Optimizing the Financial Health of Your Non-Profit Organization

optimize financial health for nonprofit organization

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Optimizing the Financial Health of Your Non-Profit Organization

optimize financial health for nonprofit organization

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While nonprofits are critical to supporting the overall health of organizations, causes and individuals across the world, the global COVID-19 pandemic had a notably negative impact on the health and well-being of these vital organizations. More than 7 percent of nonprofits are expected to close in the wake of the pandemic, resulting in 1 million lost jobs, according to Independent Sector.

A healthy nonprofit starts with a strong financial foundation, yet many organizations struggle with finances, accounting* and budgeting—nearly one-third of nonprofits face cash reserve issues, according to a GuideStar report. Nevertheless, nonprofits can strengthen their bottom line and future prospects by honing in on and updating their strategic and financial planning.

The following tips and strategies can further optimize the financial health of your nonprofit organization, serving to support its long-term growth and mission:

Update your strategic plan.

One of the aims of a solid strategic plan is to keep everyone in an organization on the same page and moving in the same positive direction. Returning regularly to your strategic plan can remind both your leadership team and board of your overarching goals and reset the focus on finances, as needed. It is imperative that your strategic plan functions as a living document, rather than something you create once and set aside. Let it be a guide for your financial and program objectives and a tool for your financial team to rely on as you follow the key strategic goals and financial plans you have established.

Bolster your operating reserve.

When you systematically move money in smaller amounts to your operating reserve, you avoid a common conundrum. Unfortunately, many nonprofits have less than one month of available operating reserves on hand. Rather than waiting for large windfalls, commit to regular additions to your operating reserve to support your organization’s overall health and performance.

Find the right balance of board members.

Every successful board includes a team that balances leadership, financial, marketing and fundraising skills. The next time you have an opening on your board of directors, seek out leaders who are equally skilled at understanding balance sheets and raising funds for future endeavors. Likewise, ensure your board has both experienced members and fresh ideas to support your organization’s financial future. If your board could use a refresh, consider adding additional members or updating term limits.

Make decisions based on data.

Organizations driven by data are a whopping 23 times more likely to acquire new customers and six times more likely to keep those customers, according to a McKinsey Global Institute study. Look to the data rather than making decisions based on past experience or emotions. This way, you can make logical decisions that will drive revenue, entice donors and bolster your long-term financial picture. 

As an added bonus, the right data demonstrates accountability to stakeholders. This type of transparency is more important than ever for nonprofit organizations.

Invest in revenue-generating programs.

Nonprofits that diversify revenue streams are often the same organizations posting the strongest revenue gains. If you aren’t already generating revenue from fundraising events, partnerships with local or national businesses, and new sponsorship opportunities, consider adding these to your plan. While grants are a valuable way to support your mission, revenue-generating programs can make a more significant impact.

Add external experts to your team.

Many smaller nonprofits have financial teams of one—or even one person who splits time between budgeting and marketing, for instance. If your organization is strapped for resources when it comes to internal accounting*, it is wise to seek help from experts who understand the nuances of financial reporting and overall accounting* for nonprofits. You can hire outside support to help you get over a particular hurdle or to benefit your long-term financial health and stability.

Finally, regular communication with everyone at the table is a must. Your financial picture should never be a surprise or an emergency situation. Organizations that create a culture of transparency invite more voices, inspire greater confidence and maintain a more even keel.

Ultimately, financial integrity is a hallmark of a great nonprofit. There is no one “right” or “perfect” balance sheet or strategic plan. But organizations that focus on communication, planning and adapting to changing circumstances tend to enjoy greater success. When your financial health is strong and stable, you can spend more of your time and resources on sharing your mission, supporting others and building towards the next generation.

If your nonprofit could benefit from support with anything from basic bookkeeping to complex financial planning, the professionals at Scrubbed are passionate about helping nonprofits succeed and thrive. Please contact us at support@scrubbed.net or 800-837-5160 for project-based or ongoing help with accounting*, reporting and any other financial needs.