Nothing scares an executive more than seeing a nonprofit budget deficit. You could be doing everything right. However, there could be hiccups in cash flow, an unexpected expense, or a change in the economy. Nonprofit budgeting is challenging because the margin of error is so tight! Take a deep breath, understand the problem and begin to take action. You will survive this budget deficit and your nonprofit will be better for it. There are solutions.
Summary of Article About Nonprofit Budget Deficits:
- Key people need to know why there was a budget deficit
- Review current plan, set new budget, have tighter controls
- Consider getting a Financing Solutions Nonprofit Line of Credit in place
- Quick getting cash ideas
Key people need to know why there was a budget deficit
Before you go telling your board of directors or other key executives about your nonprofit budget deficit, talk to someone you really trust. It might be your accountant, another nonprofit leader, or someone on your board. It isn’t so much the answers that person might provide but how they might help you think through the problem. Often times, people turn to the internet for solutions but the internet doesn’t know your particular situation. The internet doesn’t always give you great answers based on true experience.
After you have had time to understand the problem then it is time to let your board of directors and other key people know about the budget deficit.
The thing that is great about a group of people is that when times are tough, you will be surprised at the solutions people come up with. Many people respond to crises well when they have someone to work through the problem with. Don’t jump to the first solution that someone comes up with. Make a list of all the ideas and then decide which are the best solutions.
Review current plan, set new budget, have tighter controls
Review your current budget if you had one and find out what went wrong. If you don’t have a budget ask your bookkeeper to run some reports in your accounting software that allows you to see past income and expenditures. By really having a detailed understanding of the numbers, you may be able to move things around or cut future expenses to make up for the deficit.
According to Kathleen Kelly Janus, a lecturer with Stanford University’s social entrepreneurship program, and author of the book Social Startup Success: How the Best Nonprofits Launch, Scale Up, and Make a Difference: 75% of nonprofits collect data, but few feel they are using it well
It is now time to set up a new budget. Go through each item and determine if there is still money not spent in that budget. By going through each of your nonprofit income statement (called a profit and loss statement in Quickbooks) you will have a better handle on each part of your nonprofit and you can design a new budget. It’s also important for you to know if your books are kept on a cash or accrual bases.
Learn from your mistakes so it doesn’t happen again and consider bringing on an expert who can help. One of the best ways is to review your budget more often. Doing as much as you can at each board meeting will go a long way. It might also be a great idea to put plans in place so that you a have a backup plan should problems occur in the future. Another solution is to look at Profit First Professionals who have accountants that specialize in nonprofit organizations.
Consider getting a Financing Solutions Nonprofit Line of Credit in place
A lot has changed in regards to financing options for nonprofits. Nonprofits have basically been shut out of these tools because commercial banks require collateral and personal guarantees for loans for nonprofits. Having a line of credit is an excellent resource for nonprofits because it allows a nonprofit to deal with short term issues so that you have the time to deal with a nonprofit budget deficit.
Since 2012, Financing Solutions has been a leading provider of lines of credit for nonprofits with yearly revenue over $300,000. Financing Solutions has basically taken away all the hurdles that have stopped non profit organizations from setting up a credit line.
The Financing Solutions Line of Credit requires no collateral and no personal guarantee. The online application takes 2-minutes to fill out and a no-obligation offer will be emailed within hours. There is no cost until the line is used making it a great cash back up plan. When you do use the line it can be paid back at any time making the line very inexpensive. If you want to get the line in place it will only take 48-72 hours and the line will be renewed every 12 months.
Financing Solutions is rated 5 stars and A+ by the BBB.
Quick getting cash ideas
- Restricted funds: 20% of nonprofit funding in the United States is unrestricted. Talk to donors who have restricted funds and see if they will unrestrict them.
- Hold an event: backyard BBQ or a dinner in a church fellowship hall can be simple to organize
- Facebook fundraiser: tap into the power of your current relationships through Facebook
- Crowdfunding: There are tons of crowdfunding sites online that can help you raise money GivingGrid
- Online auction: If you have or can get a couple of dozen nice items or packages, consider holding an online auction.
- House parties: leverage the relationships of key people including Board members, current donors, and volunteers
- Giving Day: If your community or state has a specified Giving Day, use that as an opportunity to raise money
- Matching gift: Ask a Board member, current donor, or volunteer to offer to match donations up to their gift amount