You should not judge a nonprofit by how it operates when things are good. How a nonprofit handles challenges will tell you whether it can stand the test of time.
There are typically three top financial challenges nonprofits face throughout their lifetime. Having the right resources can be the difference between success or failure.
They say that every new challenge is a chance to show your determination and resolve. The financial challenges nonprofits face can seem especially stressful. However, when you solve them, your organization will be stronger for it.
Summary
In This Article
In this article, we will outline the top challenges that are faced by non-profit organizations.
We will start by outlining common financial challenges, and then present different business challenges and how to solve them. Regardless of whether these problems arise for you, having a comprehensive knowledge of the most common challenges facing non-profits can be vital in your preparation for facing this volatile business environment.
What Financial Challenges Are Common to All Nonprofits
For the first part of this article, we’re going to focus on 3 common financial problems you might encounter as a nonprofit organisation:
1.Getting reimbursed on time from the state and federal government and other funders.
Studies show that more than $200 billion is given to nonprofits each year in the form of government, foundation and corporate grants. These types of nonprofit grants and loans are hard to come by. If you are lucky enough to get one, you may feel as if you are on top of the world.
The problem is that it can take forever to actually get the cash in your hand. Meanwhile, you still have programs you have to run and start on time. In most cases, you receive the grant for endowment funding, capital campaigns and project specific activities. Many funders don’t allow administrative costs to be a part of the grant so these responsibilities still need to be paid for out of your pocket.
So while these revenue streams can be quite valuable, it is difficult to rely on them due to the competitive nature of applying and the actual process of getting the cash-in-hand.
2.Raising funds CONSISTENTLY from private sources so programs can be paid for from year to year.
Donations are a tricky business. Even when you have a donor that is sympathetic to your cause, there is no guarantee that the commitment will continue year after year. Their support levels may also drop over time, leaving you to struggle to try and make up for the lost income you were counting on.
The economy may also be a factor in fundraising efforts. Many groups and researchers try to study why people choose to give and, ultimately, they still get it wrong. The truth is that the reasons are subjective and vary from person to person, charity to charity and moment to moment. Not for profit businesses can serve themselves best by finding the right 501c3 financing to take you through the tough times.
So while the trends and patterns among fundraisers are not always clear, it is clear that it is a volatile area and cannot always be relied on. Despite your best efforts, your fundraising efforts may come up short, which might be a reason to look for other sources of cash flow as well.
3.Proper budgeting of programs since funds often come in all at once during the year.
You may believe that you can budget for next year by using the actual expenses from the previous year. If you do this, you will almost always find yourself coming up short. Revenue projections and necessary expenses never match, no matter how creative you get with your yearly budget.
Even when you do get the numbers to line up, you are probably just lying to yourself that you can exist on such an austere financial plan. In addition, just one miscalculation or emergency expenditure can throw a monkey wrench into the entire process and put your budget in disarray for the whole year. And you don’t get a second shot at it. This speaks to why it is so important to be accurate and honest with yourself in your financial statements and your long-term financial projections.
The money you have for the year is the money you have for the year. Unless some fundraising miracle occurs, you will be stuck with the budget you create. However, if you have extra nonprofit business financing, you may be able to even out your cash flow and make it through the year.
What Financing Solutions brings to the table is:
- A line of credit for nonprofits that can move items from your wish-we-could-do list to your make it happen list.
- Zero costs to get the line in place and zero until you actually use the line, making it a great backup plan for emergencies.
- Fast nonprofit financing that represents an excellent way to smooth out uneven cash flow from a company that understands nonprofit challenges.
- Inexpensive short term financing that any nonprofit can afford.
Why Nonprofits Turn to Financing Solutions
Here are a few of the many reasons that non-profits turn to Financing Solutions to help with their financing needs:
- Nonprofits really love the line of credit product from Financing Solutions because you can pay it off quickly and renew it year after year with no hassles.
- A LOC that is easy to get in place. Answer a few questions and get a written offer in minutes.
- Real, not for profit funding without the typical personal guarantees that banks ask for (except in the case of fraud) so you don’t have to worry about it affecting your credit rating.
- A line of credit that you can use to handle delays in reimbursements is a game changer. It allows you to start programs earlier than when the funding actually comes in, manage emergency expenses and make payroll.
- Here is a quick lesson in how you can learn beneficial techniques from for profit businesses: For profit businesses use their LOC all of the time. You might find it helpful to know that for profits use it the same way nonprofits do, for emergencies or opportunities for growth and success.
Other Challenges that Nonprofits Face (and How to Overcome Them)
While 501c3 funding might be the biggest challenge for nonprofits, it’s not the only one. There are numerous issues that, if you don’t handle them correctly, can spell doom for your nonprofit organization. You must recognize them, anticipate them, and develop an action plan to deal with them.
In this section, we are going to outline not only some of the challenges that non-profits face in the course of business, but some potential ways to solve these problems so that you are well prepared before they come up.
Challenge 1: Keeping donors engaged
For most nonprofits, having a healthy donor base is essential for survival. It’s important that they maintain a connection to your business and continue their support of your mission. The process takes effort but it’s the only way to build relationships and cultivate continuous donations.
How to Overcome the Issue
One way to do this is to make donors a part of your company. Solicit their input and advice. Offer them a chance to do more than just hand over some money. For example, if your donor has or works for a company, you can create an event where their whole organization gets an opportunity for involvement. They can have a clothing or food drive, sponsor and volunteer for an event or compete to see who can raise the most money.
You can also maintain donor interest by linking them to the actual people they are helping. Make sure that you always put a personal spin on events and funding drives by telling individual stories. You can even go a step further by providing opportunities to interact with recipients. Another idea is to have the recipients write letters or make videos to personally thank donors.
People tend to be more invested in a cause if they feel personal ownership over that cause. And by getting your donors involved, you will ensure that they have a vested interest in your cause as well, and they will be more likely to donate to that cause in the future.
Challenge 2: Selling Yourself
There are more than 1.5 million nonprofits in the world. These are the companies you are competing against. You must differentiate yourself to stand out above the noise. This means you have to sell yourself. Make no mistake about it; this requires selling yourself the same way any business might sell a product.
How to Make It Happen
To do this, you have to highlight how your donor will benefit from helping you. Perhaps you make their community a cleaner place. Maybe you help sick children. Whatever it is, you have to demonstrate how the donor’s life will be better if they support your work. Focus on results.
Too often, nonprofits only talk about needs and not the end product of their work. This is something you must work to correct. Also, you must be interesting and show your organization’s personality. Tell them what’s new and exciting about the work you do. If you don’t have anything, it may be time to up your game.
The bottom line is that donors will be interested in you if you can show them that their money has the potential to make a real difference – and this is what you need to communicate.
Challenge 3: Thinking That Everyone is Your Target Audience
The truth is that some people will never want to support your mission. Therefore, don’t waste your valuable time trying to win them over. Invest your energies on those individuals or nonprofit funders who are most likely to believe in what you want to achieve.
How to Overcome
In order to find your target market as a non-profit organization, you need to research! Do your due diligence and study the market in which you operate, and study the type of consumer who is interested in what you offer. There is plenty of data out there on markets and trends, and you need to utilize these to find out where to effectively invest your efforts.
Challenge 4: Cleaning Up Your Act
Let’s face it, some nonprofits don’t have the best reputations. Yours may be less than perfect because of bad reviews, financial mismanagement or previous inept leadership. It’s vital to fix your image before you can move forward.
Be transparent and enlighten the public about what you are doing to make things right. You must also show that the same mistakes won’t happen again. Introduce them to new leadership and be open about your finances.
How to Overcome
If you find yourself in this situation or you have recently introduced new management to your team, the best way to overcome this is to start at the bottom. Identify all the problems that need fixing first, and then make a plan for going forward. It is crucial that you start with an effective plan in order to give yourself direction. If you don’t effectively identify the problems, then you can’t hope to effectively solve them.
Challenge 5: Failing to Plan for the Future
To be successful, your nonprofit must prepare for everything. Then, you must be ready to handle it when it occurs. For that, you need the security that comes from the nonprofit working capital you can get from Financing Solutions. If you are ready to take your nonprofit to a new set of professionalism, click here: https://financingsolutionsnow.com/campaign/nonprofits.
If your nonprofit would like a line of credit that you can use when cash flow is down please visit www.fscreditline.com/np to learn more, to apply and to receive a written offer. A Line of Credit for your nonprofit costs zero to set up and zero until you use it, making it an excellent backup plan.
Conclusion
This article has introduced you to some of the top challenges that non-profits face – financial or otherwise. The non-profit space is vast, and it is difficult to characterize all these companies the same way. Therefore, it is best for your individual situation to really evaluate the space in which your non-profit operates, so that you can be prepared for these problems and challenges should they arise.
The best way to solve a problem is to be prepared for it before it happens. So read through this list and identify the problems you think your business is most likely to face, and put an action plan in place should you encounter that issue down the line. It is much easier to prepare now than to face the consequences later.