5 Questions to Ask When Planning Financial Security for Your Not-For-Profit Organisation 

Running a not-for-profit organisation in Australia is not much different to managing any other type of business! It takes proper planning on all levels including financial sustainability to keep it afloat. Building a resilient NFP involves taking all the help you can get and getting the right advice from experts in the financial industry.

Your NFP’s business plan should include aspects such as not for profit public liability insurance to avoid unexpected and costly litigation cases from sinking your organisation. But, what else can you do to keep your NFP sustainable whether you’re facing difficult times or not? What questions should you be answering to keep your NFP financially secure at all times? 

Read on to find out. 

5 Questions to Ask When Planning Financial Security for Your Not-For-Profit Organisation 

1. Where is Your Funding Come From?

NFPs face the same running costs as most other businesses and knowing where your money comes from is essential to make sure you don’t run out of funds. Understanding your funding sources allows you to gear your marketing campaigns appropriately.

Most NFPs receive money from different sources such as trust funds, investments and public fundraising. Aiming your marketing activities at the right audience ensures your funds keep flowing, even when the economy is struggling.

Your marketing strategy should be amped up to maintain contact with supporters while keeping their loyalty and financial commitment to your organisation during challenging times. 

2. Are You Making an Impact?

While your NFP needs funds to cover running costs, the main purpose of your organisation is to make an impact on the chosen cause. Knowing what impact you want to make will help you when drawing up financial plans. You need to know the answers to the following questions:

  • What does your NFP want to achieve?
  • Will your impact make a difference?
  • Is your NFP in sync with other organisations in the sector?

Once you know what impact you want to make, focus on monitoring and evaluating your NFP’s outcomes. Accurate reporting should highlight whether your entity is having a significant impact on the cause. This data my motivate more interested funders to join up and become part of your support group. 

3. What Does Your Business Plan Look Like?

Many NFPs are driven by a passion for a certain cause which is commendable and necessary for making a difference. But, it’s not enough to keep an organisation financially sustainable especially if other NFPs are focusing on the same or similar cause. Funding becomes harder to raise when there’s competition.

Proper business planning is vital for a successful strategy and sustainable entity. A business plan gives your NFP the foundation it needs to grow financially while keeping afloat during difficult times. Your NFP business plan should:

  • Outline key objectives and activities
  • Identify the actions needed to fulfill the objectives and activities outlined
  • Describe the resources needed such as employees and facilities to fulfill the NFP’s purpose
  • Include a financial plan detailing the costs of the objectives, activities and resources plus what income is needed to support them. 

Proper budgeting allows you to plan for other costs such as building maintenance and repairs, new vehicles and office equipment. Your NFP’s business plan gives you a guideline for future expenses and keeps you on track managing general costs.

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4. How Well are You Controlling the Costs?

It’s all fine and well having a budget on paper but if you’re not controlling the costs accordingly, you’re wasting time and putting your NFP at financial risk. You want to spend less than what’s coming in but it gets harder to do that when you have fixed overheads and employees on your payroll. Your business plan keeps you on track but you need to do regular check-ins to stay on top of the details.

It’s important to streamline your spending costs but going overboard with cost-cutting can be detrimental to your fundraising efforts. You should minimise wastage without compromising your NFP’s core purpose. Striking a balance is vital for financial sustainability.

Controlling costs happens almost daily and isn’t a one-size-fits-all approach. 

5. How Diversified is Your Funding Portfolio?

Diversifying your funding sources is better than focusing on one donor to support your NFP activities. A diversified funding portfolio means you have money coming in from a variety of sources, which safeguards your income should a supporter pull out or face financial difficulties.

The general rule of thumb is to not expect more than 20% of your funding to come from a single source. In other words, don’t put all your eggs in one basket!

Final Thoughts

Starting a NFP takes hard work, passion and financial acumen. The sustainability of your NFP relies on resilience but it also needs sufficient funding to meet the objectives and activities of your operation. 

Understanding financial aspects such as tax concession is vital for the success of your NFP, so consulting professionals is a smart strategy. Working with financial experts in the industry helps to maintain the integrity of your NFP and they can support you in providing advice and managing your money. From commercial lending facilities to public liability insurance, partnering with experts will keep your NFP financially sustainable for years to come.