Introduction
Nonprofits play a vital role in communities, by providing essential services and tackling critical social issues not being addressed by the Government.
With an all-time inflation high though, they face a massive challenge! The cost of everything from rent and utilities to staff cost, which are funded sparingly, and project delivery cost, continues to rise and squeeze on budgets.
The Double Whammy of Inflation!
On one hand operating costs are rising and on the other hand, the value of donations and grants are not keeping pace with the inflation, thereby reducing the ability of nonprofits to deliver on their mission! In fact, grant funders (foundations) are beginning to freeze donations and some spend down; which adds another layer of challenge to funding of nonprofit missions, so it’s a double whammy! The smaller community organisation whose funding sources are limited, feel the pinch even more!
Or should I say Triple whammy! With inflation having an impact on the public, there is an increased demand for the services non-profits provide!
Six strategies for Nonprofits: Navigating the Financial Challenges of Inflation
Budget Review and Revision
Budget review is critical! They are useful for identifying areas where cost can be cut or streamlined. Where possible, consider renegotiating service agreements, maximise use of invoice payment terms and explore more cost-effective alternatives and postpone non-essential expenses, which may also mean postponing some activities. Hence, the need to revise your budget.
Review and Revise your fundraising strategy
Perform this review with a view to diversifying and introducing new income streams.
Consider Collaboration
Collaborate with other non-profits to share resources e.g. office space, staff, etc. and bulk buy, which would help with negotiating better deals. Also consider submitting joint funding bids.
Communicate with your donors!
Talk to your donors about the impact inflation is having on the delivery of your mission and ask if they could provide inflation-adjustment top-ups to your existing grants.
Focus on Outcomes
By focusing on the outcome of your programmes, you can demonstrate the value of your nonprofit, even with limited resources which will make you an attractive grantee for funders who are still giving.
Embrace Innovation
Explore innovative ways of delivering your mission e.g. online workshops instead of the in-person and all the cost that comes with it, remote working aided by technology,
Conclusion
Inflation presents a significant challenge for nonprofits, both small, medium & large! However, adopting strategic financial management practices, diversifying funding streams, embracing innovation and focusing on operational efficiency, will go a long way to help with navigating the financial challenges that come with inflation. Even small adjustments could make a big difference and this is the time to be creative, collaborative & innovative and to pivot in order to be able to ensure you continue to make a lasting impact.
Here‘s an interesting read about the trajectory of inflation and recommendations for boards and leadership teams; you might find this useful.
Contact us if you if you require an independent review of your non-profit’s financial plans. We provice fractional finance department services offering as little or as much of our time as is required!
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