such as:
- Online donations made to your nonprofit. Your bookkeeper should understand how your donation software works and how to pull data from it to upload to your accounting solution or to your ledger.
- Event contributions. Different types of contributions made at your events are important to take note of so that your organization can record transactions appropriately. For instance, auction sales may be treated separately from your event donations.
- Organization bills and payroll. Nonprofit bookkeepers are responsible for handling payroll and taking care of the operational costs at your nonprofit. Therefore, they need to be well-versed in how these operations work for organizations like yours.
As we mentioned, your nonprofit bookkeeper is the individual who records the transactions made by your organization. Therefore, they set up your organization for financial success through effective reporting of important data.
3. Practice Maximizing Fundraising Initiatives
In order to maintain financial health, your organization needs to make sure you have effective revenue-generation strategies. For nonprofits, this means effective methods of fundraising. Maximizing your nonprofit’s fundraising strategy ensures you have the financial capacity to reinvest in your mission.
In order to make the most of your nonprofit’s fundraising efforts, we recommend the following strategies:
- Focus on donor retention. It’s much easier to retain existing supporters than it is to acquire new donors. Instead of focusing all of your efforts on your acquisition, try stewarding those you already know have a vested interest in your organization. According to Qgiv’s donor retention guide, the average donor retention rate rests right around 40%-45% for nonprofits. If your organization exceeds that average, you’ll see greater benefit from the strategy.
- Make it easy to give. Donor abandonment occurs when supporters want to contribute to your cause, but end up exiting your donation page for one reason or another. The best way to prevent donor abandonment and convert more supporters into donors is to streamline the online giving process. Boost donations by making sure your donation page loads quickly and limiting your donation process to a single page with a clear submission button.
- Pay attention to mid-level donations. Many nonprofits make the mistake of focusing their entire attention on either new donor acquisition or major donations. One of the neglected groups of donors tends to be mid-level donors. We recommend implementing stewardship strategies to capture the attention of this group. After all, they are the most likely to turn into major donors one day. Plus, donations of any size can quickly add up to comprise substantial fundraising revenue.
As you maximize your fundraising, you should consider also setting aside a reserve fund. These funds can be used during times of crisis such as these. It’s like an emergency fund that can be used when your nonprofit most needs additional financial support and can tide you over until economic conditions are replenished.
4. Utilize Your Available Financial Resources
Your nonprofit has several financial resources available to aid your efforts. Fully utilizing these resources will help your organization save where it’s possible, augment your revenue sources, and better financially support your mission.
Some of the financial resources we recommend considering include:
- Corporate philanthropy resources. Sponsorships and matching gift resources are a great way to boost your fundraising efforts while crafting partnerships with local businesses. Companies receive positive publicity for supporting a philanthropic cause while your organization receives funding.
- Nonprofit provider resources. During this difficult time regarding COVID-19, several nonprofit providers are offering a number of resources to help organizations better handle the pandemic. Make use of these resources and check with your own providers to see if they’re offering any type of assistance to organizations like yours.
- Government assistance. In light of the pandemic, the federal government passed the CARES Act to help individuals, businesses, and nonprofit organizations better handle the economic impact that the virus had on society. If you want to read more about it, check out Jitasa’s guide to the CARES Act for nonprofits. And, keep an eye out for additional updates from the federal, state, and local governments regarding additional information or assistance.
- Grant funders. Many funders recognize the difficult situation that nonprofits face in these times of economic difficulties. Therefore, they’re offering additional support and funding to help tide them over. Look into grant funding from the government, local businesses, foundations, and other popular resources to see if they’re offering additional support to grant seekers.
Using your resources to their greatest extent helps your nonprofit’s fundraising efforts go further, your expenses mean more, and creates the largest impact with the least amount of manpower.
As you change up your strategy and ensure to maximize your nonprofit’s financial efforts, it’s important that you don’t compromise your security standards, especially not with faulty technology. IT experts like those at Apparo can help your nonprofit ensure security and safety in your technological resources. Your nonprofit’s financial security is important to ensure you keep the doors open and maintain the philanthropic impact that you have on the world, even during times of crisis.
With a secure system, you can implement these tips to help your organization better craft a fundraising strategy that helps maintain financial stability and health. Good luck!
Jon Osterburg has spent the last nine years helping more than 100 nonprofits around the world with their finances as a leader at Jitasa