If you’re worried about the potential impacts of economic downturns on your nonprofit, you’re not alone. According to the 2024 State of the Nonprofit Sector Report, the top five nonprofit concerns this year include rising operating costs, lack of financial resources, and inflation. But what can you do to get ahead of these concerns and prepare your organization for the impacts?
Raising more funds is just the beginning. To confidently navigate economic uncertainty, your organization must also have a plan to safeguard and steward those funds. Let’s discuss three tips that can help you build a more robust financial foundation for your mission.
1. Prioritize strategic cash management.
What you do with your organization’s funds matters. This doesn’t just mean what projects you allocate donations to—where you store your funds, how you track them, and how you manage your operating reserves are also important. To put your nonprofit in the best position to weather economic uncertainty, you need to manage all of your cash and assets strategically.
According to Infinite Giving’s nonprofit cash management guide, strategic cash management involves a variety of essential activities, including:
- Budgeting. Set realistic budgets based on your nonprofit’s past fundraising and spending data, along with financial projections. With a solid budget and plan for your expenses, you’ll be better prepared for economic fluctuations.
- Monitoring your cash flow. You must be aware of the reality of your organization’s financial situation before you can work to change it. Regularly monitor the flow of cash through your nonprofit, tracking assets, liabilities, revenue, and expenses.
- Establishing financial governance policies. For financial risk management, Jitasa recommends creating policies for gift acceptance, conflicts of interest, expense reimbursement, and staff compensation. In addition to these basic policies, you’ll also need to create an investment policy statement (IPS) that outlines what type of investment strategies your nonprofit will use to steward funds.
- Maintaining a rainy day fund. A reserve or rainy day fund is a dedicated fund you set aside for emergencies or unexpected needs. Ideally, you should keep at least 6-12 months’ worth of your operating expenses in reserve, but anything is better than nothing.
- Stewarding your reserve funds in low-risk, highly liquid holdings. When you place reserve funds in a traditional savings account with low yields, the money loses value over time due to inflation. Instead, put your funds to work by placing them in low-risk, highly liquid holdings like treasury bills.
Proactive cash management strategies will help your organization grow a healthy reserve fund and maintain stability during economic changes. For the best results, work with a nonprofit investment advisor to get tailored advice from an expert with a fiduciary responsibility to work in your organization’s best interest.
2. Cultivate a variety of large gifts.
You should always put extra work into cultivating major donors and sustaining these relationships since they fund most of your work. However, economically challenging times call for new approaches.
In a time when more and more wealthy donors are interested in non-traditional giving methods, meeting these donors where they are could be the difference between securing major gifts or letting them fall through the cracks. Tap into every opportunity to earn large gifts by actively seeking donations of:
- Stocks and securities. Historically, stock giving hasn’t seen strong decreases correlated with economic downturns. Rather, donating stock is appealing to wealthy donors since it’s a tax-free way to rebalance their portfolios. When they donate stocks instead of selling them, donors aren’t required to pay a capital gains tax on the stocks’ appreciation and they receive a charitable tax deduction based on the value of the stock at the time of transfer.
- Cryptocurrency. It’s likely that some of your donors own Bitcoin, Ethereum, or another cryptocurrency. You can convert crypto to cash as soon as your nonprofit receives a donation, ensuring that you avoid market volatility and ultimately wind up with a large cash donation.
- Donor-advised fund (DAF) grants. DAFs are extremely popular among wealthy Americans because these accounts enable them to set aside money for charitable purposes at any time (and receive a tax deduction). Prioritize this giving method and provide clear instructions to remind donors to request grants for your nonprofit. It’s often easier for donors to deposit stocks into their DAFs and request DAF grants than to donate stock directly since assets are liquidated upon deposit.
Aside from encouraging major donors to make these types of donations, take steps to attract new donors who may be interested in non-cash giving.
Start by adding an intuitive non-cash giving widget to your donation page using a stock donation platform or other specialized tool. Then, identify prospective donors and conduct individualized outreach. Promote your new giving methods on your website and other marketing channels to spread broader awareness among current and prospective supporters alike.
3. Tap into corporate giving opportunities.
While individual donors may give less due to economic downturns, businesses are more excited about corporate charitable giving than ever. Companies know that their customers and employees want to see them work toward change, so they support relevant nonprofits in a variety of public ways.
For nonprofits like yours, corporate giving programs represent a major opportunity to secure necessary funding without putting extra strain on donors who are affected by economic challenges. Specifically, explore impactful corporate giving sources like:
- Matching gifts. When an employee makes an eligible donation to your nonprofit and requests a matching gift from their employer, the company will match the donation at a 1:1 or otherwise specified ratio. This means that if a donor gave $100, the employer would give an additional $100, totaling $200 for your cause.
- Volunteer grants. Donors facing economic hardship may opt to donate their time to your organization instead of money. Let these supporters know that, thanks to volunteer grants, they may be able to give both at no cost to themselves. Eligible employees can volunteer with your nonprofit, report their hours to their employer, and request a volunteer grant. If approved, the company sends a monetary donation based on their guidelines.
- Corporate sponsorships and grants. Many corporations commit to funding nonprofits without any employee or donor involvement needed. For instance, they might provide a grant to fund a certain program or sponsor your upcoming fundraising event. The company gets a reputation boost and positive brand recognition, while your nonprofit receives an impactful source of short-term revenue.
Eventually, tapping into these opportunities can even lead to lasting, mutually beneficial partnerships that sustain your nonprofit for years to come. Build relationships with value-aligned companies, and you may be able to count on their support long-term.
As you leverage these strategies to navigate economic uncertainty, don’t be afraid to be open with donors about your organization’s financial situation. Your supporters will appreciate the transparency, and they’ll be inspired to give more when they can.