Karen Houghton
October 9, 2024
Finance

Economic uncertainty is a growing concern for many nonprofit leaders, and you’re not alone if you’re feeling the pressure. According to the 2024 State of the Nonprofit Sector Report, some of the top challenges nonprofits face include rising costs, inflation, and limited financial resources. So how can you proactively prepare your organization for these challenges?

Raising funds is just the start. To ensure your nonprofit can thrive during tough economic times, it’s essential to have a strategic plan in place for managing and stewarding your resources. Here are three key strategies to help strengthen your financial foundation:

1. Prioritize Strategic Cash Management

How you manage your nonprofit’s funds is critical to long-term sustainability. Beyond just allocating donations to projects, it’s important to focus on where your funds are held, how they’re tracked, and how you manage your operating reserves.

Infinite Giving’s Nonprofit Cash Management Guide outlines several key aspects of effective cash management:

  • Budgeting: Develop budgets grounded in your past fundraising and spending data, while factoring in future projections. This will help prepare your organization for any economic fluctuations.
  • Cash Flow Monitoring: Regularly track your cash flow, including assets, liabilities, revenue, and expenses. Knowing where your organization stands financially is the first step to safeguarding it.
  • Financial Governance Policies: Establish policies for gift acceptance, conflicts of interest, expense reimbursement, and staff compensation. An investment policy statement (IPS) is also crucial, ensuring you have clear guidelines on how to invest and steward your funds.
  • Building a Rainy Day Fund: Having 6-12 months of operating expenses in reserve is ideal, but any reserve is better than none. A rainy day fund will help you navigate unexpected challenges.
  • Low-Risk, Liquid Investments: Traditional savings accounts often yield low returns, leaving your reserve funds vulnerable to inflation. Consider investing in low-risk, highly liquid assets like treasury bills, as recommended by Infinite Giving.

By proactively managing your cash and assets, you can create a more resilient financial position to weather economic downturns. To get the best results, consider working with a nonprofit investment advisor who can offer personalized strategies that align with your goals.

2. Cultivate a Variety of Large Gifts

Maintaining strong relationships with major donors is always critical, but during economic uncertainty, exploring new ways to engage these donors is key.

With an increasing number of wealthy donors favoring non-traditional giving methods, your nonprofit can stand out by offering diverse donation options. Here are three impactful opportunities to consider:

  • Stock Donations: Stock giving tends to be resilient during downturns and can offer donors significant tax advantages. By donating appreciated stock, donors avoid capital gains taxes and receive a tax deduction based on the stock’s value at the time of the gift. Make it easy for your donors to give stock by using platforms like Infinite Giving, which simplifies the process.
  • Cryptocurrency Donations: Some of your supporters may hold cryptocurrency like Bitcoin or Ethereum. Offering the option to donate crypto allows you to convert it to cash immediately, avoiding volatility while receiving a substantial gift.
  • Donor-Advised Fund (DAF) Grants: DAFs are increasingly popular, allowing donors to set aside assets for charitable giving while receiving immediate tax benefits. Promoting DAFs and providing clear instructions on how to make a grant request can help unlock significant gifts for your nonprofit. For more on how DAFs can benefit your organization, check out our guide to Donor-Advised Funds.

Make sure to promote these giving options across your website and other communication channels, and consider adding a non-cash giving widget to your donation page to simplify the process for donors.

3. Tap into Corporate Giving Opportunities

During times of economic uncertainty, corporate giving can be a reliable source of funding. Businesses recognize the importance of supporting causes that align with their values, and many are increasing their philanthropic efforts.

Explore corporate giving programs such as:

  • Matching Gifts: Encourage donors to check if their employers offer matching gift programs. When companies match their employees’ donations, your nonprofit receives double the impact.
  • Volunteer Grants: For donors unable to give financially, let them know their volunteer hours could result in corporate donations. Many companies offer volunteer grants, contributing a financial donation based on the number of hours their employees volunteer.
  • Corporate Sponsorships and Grants: Cultivate relationships with companies that align with your mission. They may be willing to sponsor your next event or provide grants to support your programs.

Corporate giving partnerships can lead to sustained funding and long-term relationships that benefit both your nonprofit and the company. Jitasa offers more insights on how to maximize corporate sponsorships and other strategic partnerships.

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Summary

Navigating economic uncertainty requires thoughtful planning and a willingness to explore new opportunities. By prioritizing strategic cash management, diversifying your major gifts, and tapping into corporate giving, your nonprofit will be better equipped to weather any financial storm.

Be open and transparent with your donors about the challenges your organization is facing. This honesty can foster deeper connections and inspire more generous support when your nonprofit needs it most.