How to Build Financial Resilience for Your Nonprofit in Tough Times
The current mix of high interest rates, inflation and market volatility comes as a staggering blow to the finances of many nonprofits. And while individual causes and markets are different, the big picture view reveals a slow decline of large philanthropic givers.
Staying afloat in this environment depends on your ability to manage what is out of your hands, and to make full use of the resources and variables under your direct control. While no one can predict what the markets will do, institutional quality investment advice can make a real difference for nonprofits. And at the same time, many innovators have created more financial resiliency simply by making full use of the tools already at their fingertips.
Your Board Members Are Your Secret Weapons Against Volatility
When I look at the nonprofits that have managed to weather the storm of the past few years, the common thread tying them together is usually a board of directors willing to roll up their sleeves and augment the staff’s work. I want to be clear: I’m not talking about ousting the hard-working development directors who are so essential to the mission. It's about us all pulling together, amplifying our resources and making the most of our networks.
Board members have a wealth of experience and influence that can benefit your organization, and that can start with picking up a phone. A developmental director can orchestrate the strategy, name the contacts and provide talking points. Then, the board can handle the last mile with personal introductions and outreach into their own professional networks.
This doesn’t mean the staff can’t do their jobs. It’s an acknowledgement that a nonprofit’s staff need to focus on their most important work. Board members who pitch in and play to their own strengths can give valuable capacity back to staff. You aren’t just saving money, you’re easing pressure and building a stronger, more resilient organization.
Outsourcing the Gavel
On the subject of increasing capacity, I believe more nonprofits should consider looking for third-party services to support their short-term fundraising operations. For example, anyone who has ever planned an auction will tell you they can easily overwhelm a nonprofit’s staff. It takes a lot of hard work to procure items, catalog them, promote the event, connect with likely buyers in advance of the auction, handle bids and payments, and make the whole experience even remotely enjoyable for givers.
By handing over the auction gavel to outside professionals, nonprofits can free up precious time and energy for program development or donor engagement. And in all likelihood, they will put together a more engaging auction experience, with better outcomes for your nonprofit, than you would have managed with in-house staff trying to juggle several other urgent priorities. This is just one example, but I would encourage you to explore outsourced services that can help your organization through hard times.
Short-Term Risks and Long-Term Goals
Most nonprofits keep their assets in portfolios designed to withstand the test of time. But your long-term thinking should extend to your spending policy too. With interest rates up, it's tempting to raise spending too. But short-term gains don't always mean long-term sustainability.
Most nonprofits calculate spending policies based on a rolling average of their funds’ value over the past few years. The sudden spike in interest rates may lure us into increasing our spending. But the simultaneous rise of inflation means those returns have probably lost some value in real terms. And in the grand scheme of things, these rates might just be a blip.
But that doesn’t mean that all short-term volatility should be ignored. The collapse of Silicon Valley Bank earlier this year set off a chain reaction of instability within the banking system that has already impacted the nonprofit sector. Re-evaluate your banking partnerships and consider alternate solutions, like laddered treasury bills, to help safeguard your cash assets.
Amid so much social, organizational and financial volatility, one of your best moves at a nonprofit is to take a deep breath and look around you. There are resources available within your organization, and beyond it, that can help you support your mission through stormy times.
The preceding blog was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.
Related story: The Effect of Inflation on Charitable Giving
Mark Eshman is the director of Mercer Advisors’ endowment and foundation services.
All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. The information is believed to be accurate but is not guaranteed or warranted by Mercer Advisors. For financial planning advice specific to your circumstances, talk to a qualified professional at Mercer Advisors.
Mercer Global Advisors Inc. is registered with the Securities and Exchange Commission and delivers all investment-related services. Mercer Advisors Inc. is the parent company of Mercer Global Advisors Inc. and is not involved with investment services.