Spring: a perfect time to consider new growth, to renew your sense of optimism, to revitalize your energy, and to nail down your non-profit budget with the help from a Part Time CFO. It’s like a record scratching to a halt, isn’t it! But this is a critical period for non-profits: an opportunity to think strategically about the year ahead and how you will fund your mission – and an opportunity to renew the tips in this article.
The non-profit arena is tough. The competition for donor dollars, the need to satisfy diverse stakeholders, the struggle to keep volunteers, not to mention the pressure to achieve a serious social mission, can all foster frustration for organizational leadership. Directors and board members must often perform without the essential resources required for success.
Now, let’s be very clear. We are not talking about mediocre performances from the director, staff, or board. We are talking about the reality that non-profits sometimes become so used to “the struggle” that they begin to believe they’re not supposed to get the best – and as a result, they don’t demand it.
Well-run non-profits need a positive bottom line and positive net assets in order to build reserves. A best practice is to have at least six months’ worth of reserves to survive a bad year. For-profits need reserves for the same reason.
A single customer should account for no more than 25% of revenue. If one client dominates at a for-profit, so does risk (lost revenue, potential downsizing, etc.). Non-profits, too, must be wary of concentration risk. If a large chunk of funding comes from a single source or event, what happens when the economy softens?
Non-profits and for-profits must be willing to make tough business decisions to avoid dipping into reserves. For-profits are asked to make these kinds of decisions every day, but non-profits can find it difficult thanks to the caring, people-centered atmosphere typically fostered. When it’s time to make a tough decision, it can help to remember that the mission must come first.
In the for-profit world, investors fund a company’s growth. They have a vested interest in operations and in ROI. Grantors and donors are the investors of the non-profit world, and they have the same concerns. They want to know if the organization is a good steward of its financial resources and whether funding is making a difference in achieving the mission.
For example, a budget of $70K will afford a highly qualified part-time CFO, but not much of a full-time one. Because there is a common misconception that non-profits should hire only full-time positions, the director may have settled for an accountant rather than the CFO he or she really needed. But with business thinking and creativity in place, the path that will lead to success is the only logical choice.
There is no such thing as “just” a non-profit. These organizations provide vital services to their communities, fulfilling a serious social mission. They deserve the best – the best professional advice, the best financial strategies, the best shot at success. Just start thinking like a business, and just get it all for your non-profit.
Contact Carol about setting your non-profit up for success today.