10 Essential Cashflow Tips For Nonprofits

Running a successful nonprofit can in some ways be harder than running a successful business. Many newbie nonprofit directors do not realize how much of the job revolves around money management. All your funds have to be raised solely through donations and grants. And these donations and grants have to be enough to cover all of your admin costs, while also funding your cause.

A lot of nonprofits experience cash flow problems. These are caused by either too little money coming in, or too much money coming out. Cash flow issues can often lead to nonprofits taking on debts or having to cut back on essential services that are important to their mission. This can quickly have a snowball effect and can lead to many nonprofits having to shut down because they can no longer pay off debts or afford to pay for essential admin. 

By taking measures early to steady your cash flow, you can ensure that your nonprofit is a success. Below are a few tips on how to manage your cash flow as a nonprofit. 

Explore a range of fundraising solutions

It’s important that you don’t rely solely on one form of fundraising. If this dries up, you’ll have no income. Instead, try to explore a range of different fundraising solutions. A few fundraising strategies to consider could include:

• Grants from local and state governments: There are many grants available out there for nonprofits to apply for that can help provide funding. 
• Charity products/services: Selling a product (such as cakes) or providing a service (such as washing cars) could be another way to raise funds for your nonprofit. 
• Corporate sponsorship: This involves a company donating funds in exchange for you advertising their company.
• Ticketed events: By putting on ticketed events like concerts and comedy clubs, you may be able to raise money through ticket sales.
• Online crowdfunding: Through online adverts and targeted emails, you can direct people to crowdfunder pages where people can donate to specific projects and causes until you’ve reached a target. 
• Raffles and competitions: You can charge people to enter raffles and competitions with prizes. Money made from selling tickets for these competitions can go towards funding your non-profit. 
• Voluntary donations: Simply by asking people in person or advertising your nonprofit online, you may be able to encourage voluntary donations without having to provide anything in exchange. 

Ultimately, successful fundraising is all about getting creative and constantly trying new things. New and exciting opportunities will attract new donors. Don’t let fundraising become a routine. 

Find passive income streams

Passive income streams are forms of income that don’t require constantly working for each payment. When it comes to raising money for nonprofits, this typically involves encouraging people and companies to make recurring donations rather than a single one-off payment. This could include:

• Membership donations: Donors sign up as members and donate a certain amount each month.
• Corporate partnerships: Companies pay recurring donations in order to receive ongoing sponsorship

During periods when you’re struggling to raise one-off donations, these passive incomes can help to continue covering expenses. If key members of staff are ill or on vacation, or you have to briefly stop operations, passive incomes can also continue to keep money coming in. 

Use grant management software

For nonprofits that are heavily reliant on grants, it can be important to find an efficient way of applying to these grants and managing payments. Grant management software is worth investing in as it can help you to more easily keep track of grants. 

Obviously, software for managing donations is important too. However, much of this software doesn’t have features to manage grants, which is why having separate software is useful.

Create clear budgets and stick to them

Budgeting is essential when running a nonprofit. Each month, you need to work out exactly how much you have to spend and exactly what costs you have to cover.

A clear budget forces you to plan ahead so that you don’t make spontaneous decisions about marketing or events. By working within restrictions, you could find that you’re also more inclined to look for money-saving methods of doing things so that you’re not unnecessarily frittering away money. 

Reserve cash for unexpected expenses

Not all expenses can be planned for. If an event you’ve already paid for has to be canceled at the last minute or you’re the victim of a ransomware attack, it could be useful to have some savings stored away somewhere securely to help pay for these disasters.

Insurance can also help cover you against some of these incidents. However, savings can typically be used more fluidly to fund a variety of different unexpected costs. There are specialist savings accounts for nonprofits that you can use for this purpose. 

Use volunteers wisely

Many nonprofits hire paid employees for important and difficult roles. However, there may be many times when you can hire volunteers to give you a helping hand. Relying on volunteers can greatly reduce your nonprofit’s outgoing expenses. The hard part is attracting volunteers who you can rely on.

You can attract volunteers through advertising and by networking. Younger people trying to gain work experience and older people who are looking to occupy themselves while retired are some of the most common volunteer demographics. Consider focusing your advertising on these age groups.

It’s worth noting that you may be able to outsource professional services for free in some cases by offering sponsorship in exchange. By networking heavily and meeting different types of people, you may stumble across professionals who readily volunteer to provide services for free to help your cause. Alternatively, you can advertise services that you need providing online and see if anyone is willing to help. 

Abandon paid marketing strategies that aren’t working

Nonprofits need to constantly be investing money into marketing in order to attract donors. However, it’s important to regularly create marketing reports to work out which methods of marketing are actually working. 

Analytics software and surveys aimed at your donors can help you to determine where your donors are coming from. This can then allow you to pinpoint forms of advertising they may not be working. Abandon these strategies and instead focus on pouring money into the marketing strategies that are working. This could ultimately help you to attract more donations while reducing your outgoing costs.

Create cash flow projections

While budgeting for the month ahead is a good start, you’ll often find that the best non-profits budget many months ahead. This requires you to create cash flow projections of each month. 

The longer your non-profit has been going, the easier it will be to create these projections, as you’ll be able to look back and see how your income and expenses have changed over time. You’ll also be able to budget more effectively for certain months of the year where you may have previously failed to meet fundraising targets or raised more funds than expected.

Some accounting programs may be able to help you create these cash flow projections – displaying your income and expenses as a graph so that you can more easily visualize it. 

Use loans as a last resort

Loans can be a convenient way to access funding when you’re struggling to find it elsewhere. However, loans also increase your future outgoing costs – meaning that you’ll have to raise even more funds each month to cover debt repayments. This could eventually result in your taking out loans to pay off loans, putting you into a debt spiral. 

As a result, nonprofits should only rely on loans as a last resort. By budgeting and having savings set aside, you can reduce your reliance on loans. If you do have to take out a loan, make sure that it is a low interest loan with affordable repayments. There are specialist lenders out there for nonprofits that could be worth trying. 

Charity accounts with large overdrafts can be a better form of debt as you can pay them off in your own time. Just make sure that you are actively trying to pay off this overdraft and that you don’t regularly go over the limit. 

Invest in expert financial support

It’s worth spending money to talk to financial advisors in order to get the best financial advice suitable for your nonprofit. There are advisors out there that specialize in nonprofit finance. They may be able to offer the best advice when it comes to fundraising, reducing expenses and keeping your nonprofit financially legal. 

You could also consider working with accountants to help handle bookkeeping and create projections. You may even find it beneficial to hire a in-house paid treasurer with accounting experience who can help you to manage the whole financial side of your nonprofit. This could be useful if you and your current board members have no financial experience.

There are free financial resources out there for nonprofits. However, paying for financial support will get you the best support in many cases. Just make sure to hire people who are qualified and who have a good reputation.