For any business or individual that gets into investments, one piece of advice is to diversify your funds.
At the basic level, this means to spread your wealth across multiple funds and sectors, each of which that holds different asset classes. One fund may be for long-term gains, another for short-term, but the idea is to spread your investment risk across multiple areas. Even if one fund trends downward, the rest of your portfolio and the expected return is still intact.
Simply put , don’t keep your eggs all in one basket.
This same advice holds true for nonprofit finances. If there is one source of funding that you are receiving more than others, relying on that one source for your continued growth may set you back. Economic changes, budgetary constraints, and varying demand for causes are just a few examples as to why funding may shift year to year.
But when you put together a plan for your nonprofit finances and give yourself the needed resources, you will see your donations begin to prosper. Here at iDonate, nonprofit organizations who have been with us for at least three years grew their giving over 40% during that time.
To continue your financial sustainability, consider these three areas that can help you preserve the funds you have, and ultimately grow the funds you want.
Expand Your Donation Sources
You know the relationships you have with your donors is important. But trying to constantly receive one donation at a time from one individual at a time is tedious and costly.
Other than one-time credit card donations, noncash gifts of all kinds are a great way to create a new source of funding. These include most anything lying around the house, but nonphysical items like stocks and cryptocurrency are also considered noncash and can be a major benefit to your organization. Like all noncash giving, there is a tax deduction for donors who give noncash gifts to charity. With stocks and crypto, neither the donors nor yourself as the nonprofit have to pay any additional tax on the capital gain.
One reason many hold onto these items is because they don’t know how to donate them. Smaller items like clothes and some electronics can be easily sent in a box, but how does one donate larger items like cars and boats?
Here at iDonate, we take care of all those steps for you. Once your donor fills out the necessary information on the iDonate form on your website, they will receive an email from iDonate detailing the next steps. Once the final transfer and sale of the item is complete, you will then receive a check of the proceeds. For you, no other work is necessary.
When you give your donors more ways to give, the sources for your funding greatly increase, giving you more room for financial sustainability.
Partnerships and Collaborations
No matter the cause, there may be more than one organization that focuses on the same mission as you. Competition is a word normally reserved in the for-profit business sector, but with other nonprofits working the same or similar cause as you, there is some natural competition to fight for the same donor dollar.
Of course, pitting one nonprofit over another with a good cause on the line begins to erode much of the goodwill from the public eye. If there are already declining resources, a further lack of trust is the last thing you’d want.
Infrastructure problems or various external mandates from the government or an industry itself are some reasons why a partnership or collaboration could be necessary, but the benefits can still exist for both organizations. One research study states:
“Strategic alliances or collaborations provide capacity building to organizations that may not otherwise achieve independently. Collaborations help acquire critical resources and reduce financial uncertainty, which offsets costs associated with reduced autonomy of operations and may improve nonprofits’ abilities to serve the communities.”1
The partnership certainly doesn’t have to be anything formal, but pooling all your resources with another organization’s into one campaign could jumpstart long-term financial sustainability.
Accurate Nonprofit Finances
Practicing correct and accurate financial reporting puts you in good standing with not just the IRS, but also with your donors and even yourself.
If you are constantly trying to fill in the gaps on your balance sheets and income statements, and therefore don’t have the time and resources to invest in your own organization, this has been called the “nonprofit starvation cycle.”2 Sometimes there are unrealistic expectations that can’t be met, which causes incorrect financial reporting, which then causes even more headaches down the road.
Be sure to establish clear boundaries for your finances and what you wish to achieve. Be upfront with your donors about your goals so they can understand where their money is going, and you can fully understand how you are going to spend it. This strengthens accountability with your donor base and leads to continued financial sustainability within your nonprofit organization.
1 Financial Sustainability for Nonprofit Organizations: A Review of the Literature
2 The Nonprofit Starvation Cycle