One thing about a nonprofit’s financials is that revenue projections can be a bit “iffy”, while projected expenses always seem to roll in just as planned. Aggressive revenue projections are not necessarily bad, but unless someone owns the fund raising function-and works it virtually every day-a nonprofit runs the risk of falling short of funding, and jeopardizing the organization.
Many nonprofits are learning this lesson the hard way today as their government funding dries up and individual gifts are reduced. On top of that, most private foundation sources are cutting back too.
How to cope
I worked with a nonprofit doing terrific work . Its’ problem: revenues had not been keeping up with plan…or its expenses. In fact, it was significantly in debt. This organization was in real trouble and had to make important changes immediately. We came up with several findings:
First, the Executive Director was burdened by tasks that were better delegated to volunteers. He needed to spend significantly more time focused on fund-raising and friend-raising.
Second, no one really owned the fund raising responsibility.
Third, the Board was not consistently monitoring financials at its meetings. Without consistent and detailed review of financials, the organization’s financial well-being was put at significant risk.
Fourth, they were involved with a side business that they hoped would generate sustainable revenue to support the nonprofit entity. It was not delivering as planned, actually losing money, and there were no immediate plans to address this short fall, its causes, or remedies. This negative cash flow was a threat to the entire enterprise.
Another problem was in board make up itself. There was no one with business management experience serving there. While the board was comprised of committed and motivated professionals, none of them had organizational management or leadership experience. It had no plans to add those key skill sets.
Finally, they used a couple of different financial reporting formats. This caused confusion and impeded consistency and clarity in their preparation and review. After discussions about how best to address these issues…and its financial needs, the organization plans, among other things, to do the following:
- Add business management expertise, a CPA, and a marketing professional to the board as soon as possible.
- Ask its Executive Director to reallocate his time- 40% to fundraising; 40% friend raising (presentations, speeches, etc; and 20% managing the organization
- Delegate certain Executive Director duties to other staff; such as, office equipment maintenance and repair, some of the newsletter’s writing and editing, being the primary go-to person at both locations whenever anything happened.
- Host “parlor meetings” with key donors to ask for special assistance
- Bring on a volunteer with fund development experience to help create and proactively execute fund raising efforts, thereby relieving the executive director of busywork and freeing him up for additional development projects.
- Develop a strategy to address the underperforming related entity. For instance, if it is unable to contribute some agreed upon level of revenue within a stated time, it should be dropped
- Instill a more formal approach to its board meetings
- Making greater use of actively-working board committees
- Creating a consistent, mandatory list of agenda items to be addressed at each meeting
- Consistency in financial reporting format
With these steps in place, the organization should be able to get back on solid footing. Does any of this sound familiar? If so, call me and let’s talk.