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How your non-profit organisation can prep for a strong financial future

Money Matters

How your non-profit organisation can prep for a strong financial future

Non-profit organisations (NPOs) have had to adapt and pivot their services to survive, with coronavirus hastening change and digital transformation plans.

Sound financial management processes supported by the right technology can help your organisation make the most of its money and keep things on track.

If you’re still relying on disparate IT systems, you’re probably finding things difficult, whether that’s with jobs such as tracking fundraising income or handling remote working.

You can’t pivot your services quickly and grow to your potential if you still use systems that lack visibility.

In this article, we outline some key steps that your NPO might want to take to prepare for future changes in your operating environment.

Here’s what we cover:

Change management

Change management is a structured approach to ensure your handle transitions smoothly.

A change management process can set up NPOs to benefit from the long-term effects of change. A vital component of this is assessing the impact of your changes.

  • How should you go about assessing and reacting to changes?
  • What conclusions can you draw from reporting?
  • How can you use this information to manage change and make both strategic and operational decisions?

10 steps to help your NPO become financially sustainable

Here is a 10-step list that will help you make the right decisions and become financially sustainable—where you’re confident about supporting your beneficiaries in the long term.

1. Understand your NPO’s purpose

NPOs exist to fulfil a particular purpose. You and your trustees are responsible for understanding your environment (likely to be volatile) and fulfilling those purposes as effectively as possible.

Revisit the purpose of your NPO, as it’ll help you build a strategy that’ll get you to your desired outcomes and impacts.

  • What is the aim of your NPO?
  • What are your objectives?
  • What are your projects?

Before assessing what needs to change, you need to understand the context of the financial models you will base decisions on.

2.  Draw up a list of questions to answer when considering your financial sustainability

Determine what information is required when deciding how financially sustainable your NPO is.

  • Are you operating within your means?
  • How certain can you be about your NPO’s financial future?
  • How secure is your NPO’s income?
  • How predictable is your NPO’s income?
  • How diverse is your NPO’s income?
  • Can you quickly tell where you’re spending money?
  • Does the balance of spending reflect your strategy and stated priorities?
  • Are there enough reserves for a rainy day?
  • Is any debt you have currently manageable? 

3. Find out what information you have

You can only fully answer questions about your financial sustainability if you access the correct information. And with that in mind:

  • Can you quickly access critical information?
  • Is it enough to assess sustainability and impact?
  • As well as historical data regarding actual costs and incomes, what will you need to make future forecasts and undertake scenario planning and modelling?

Accessing the data you need can be more challenging than you think, especially if you’ve wrapped it up in spreadsheets. Having financial management software could make this easier for you going forward.  

4. Evaluate the tools and resources you have available

Accessing data is one thing, analysing data is quite another.

Making sense of spreadsheet data is possible but difficult. The cloud allows you to quickly process and analyse data with computing power and software designed for that purpose.

It’s not just a technology question, though. You’ll need to report the information in a way that makes sense to the right people and take practical action based on the data.

Things to consider include:

  • Is your finance software capable of analysing the information you have?
  • Can it provide future information promptly to support the change process?
  • Who is doing the assessment, and have they got the time and skills needed?

5. Determine your key risks

As well as gathering and analysing information, you’ll need to develop realistic scenarios where you might need to react. This could include:

  • reductions (or increases) in income across all streams.
  • unexpected costs, such as costs on structural repairs to key properties.
  • larger than expected bills—what will happen if you don’t pay them on time?
  • imminent legislation or regulations to comply with.

6. Break down the impact assessment of these scenarios into separate blocks

Change management is about assessing the impact on your NPO, and you should understand how different areas of your organisation come together.

Identify the building blocks required to assess the overall impact, such as:

  • Cost structures
  • Cash flow
  • Individual initiatives
  • Staff and beneficiaries.

7. Consider who needs to see the information

Once you undertake your impact assessment, you need to work out how it should be presented and to whom.

For some people, only presenting numerical data may not be appropriate. For example, not all trustees have the financial expertise required to evaluate that information.

Consider contextualising examples from a leadership perspective, offering a more descriptive common-language explanation of the assessed scenarios and conclusions you’ve made.

8. Decide responsibilities

At your NPO, decide who will be responsible for implementing change and acting upon the decisions made based on your financial analysis work.

Assign responsibility for crucial actions within the organisation. Support them with transparent progress monitoring and reporting to ensure their actions remain on plan. It’ll also make sure any issues are reviewed and reacted to promptly.

9. Focus on what’s important

With today’s financial management software, you can probably pull a lot of financial information. Be reasonable and proportionate—you can’t measure, assess, analyse, and predict everything.

10. View change in a positive light

Change is scary, and you’re understandably cautious. But change management isn’t just about mitigating risk.

Rather than just focusing on doomsday scenarios, seize it as an opportunity to:

  • Operate more strategically
  • Build infrastructure
  • Invest in technology.

Have north star goals such as recovery, resilience, and positivity when assessing change. To build on opportunities with confidence, you need to feel you’re reliably making decisions based on sound financial data.

Final thoughts: Be prepared

Similar to any profit-making business, your NPO should want to do its very best and succeed. You need to understand what you’re trying to achieve and what you can do to improve performance.

Being prepared can help your organisation deal with change when it happens.

And as an outcome, that means your NPO can focus on what you’re doing now and what you need to do on an ongoing basis to meet your strategic objectives, while ensuring financial sustainability.

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