When you run a nonprofit organization, it can seem like you are walking a long road with lots of signs. Some of those signs will lead you in the wrong direction. Others may be somewhat confusing. Then there are those that are clearly saying your nonprofit might need a line of credit.
Frustration, conflicts and money woes should not be ignored. They are signs that something needs to change. This change won’t just happen on its own. You must recognize the signs and then take charge. It might require getting a nonprofit line of credit.
So How do You Know If Your Nonprofit Needs a Line of Credit
Warning 1: You are missing or delaying payroll.
Next to fulfilling your mission, making payroll is perhaps your biggest responsibility. Your employees likely live paycheck to paycheck and they are counting on you. When they do not receive their pay on time, they may be unfriendly to clients or less effective in their jobs. Additionally, they will lose faith in the viability of your organization. They might even decide to leave. It’s hard enough to keep employees at a nonprofit. There is always better pay, more resources and less stress that they can find in the for-profit sector. You don’t want to add missing payroll to the mix. More importantly, not paying your people on time is illegal. It can get you in a lot of trouble with your state and IRS.
Warning 2: You can’t always pay your bills on time.
When you will receive government checks, donations or reimbursements is often unpredictable. Because of that, you can’t always pay your bills on time. This leads to bad credit and vendors who don’t want to work with you. It also puts you in danger of having to close your doors for good. If you do pay your bills on time in this situation, it usually means that other areas of your business suffer. For example, you might pay the caterer but then not have enough cash to reimburse employees for travel expenses.
Warning 3: You run a surplus at the end of the year.
This is most often due to the fact that you are not sure if you will get funds in. As a result, you may defer difficult budget decisions or avoid planning strategically for the future. This fear can stunt your growth and cause you to doubt your business model or mission. A nonprofit budget includes numerous risks and questions. However, you must also monitor it closely to ensure your organization continues to move forward. This can be hard to do in the chaotic environment of a nonprofit. While a surplus is not an immediate red flag, it is a sign that you need to pay more attention to your balance sheet. You should also look into getting not for profit business funding to help even out cash flow.
Warning 4: You are borrowing money from board members.
There are very specific IRS rules regarding how board members can provide nonprofit business loans to their organization. Worst of all, it’s just a really hard position to put your board member in.
Warning 5: You have to stop or slow down certain programs.
Due to inconsistent cash flow, it can be difficult for some nonprofits to run programs. Typically, vendors need payment beforehand. If you cannot provide it, they may not allow you to rent facilities, receive goods and services or create materials. This means you will have to delay programs or maybe even cancel them altogether.
Warning 6: You are reading this post.
Chances are you found this blog because you were searching for a way out of your troubles and looking for a source of nonprofit emergency funding. Well, here we are.
At Financing Solutions (www.financingsolutionsnow.com), we can give you a nonprofit line of credit (LOC). This allows you to have a supply of money you can draw from at any time. You can then repay the funds when your government grants or other payments come in. Therefore, you probably don’t have to fight with board approvals or deal with the uncertainties that a lack of funding can create.
Our LOC is very easy to get in place and there is no cost until you actually use it. Once you do use your line it is very inexpensive.
Even better, a LOC from Financing Solutions will stay in place year after year. You can use the line for 1 day to 25 weeks.
The average nonprofit uses their line of credit for 3-4 weeks while they are waiting for a payment check from donors or a government grant. With the erratic nature of nonprofit 501c3 financing, your organization should always have a line of credit, just in case.
Signs of Nonprofit Burnout and How You Can Prevent it
Undoubtedly, your nonprofit is doing exceptional work. Some people mistakenly believe that, because they don’t make a profit, nonprofits are not real businesses. The truth is that nonprofits are a vital component of our economy and a major producer of jobs, just like for-profit businesses.
Still, nonprofits typically face numerous challenges that the for-profit world does not experience. One of these is organizational burnout.
Although other industries and sectors do encounter it, it’s much more predominant in nonprofits. This might be due to the fact that there is often a greater emotional attachment to the people you are serving. Also, there is a more obvious link between the work you do and it’s direct impact on the community. Add heavy workloads and short staff to the equation, and you have a recipe for breakdowns and stress.
This is a puzzling statistic but not an insurmountable problem. Once you understand the issue and learn to recognize the signs, you can work to combat it.
A lack of boundaries in an organization can cause burnout. These can be either professional or personal. Bringing private issues into the business or sharing personal information with clients can lead to a lack of focus and make staff appear less than qualified. Develop a policy for employees to seek therapy for themselves so they will feel less inclined to discuss their problems in the workplace.
In addition, some nonprofit organizations expect employees to work practically 24/7. They make it seem like if you do less, you lack commitment. This creates mental health consequences and actually serves to make everyone less effective. The answer is to provide an adequate amount of sick and personal leave for your employees and encourage them to use it when necessary. Additionally, if you find yourself sending emails to staff in the middle of the night and expecting an immediate response, stop it. That type of behavior significantly contributes to burnout. Remember to give yourself real days off where you completely unplug without checking emails or making business calls.
Changes in the physical health or emotional attitudes of employees are also signs. Mental stress can typically manifest itself in physical ways. Research shows that stress can directly influence your immune system, making you more susceptible to colds and other illnesses. You might also feel constantly tired or experience frequent headaches and irritability. It could also be just an indistinct feeling of sickness or debility. Emotional issues might be seen as fatigue, difficulty concentrating, depression or even cynicism about the work. If you notice that your employees call in sick repeatedly with no clear reason or you have these feelings yourself, it’s time to take stock of your organization and how you operate.
Another sign is when your staff all works in individual silos. Open communication and feedback is essential in a healthy organization. Social support is also necessary. Employees need to interact and share both challenges and successes as a team. Some managers think that this kind of interpersonal connection leads to distractions and loss of valuable time but actually the opposite is true. When staff develops a culture of collaboration and respect, everyone is more productive. As CEO, it is your responsibility to lead by example and cultivate the right values to eliminate burnout triggers.
When you do everything by hand this can quickly initiate burn out as well. If you cannot remember the last time you changed processes or invested in new technology, it’s definitely time for a change. Duplicate paperwork, multiple review systems and spending hours on email can take their toll on morale and time management and generate stress. It’s important that you find ways to delegate smaller jobs and streamline processes to work smarter and instead of harder. Automating certain tasks can allow you and your staff to free up your time and focus on growth and meeting your goals.
There is an overall dread about your 501c3 organization and a general belief that you won’t make it. This feeling is real and can easily become pervasive. When it happens, employee morale decreases and donations shrink. The key is you. If you are in a constant state of anxiety because of funding issues, everyone notices.
The only way out of this situation is to make sure you always have a source for nonprofit capital, like a line of credit from Financing Solutions. With our help, you will have the financial energy you need to go the distance.
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.