December 22, 2011

Nonprofits are facing unprecedented challenges during the present recession. Demand for services has skyrocketed and, for the most part, donations and grant revenues have plummeted.

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The normal reaction is to hunker down, trim every cost possible and hope things improve. Instead, regard tough times as an opportunity to strengthen your organization.

First, evaluate your overall financial strategy. Many nonprofits have a break-even mentality, feeling it’s somehow mercenary to “make a profit.”

This kind of thinking leads to a dangerous vulnerability. It’s vital to deliberately build up reserves, not just for lean times but for program expansion and capital spending.

Look ahead three to five years and prepare realistic goals. But stretch them to motivate your staff and board to press onward to greater financial stability.

Next, assess your past and present program performance.

  • What trends can you identify?
  • Is it costing you more now to serve the same number of clients?
  • How can you operate more efficiently without compromising outcomes?
  • Where are your greatest successes?
  • Who are your core constituents?

The answers to these questions will help you work smarter and do more with the resources you have.

On the other hand, look for new opportunities that will make an impact on the needs of your clients during this time of economic hardship.

For example, one nonprofit that serves small businesses made a commitment to add staff and programs to address important access to capital issues faced by clients. Enormous goodwill was generated and new sources of funding became available. There is no better time than now to take a hard look at your activities and hone your programs to be on-target and effective.

Finally, go to your primary funders with your financial and program projections. You may be able to negotiate additional support to bridge the present funding gap. A sound action plan will be essential in convincing them to invest.

This article was originally posted on December 22, 2011 and the information may no longer be current. For questions, please contact GRF CPAs & Advisors at