This topic is huge! And more than we could ever cover in just one blog post!
So I am going to scratch the surface across a three-part series.
In today’s post, let’s look at Financial Sustainability.
Keeping your organisation solvent is one of the key governance responsibilities for anyone on a Board, or a Committee of Management. Making sure you have the funds to pay your bills when they are due sounds pretty simple, but I do see a surprising number of not-for-profits drop the ball on this one and subsequently get themselves into all sorts of trouble.
Have a budget
The number one key to Financial Sustainability is having a detailed and documented budget, showing expected monies in and out, that is regularly monitored and reviewed.
Know your costs
Know what it is that you are going to have to cover the costs for over the coming year. For established organisations this might be fairly straightforward, based on what you have spent money on over previous years. For newer organisations, or for organisations for whom every year is different, this might involve a fair amount of educated guesswork. Even for the longer-established organisations, we know things don’t always go to plan, so there needs to be some contingencies built in for those unexpected occurrences.
And a word on budgeting…the things that you budget for should reflect the areas you have prioritised through your Strategic Plan.
Understand your income streams
Hand-in-hand with knowing what your costs are, comes knowing where you will source the funds to cover those costs. Again, past history can be helpful, and you can make some (cautious!) assumptions about ‘ongoing’ or recurrent funding sources. But I think most organisations would have experienced having an expected income stream dry up at some point, especially in COVID times. I recently heard about a craft shop social enterprise that (unsurprisingly) experienced a dramatic drop in revenue during the pandemic…they switched across to online sales through their social media platforms, and now they are selling all over the country and are busier than they ever were!
With your income forecasts, it is also important to have a bit of a contingency built in. This may come in the form of conservative estimates of the expected size of your various income streams. And under reliance on less well-established or more tenuous ones is prudent.
In reality you may just find that you need to rein in your planned spending, and ‘cut your coat to suit your cloth’ as they say.
None of this is rocket science but it is well worth spelling out as a reminder for us all to avoid the potential pitfalls, and the very real risk of our organisation facing insolvency and becoming another statistic in the league of financially unsustainable not-for-profits.
Sharing Financial Sustainability challenges and solutions
If you want the opportunity to join in one of our Not-for-profit Networking Lunches where this quarter’s topic is just that – Financial Sustainability – get in touch and I will pop you on the list for our next session on 25 November, 12 – 1 pm (online).