How Can Nonprofits Handle Delayed Donations and Grants Without Cash Flow Disruptions?

8 min read

March 12th, 2024

The government spending freeze announced in late January has been temporarily blocked. Still, nonprofit leaders who depend on government grants, loans, and assistance find themselves balancing on somewhat unstable financial ground

Of course, running a responsible nonprofit is never without financial challenges, uncertainty, and the need for a minimalistic budget. So, whether your nonprofit is facing federal grant funding delays or managing delayed donations from private donors, nonprofits need to have a strategy for stabilizing their cash flow so that they can operate without disruption — no matter what challenges the future brings.

Strengthen Your Organization’s Financial Health With These 10 Nonprofit Financial Contingency Planning Tips

1. Plan (Don’t Panic)

The temporarily blocked federal spending freeze is designed to eliminate waste, not to dismantle nonprofit organizations that are working hard to do good in their communities. While these plans may eventually lead to some hiccups and cash flow disruptions with federal funds that your nonprofit receives, the goal behind the spending freeze will hopefully eventually lead to more responsible government spending and oversight, meaning that responsible nonprofits who use their funding to expand their missions, ultimately, will not be impacted in an ongoing way.

That being said, a lot is still up in the air, but plenty of nonprofit leaders, such as the National Council of Nonprofits, are already stepping up to speak on behalf of nonprofits and emphasize the importance of federal funding for their missions.

So, take a deep breath and try not to panic.

The silver lining in this situation is that the spending freeze has been blocked, and the block provided nonprofit leaders with a warning and a window of time. Use this time wisely and begin making a plan for shoring up your cash flow so that you will be able to overcome any impending future financial challenges.

Read More: How Much Do Bookkeeping & Accounting Services for Nonprofits Cost?

2. Revisit Your Finances

Now is the time to take a close look at your finances. Assess your budget and reassess your cash flow standing. Take a look at what your financial picture will look like if all of your federal funding does not exist.

• Create a “what if” scenario budget that excludes federal funding.
• Create a “what if” scenario cash flow forecast that excludes federal funding.
• If you aren’t sure which of your government-based funding streams might be lost, look at these documents in worst, best, and most likely scenarios.

What does this picture look like for your organization? How long can you continue to cover essential expenses with your organization’s savings and other revenue streams? What does your monthly budget look like based on other revenue streams?

Likely, you will need to make some adjustments to remain financially operational. You can begin by combing through your budget, line by line, to identify non-essential costs that can be cut or redirected to support your core programs and services.

3. Assess Your Programs

Next, gather your program budgets and performance data so that you can begin stack-ranking programs by which ones do the most good for the least amount of money. In a nonprofit organization, return on investment can be defined as impact per dollar spent. Ranking your programs and services in this way will help you prioritize what spending you should focus on and what spending you might need to consider putting on pause, along with any delayed funds.

4. Meet With Your Nonprofit Board

An abrupt loss (or looming loss) of funding calls for all hands on deck. This is a time to lean on your board of directors for their guidance, assistance, commitment, brainpower, and networks.

• Provide them with the full financial picture.
• Be transparent about the effect on your impact or ongoing operation.
• Create a committee to work on the problem.
• Ask them to begin appealing to their networks right away.

5. Focus on Your Impact

If your nonprofit is facing financial challenges, then you must take steps to improve your fundraising efforts, and this is going to require you to find ways to communicate your impact and inspire donors with your mission. Look at your annual report to pull figures about the numbers you have served and translate these numbers into real stories that you can use to shore up support for your cause. Communicate the impact of $20, $100, or $1,000 gifts to let people know the difference they can make.

Additionally, be sure to communicate the unique financial predicament that your nonprofit is currently in. Communicate how the funding changes have impacted your organization and present your plan for adapting to ensure the survival of your cause.

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6. Contact Your Representatives

Use your impact to advocate on behalf of your organization to your local government representatives. Reach out to let them know the difference you’ve made with the money you’ve received in the past. Show them pictures, tell them stories, and be sure they see the faces of the people (and organizations or animals) who will be negatively impacted if you lose funding.

7. Communicate With Donors

Additionally, reach out to your donors to begin strengthening other funding streams. Your existing and previous donors have already demonstrated that they care about your mission. So, reach out to them and let them know the challenges you are facing right now. Let them know that you need their support to continue serving the community.

Read More: What Nonprofit Board Members Should Know About Nonprofit Accounting

 

8. Involve Your Community

Turn to your greater community and even a much larger community online with a grassroots effort. You can collaborate with other nonprofits in your community that are facing similar challenges. Host public fundraising events together, and get the news out through social media.

Additionally, work with individuals who care about your cause. Create a group of community ambassadors who can help spread your mission, recruit new volunteers, and encourage others to donate through a peer-to-peer campaign.

9. Look for New Partners

Collaborations between nonprofits and corporations can take many forms, and they benefit both parties equally. Scour your community and network for business leaders who will team up with your nonprofit. Whether they offer a reliable source of funding or provide less tangible benefits such as a wider donor network, in-kind donations that save you money on professional services, or at-check-out fundraising opportunities, a partnership with a business can help you strengthen your nonprofit’s finances while also expanding its reach.

10. Prioritize Saving Nonprofit Emergency Funds

In personal finance, you have probably heard the advice that “paying yourself first” is the best way to learn how to save and prioritize savings over expenses for a healthier personal budget. Well, the principle is true in nonprofit management, as well. Your nonprofit budget should prioritize saving so that you have an emergency fund available at all times. This way, you can rely on your emergency dollars to help fill in the cash gaps that can occur when private donations are delayed or unexpected changes occur with government funding.

Additionally, this emergency money transforms other kinds of unexpected financial emergencies (a water pipe breaks in your office or your delivery vehicle is in an accident) into simple annoyances because you have the money saved to handle whatever might come and then get back to business as usual.

To start paying your nonprofit first, build your emergency fund into your budget as a monthly line item and treat it like a non-negotiable expense.

Cash Flow Stabilization for Nonprofits With Outsourced Expertise

With a well-run back office, your nonprofit can make the most of its funds, ensuring that you maximize the impact of every dollar spent by assessing your processes, stack-ranking programs, automating systems, and helping you operate as efficiently as possible. With a strong back office, you can improve financial planning, budgeting, and contingency planning so that your nonprofit can continue serving your community without cash flow disruptions, making government funding feel more like a windfall than a necessity.

At GrowthForce, we have extensive experience working with nonprofit leaders to improve and strengthen their organizations, and we can help you find out how an outsourced back office that includes a knowledgable team, powerful tools, and tested technology can strengthen your nonprofit.