Lack of awareness, poor branding, and bad communication can kill a nonprofit very quickly, it’s true. In my experience, however, those aren’t what really puts the nail in the coffin of most charitable organizations that fail. No, that honor goes towards the poor management of funds and resources.
In many ways, running a nonprofit is very similar to running a startup. You need to understand the resources you have at your disposal, and how to best use those resources to achieve your goals – in this case, your charity’s mission. And part of that resource management lies in knowing precisely how, where, and when to spend money (and when to hold onto it).
A lot of charities seem to have trouble with that last part. That’s where we come in. Today, we’re going to go over some general advice to help you get better at managing your finances, in bullet form:
- If you haven’t done so already, appoint a finance officer. Make sure whoever you’ve appointed knows a great deal about accounting, and that they’re trustworthy enough to provide you with an accurate representation of where your money’s going and what you’re spending it on.
- Figure out your revenue streams, and how they impact your overall budget. Where are your funds coming from? Who are your chief donors, and how much are they giving you?
- Know your precise costs. There are a ton of hidden expenses that a lot of first-time charity owners tend to forget about – office supplies, for example, or the cost of printing out marketing materials.
- Whenever a new funding opportunity pops up, consider it in the context of how much it’ll cost your organization to acquire those funds. A lot of first-time nonprofits tend to accept funding from sources that ultimately cost them more than they make.
- Make sure you always have some money in reserve, no matter how well things seem to be going. You can’t guarantee that you’ll always receive a wealth of donations, nor can you be certain your cash flow will never run out.
- Take a look at your staff – are their salaries in line with what you’re making and putting towards your mission? At the absolute maximum, you should be spending $25 per $100 you raise on costs that aren’t directly tied to your cause.
- Communicate. Talk to your donors to thank them for their donations, promote constant contact between administrators and members of your board, and make sure you’ve always got access to records of what you’ve made and spent.
Not everyone is good at managing money. If crunching numbers is a weakness of yours, you need to find someone for whom it’s a strength. Your mission – and the very existence of your non-profit – very likely depend on it.