Being an NFP is hard. You’re particularly vulnerable to the vagaries of financial markets. Unless donors have one eye heavenwards, you’re often the first to feel the chop when capricious markets tank.
It’s not end-of-days, however. Creative problem-solving, flexible strategies, and the right accounting software can help you overcome these nine major challenges.
1. Financial Stability
Perhaps the single biggest challenge nonprofits face is inconsistent revenue. The public must remember that NFPs don’t just fund projects, they also have to pay salaries, utilities, and rent – like an ordinary business. Lack of funding makes doing any of these things difficult, making some NFPs teeter permanently on the edge of insolvency.
The solution lies in effective budgeting and financial forecasting. Regular financial reviews reveal cost-saving opportunities, identify patterns that help prepare for revenue fluctuations, and uncover the potential to increase funding by diversifying revenue streams.
2. Grant Management
Grants are great because they are reliable, unfortunately, they come with buckets of requirements that make management complicated. There are complex reporting requirements, then there are compliance requirements, and then there’s tracking so you and your patrons know which grant is funding which project.
The solution lies in grant-specific accounting practices which can be managed with the right software. Grant accounting software typically includes tracking and reporting functions. This keeps nonprofits accountable and patrons satisfied that their money is being used for the power of good.
3. Operational Efficiency
NFPs have the same operational costs as other public organizations. So, they have the same challenges, the biggest being cutting admin costs without denting their initiatives. Somehow, they must streamline operations, optimize workflows, and ensure resources are fairly allocated.
The solution lies in outsourcing payroll and other accounting tasks. This comes with several benefits; greater accuracy and (virtually) guaranteed compliance with all regulations. Freeing employees to lend their talents to ongoing programs is also a biggie. And that’s just two that spring most readily to mind.
There’s nothing worse than leaving your staff high and dry when paying wages and salaries. You need a reputable company with superb payroll management services to ensure employees are always paid on time. Sage Intacct is a world leader in NFP accounting software, so they’re a good bet when you want to outsource your accounting tasks.
4. Technology Adoption
Many nonprofits lack funding to upgrade their technology. Outdated tech hampers fundraising. The cycle is almost impossible to escape. Uncertainty worsens the problem. NFPs can’t afford experts to manage new systems. It’s a case of the devil you know rather than a leap of faith.
The solution lies in cloud-based accounting software, which is a godsend because you only pay for features you need. Benefits Of A Streamlined Cloud Accounting System For Nonprofits, and, critically, have robust data security systems. Add a handful of additional benefits to the crossover and wonder what took you so long.
5. Strategic Planning
It’s not that NFPs don’t want to develop strategic plans that’ll help them live their vision and achieve their mission. It’s that there are usually other more important things. Setting aside time for a planning meeting and follow-up meetings doesn’t seem like a priority. Unfortunately, it really is.
The solution lies in sophisticated forecasting and scenario planning tools that help analyze data and lead to informed strategic decisions. Tools help to identify potential risks so you can develop plans that are flexible enough to cope with change.
6. Governance and Compliance
There are many, many elements to running an NFP and all need proper consideration. Compliance with regulatory requirements is essential to avoid financial penalties or even closure. Ethical standards must be met. There are governance best practices. And they don’t always align perfectly.
The solution lies in developing and implementing strong governance structures that encompass all the policies and procedures that ensure complete compliance wherever necessary. This is where it’s essential to create time for regular audits, training, and reporting to ensure utmost transparency and accountability.
7. Donor Engagement
It’s an NFP’s worst nightmare; donors pull their support, fundraising efforts fail, and initiatives, programs, and projects turn to dust. While they’re unlikely to be hit with the trifecta, nonprofits must work hard to keep their donors on the books.
The solution lies in donor management tools that are set up to track all donor interactions, personalize communication to keep them in the loop and reassure them that their contributions are essential to maintain the NFP’s good work.
8. Leadership Development
“Don’t follow me, I know not where I go,” is exactly what you DON’T want the head of your NFP say. Sadly, nonprofits don’t always have the right people in leadership roles. Founders aren’t fundraisers, volunteers aren’t project managers, and there’s no qualified leader.
The solution lies in strong CFO services that provide financial leadership, strategic guidance, and robust risk management. The great news for nonprofits is that it’s possible to outsource CFO services, so you get all the benefits without all the costs.
9. Community Impact
No one throws money into a vacuum, so why would they support an NFP that keeps them in the dark? NFPs must communicate the impact of their programs to essential stakeholders. However quantifying, analyzing, and presenting data is difficult without the know-how.
The solution lies in assessment tools and analytics software that measure outcomes and communicate with stakeholders. Data alone isn’t enough. Nonprofits must use tools to present reports in fun ways using data visualization and multimedia platforms. That is when donors invest their money.
Challenges?
Yes, nonprofits face challenges. There are particularly challenging challenges.
There are also solutions. Importantly for NFPs, the solutions don’t cost an arm and a leg. The solutions do the opposite. They buy a dapper trouser suit and let the nonprofit get on with business.
