The last three years have been challenging for a number of nonprofits, yet a lucky few received increased philanthropic support from, for example, pandemic government grants or private foundations, or some have received major gifts and bequests from wealthy donors. And yet while any unplanned funding bounty provides enormous opportunity for a nonprofit striving to improve philanthropic impact, a sudden increase in financial support requires an equal level of nonprofit financial planning to effectively receive that funding.
So here are three things that nonprofits need to know to prepare for an increase in financial support.
Have a Nonprofit Emergency Reserve
First, a nonprofit needs to have emergency reserves. While we always wish for things to go perfectly as planned, it’s almost never the case. So for example, a large regular grant that has been counted on for years and years is suddenly terminated. Or a key person leaves the organization and the search for a replacement requires a host of unanticipated costs. . So a pot of cash set aside that is easily accessible can give an organization peace of mind should these unexpected events result in a major hit to the organization.
Expect An Increase in Expenses
A growing nonprofit will invariably see a significant increase in expenses, most likely staff, could be facilities or other programmatic and administrative expenses. So therefore, if a nonprofit is planning for growth, it should be preparing months or years in advance for these expense increases by boosting fundraising and savings. And make sure you set aside these funds so they are only touched for growth-related expenses.
Get Educated About Requirements for Restricted Gifts
And finally, if your nonprofit’s windfall is a restricted gift, you most likely have an endowment. And while a nonprofit endowment is a fantastic asset, it does come with a lot of responsibilities: operational, legal, investment. And so please check out our website. We have tons of resources to get you started.
Talk to the financial experts at Fairlight Advisors to learn more about managing your nonprofit’s investments. Schedule a free consultation today!