Strategy, Legal & Operations

Nonprofit crisis management: 7 essential steps for finance leaders to prepare 

Discover how a robust, modern financial management solution can help finance leaders to prepare for nonprofit crisis management.

When a period of uncertainty hits, nonprofit leaders need to respond quickly and adapt their plans for rapid change.  

It can take many forms, including geopolitical upheaval, natural disasters, pandemics, wars, and financial calamity, to name a few.  

While an organization’s response to each of these might be quite different, one thing is consistent: nonprofit leaders must have a plan and also be agile enough to change the plan quickly when a crisis occurs.  

When uncertainty rises, donations tend to decline. The best planning is built around real-time financial and operational data that generates proactive insights.  

For this reason, nonprofit crisis management must include a robust, modern financial management solution that can help leaders take stock of the current financial situation, create forward projections, and make early, intelligent decisions to shore up funding and engage donors.  

Amid economic uncertainty, will donations keep up? 

In the recent 2024 Nonprofit Technology Trends Report, 44% of nonprofit leaders reported an increase in revenue in 2023, with an additional 29% reporting flat revenue.  

That is good news. And the large majority of organizations (63%) also expect an increase in revenue in 2024.  

However, organizations revealed they’re also seeing increased demand for services coupled with higher costs.  

More than one-quarter of survey respondents noted increased participation in programs, and 70% said their program costs increased. 

Nonprofit finance leaders know charitable donations are closely correlated with the direction and trends in the stock market.  

When the market heads down, as it did in 2022, donors pull back a bit to assess the financial situation.  

Surging inflation also made an impact on giving, especially among individuals and households.  

The Giving USA 2023 report revealed that in 2022—as inflation hit a 40-year high and the S&P 500 decreased by 19.4%–total giving to US charities declined by 3.4%.  

Adjusted for inflation, that equated to a 10.5% decrease in available funding dollars.  

As we move deeper into 2024, economists are debating between an oncoming recession and a ‘soft landing’ for the US economy.  

In light of continuing economic uncertainty, it’s essential to engage with donors and show them the concrete results of how your programs are achieving your mission.  

Going forward, you’ll want to be able to powerfully demonstrate both financial stewardship and positive outcomes.  

Real-time data speeds your ability to respond 

When you’re moving fast to respond to new or growing needs in your community, you need access to real-time financial and operational data.  

It’s nearly impossible to respond effectively to rapidly changing circumstances with reporting that may be weeks or months old.  

In nonprofit crisis management, your accounting solution is a critical tool to help guide your organization through uncharted waters.  

Knowing exactly where your finances stand keeps your organization nimble so you can respond quickly to changing conditions.  

Ideally, you also want real-time financial performance data to be very easy to digest.  

A visual format that displays key performance indicators in charts or gauges provides an at-a-glance view of financial health is ideal.  

Dashboards that include charts and KPIs can quickly reveal where you may have extra cash available to surge existing programs or roll out new ones.  

You can also identify areas where you can cut expenses if needed.  

Another tool that is very useful during periods of uncertainty is a financial planning and budgeting solution, especially if it’s fully integrated with your financial management and accounting solution.  

This can help you cut budgeting and forecasting time and effort by 50% or more.  

And that’s critical for saving time when you’re trying to react quickly.  

A budgeting tool also helps you collaborate and communicate necessary budget changes across the organization.  

7 essential preparedness steps for nonprofit finance leaders 

No one knows what the next period of uncertainty will entail or when it will occur.  

Storms, floods, and tornadoes can strike suddenly. Cyberattacks are a constant threat with unpredictable impacts.  

Economic winds can shift rapidly when ‘black swan’ events occur, and suddenly, many new clients would seek out your organization for assistance.  

And one only needs to scan the latest headlines to see how quickly geopolitical tensions can rise and boil over, impacting your ability to deliver services. 

For all of the above reasons, nonprofits must be ready at any time to trim unnecessary expenses, review programs, and step up donor engagement in order to sustain existing programs and direct new efforts.  

Here are 7 things you can do right now to increase your crisis management capabilities: 

1. Communicate with donors right away 

When a crisis strikes, or is growing on the horizon, waste no time in asking your existing donors to help you create a cash reserve.  

These extra funds now will help meet needs during any rapidly evolving situation. 

2. Stay on top of your financials 

Be prepared to deeply analyze your current financial situation.  

Where can you conserve cash now to prepare for a potential drop in individual donations?  

Are there any funds that could be redirected to existing programs that meet community needs?  

What would it cost to spin up new programs that address new problems during challenging times? 

3. Show extra love to major donors 

Increasingly, large donors are responsible for a larger share of total contributions.  

However, make sure you remain among your major donors’ top priorities during any times of uncertainty, knowing that smaller donors may have less to contribute in a shaky economy. 

4. Apply donor engagement best practices to your website and communications 

Share your vision through powerful imagery. Make sure all of your messaging builds and reinforces your brand.  

Bring donors into your story with metrics that demonstrate the urgency of your mission and personal stories of how you’ve helped.  

Expand your reach by ensuring your website, social media, and campaigns make it easy for people to give. 

5. Review current programs 

In times of uncertainty, community needs accelerate at the same time the economy is contracting.  

Nonprofit financial leaders should make a continuous habit of studying recent program performance in terms of financial outlays versus program impacts.  

What programs have made the biggest difference?  

What programs will be needed going forward?  

Keeping this analysis top of mind will help you take action more quickly at the start of a crisis, preserving the most impactful programs while reigning in costs and conserving funds to meet additional needs. 

6. Apply for grants 

If your organization depends on grant funding, never rest in the comfort that your funding needs have been met with existing grants.  

Being ready for the next challenging period (as well as for unexpected turnover in grants) means staying on the lookout for new federal, state, and local grants you can apply for and win. 

7. Create fundraising templates 

When uncertainty strikes, you’ll need to quickly marshal your fundraising efforts.  

Why not generate fundraising ideas today for a possible future challenge?  

Create some ready-to-customize fundraising templates. This will allow you to remain calm during chaos and communicate much sooner with your existing donors.  

Customize your fundraising templates with the particulars of the current situation and roll out a campaign.  

Bonus tip: Prepare for a potential internal challenges 

So far, these tips have been about how to respond to external challenge and help your community and clients. But your organization could also become the victim.  

Make sure your team is ready for natural disasters or other localized emergencies by maintaining logistical plans to escape the building, communication plans for contacting employees, and the technological ability for employees to work from home.  

Stay properly insured against fire, weather, and cyber threats.  

Finally, in the unfortunate circumstance where an issue means your organization has become the headline, have a crisis communication plan in place, including a designated spokesperson. 

Final thoughts 

While no one can predict when the next period of uncertainty will hit or what it will entail, we can say with 100% certainty that the next crisis will happen.  

When it does, nonprofits with good planning and access to real-time financial and operational insights will be best prepared to respond quickly and keep donors engaged.  

Nonprofit finance leaders need a rock-solid nonprofit accounting solution with robust capabilities around reporting, dashboards, and budgeting.  

Organizations that have developed proactive crisis management plans, established efficient workflows, and adopted good nonprofit financial management solutions will be in the best position to navigate the turbulent waters of the next crisis.  

Crisis management is only one of the many benefits of a cloud-based accounting solution.  

Benefits of Cloud-Based Nonprofit Accounting Software

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