Weathering the Storm: How Nonprofits Can Navigate Financial Challenges Amid Executive Actions
The New Reality for Nonprofits
It’s no secret that actions taken by the new administration have shaken the nonprofit sector to its core. Even with the immediate impacts stayed via legal action, there are still significant impacts ranging from the reduction of funding, delayed funding, stricter compliance burdens, and changing priorities.
It’s on executive leadership across the sector to act swiftly and decisively with an eye for long – term, sustainable, strategic action.
Fiscal Management Strategies to Protect Your Organization
There are a variety of strategies to help sustain fiscal operations and weather the storm including controls over spending, improving cash reserves, diversifying revenue streams, and more.
1. Strengthen Fiscal Forecasting
Before making any decisions, any first step needs to involve getting an accurate picture of organizational finances on both a short- and long-term basis. If not already done, the budget needs adjusting and stress tested, taking into account best-, moderate-, and worst-case funding outcomes. Once created, the budget needs to be reviewed on a regular basis to take changing circumstances into account.
2. Implement Controls Over Spending
The area with the most immediate impact is also the most difficult for many organizations to implement due to the human impacts. Changes to spending can include the following:
Hiring Freezes: Halt non-essential hiring and re-evaluate workforce planning based on mission-critical needs.
Travel & Discretionary Expense Freezes: Eliminate or severely limit all non-essential travel and discretionary expenses.
Capital Freezes: Delay or cancel any capital projects not immediately necessary for mission objectives or tied to funding sources.
Benefit Freezes: Freeze salary increases and new benefit programs temporarily, while communicating openly with staff to maintain trust and morale.
Executive Leadership Salary Reductions: Implement a salary cut above a certain threshold while maintaining the salary of programmatic staff.
3. Prepare for Difficult Decisions: Layoffs and Restructuring
If the above measures are not sufficient, it may be time to consider workplace reductions. Before laying off staff, it may be wise to consider alternative methods of reduction. These methods can include both furloughs and voluntary leave programs, providing staff an option to return when funding becomes available.
Before layoffs are inevitable, ensure a tiered contingency plan is in place that includes
· continued risk assessments,
· ongoing communication with personnel,
· targeted numbers for each level of severity, and
· a plan to rehire and return staffing to normalcy if there is the ability to do so.
When creating this plan, ensure staffing is in place to maintain grant compliance, in addition to any compliance with any labor and employment laws.
4. Diversify Revenue Streams
Although not as immediate of an impact as spending, nonprofits should look to diversify revenue streams as much as possible. There are a number of alternative funding sources an organization may turn to if needed, however, they may take significant time and effort to materialize.
· Explore Foundation Grants: Identify and apply for new foundation funding opportunities and try to strengthen relationships with current funders to mitigate against the loss of current funding.
Increase Community Outreach: Build and engage a stronger local donor base through storytelling, volunteerism, and events. There’s power in numbers. Attempt to leverage social media and digital platforms for micro-donations and community campaigns.
Develop Earned Income Opportunities: If not already in place consider providing fee-for-service programs, along with consulting or training workshops aligned with your mission. If they are in place, consider heavier marketing of these services due to their lack of reliance on governmental or donor funds.
Corporate Partnerships and Sponsorships: Build alliances with businesses looking to enhance their social responsibility profiles. Corporate donations and sponsorships can be critical components to any funding structure.
State and local government funding allocations: If possible, reach out to members of government that may be friendly to your organization to see if you may be considered for state or city level appropriations. As these are at a localized level, they carry less risk than Federal funding sources.
Fiscal Sponsorships: If the organization is in a strong enough position, there may be opportunities to provide fiscal sponsorships to like-minded entities not yet eligible for 501(c)(3) status. They can help provide funding for staff, provide some levels of support through administrative funding, and open up additional veins of revenue that may otherwise not have been accessible.
The ultimate goal of all the above should be to create a reserve to help the organization sustain a six – to – twelve month funding drought.
Other areas of emphasis should include board engagement and stakeholder communications to keep all parties engaged and active.
Next Steps
In times of uncertainty, waiting is the riskiest move. Nonprofits acting decisively today will be able to sustain their missions tomorrow. Begin by gathering your leadership team, assessing your financial position, and prioritizing the strategies outlined here. The road ahead may be challenging, but with disciplined planning, community engagement, and a bold commitment to innovation, your organization can weather the storm — and emerge stronger. At Spokane Accounting Services, we have the tools to help you nonprofit not only succeed in trying times, but thrive. Give us a call for an obligation-free consultation.