What does financial stability mean to you? Does it mean raising just enough funds to be able to cover all the operating costs and expenses that come along with running your organisation, or, does it mean something more? For many NFPs, financial stability seems like an impossible dream, but, it is a goal that your nonprofit must reach if you want to be able to advance your mission forward in the long-term. The following is a list of ideas to help your nonprofit achieve a solid financial footing and sustainable growth.

Planning and Budgeting

Realistic budgets are a key tool in your efforts to control and improve your organisation’s finances. While it is possible for some nonprofits to be able to borrow the funds necessary to continue operating when they miss the mark with their fundraising, your goal should be to try to avoid operating at a deficit.

Shortfalls in funding can occur at any time; a major donor may suddenly stop funding your NFP, or, a grant or endowment may simply be eliminated. Unexpected events can also occur without warning, such as a sudden increase in essential costs.

Volunteer treasurers and their boards should plan for the unexpected to occur when creating the budget and allocating resources. Don’t just budget based on last year’s income and expenses, but focus on income when creating your budget.

Make realistic projections when it comes to income and costs. Take into consideration last year’s income and costs as well as economic and market conditions today. Your goal should be to budget so that you finish the year with a positive cash balance. Use your positive cash balance to establish an operating reserve.

Operating reserves can be used to help keep your nonprofit on track in the event something unexpected, and costly, does occur. They can also be used to finance an increase in capacity so that your organisation can grow in the future.

Diversify Funding

Many nonprofits rely on a sole endowment, or just a handful of large donors to fund their activities. This is a very dangerous practice as it leaves your organisation completely exposed should one of these sources of income decide to cut-back or eliminate their support of your NFP.

Always be on the lookout for ways to diversify your funding. It’s great when nonprofits can secure a grant from a governmental agency or a hefty endowment from an institution, but look for ways to increase awareness about your nonprofit’s mission and seek funding from a diverse range of sources.

Look for an experienced grant writer to bring on board to increase the chances that your applications will be accepted. Fundraising campaigns should be created to target individual donors at all income levels. Having multiple sources of funding will increase your organisation’s ability to achieve income goals and stabilise your NFP’s finances.

Don’t Forget to Identify and Address Risks

Some nonprofits operate in a sound manner, and yet still fail because they neglected the risk of loss. Nonprofit boards need to take steps to identify all of the potential risks of loss that can occur, and then develop a plan to address them.

The following are a few of the most common areas where risks can lead to events that cause a loss for your nonprofit.

Review your insurance coverage and make sure that it is adequate to cover your NFP in the event of a loss. Make sure it covers any potential suits against your nonprofit should someone be harmed on the premises or through the actions of a volunteer, staff member, or even a member of the board. Ensure that all buildings and contents are insured in the event of a loss.

Take steps to control cash flow as well as internal flows of confidential information. Use procedures to reduce the number of individuals in your organisation that handle the actual cash, and, control and hold accountable who has access to sensitive computer systems and other areas where theft, fraud and other illegal practices may occur. Don’t neglect to do reference and background checks on those that are connected with your organisation to help reduce risk.

Seek advice from an attorney and other professionals to conduct a “risk audit” of your organisation and its practices to help ensure that you’ve not overlooked any areas that might leave you vulnerable to a lawsuit, cyberattack, physical robbery or other event.