Non profit funding and financial sustainability has been found to be the #1 Top Issue for Board Directors and Executive team members in a survey by AIDC of NonProfits and the challenges they face in 2020/21. NonProfit funding has always been challenging, but the impacts of COVID-19 have seen significant change in the form of reduced government assistance and growing competition for each charitable dollar. It’s no surprise that fund raising effectiveness is now top of mind for Not-For-Profits.
With the COVID-19 pandemic continuing in the foreseeable future, Not-For-Profit organisations, particularly those with a focus on mental health, are increasingly vulnerable and are feeling their financial and operational issues even more so in this “new normal”. The pandemic has exposed NonProfit financial management issues, economic vulnerabilities, and driven them to be more resourceful and innovative in the way they do business, and to find ways to plan ahead.
Not-For-Profit organisations were initially left out of the Australian Government’s stimulus package announced in response to the impacts of the global pandemic. This delay in support has put added pressure on organisations to rethink the way they seek and manage funding.
Financial and operational stresses that were present before the global pandemic have been exacerbated, and a new set of risk management challenges has been created.
The uncertain fundraising challenges for non profits
Just how long the COVID-19 pandemic and global economic recession will last is uncertain. So, the dilemma confronting Australian Not-For-Profits is how to keep the doors open and remain viable at this time.
The global pandemic has forced many organisations to pivot their priorities to deal with constantly changing circumstances. Not-For-Profits are being asked to deliver more with the same or decreased level of funding, forcing many to restructure their operations and reduce costs, which is causing multiple financial and operational issues for the CEO and CFO.
Why do non profits fail?
Many Not-For-Profit organisations are struggling with siloed data and no real-time business information. This is stemming from the utilisation of many different software solutions, often outdated, and results in manual process over-rides and spreadsheets. The heavy reliance on manual processes leaves Not-For-Profits vulnerable to accounting errors and lost revenue. This does not only affect their bottom line, but it prohibits these important social enterprises from achieving the impact they aspire to make, causes programmes to fail, gives management no effective planning insights, and provides a lack of transparency for Board and Governance reporting.
Non profit compliance requirements most needed
COVID-19 has driven many organisations in the Not-For-Profit sector to become more flexible and agile. The Management Team is faced with the need to adapt and change their financial policies and procedures to address the many demands from the public, strict financial management, and governing compliance and regulations.
While traditional in-person fundraising events have not been possible, and their future is still in doubt, Not-For-Profits are developing new ways to raise the funds they need. However, this brings a new level of risk with regards to their compliance.
Many Not-For-Profit organisations are now implementing innovative ways to raise funds, however, are struggling with many disparate systems with limited or no interconnectivity, and multiple manual processes and spreadsheets to manage those programmes and activities. They are having to juggle systems and re-enter information in various areas to maintain their regulatory and funding compliance. Organisations are relying on these systems for reporting, and risk inaccurate information making its way into their reports. This is where an ERP will help consolidate and surface accurate data, no matter whether it is from a Netsuite partner or some other vendor.
Another challenge to staying compliant is that legislative arrangements have not kept pace with the development of new fundraising activities, like web-based and crowdfunding. While residing in one state, Not-For-Profits must remain compliant in all states in which they collect donations, and the cost of this is creating further stress for already tight operating margins.
Economic downturn and increased demand for services is a key non profit issue
As unemployment rises as a result of the global pandemic, Not-For-Profit organisations that focus on mental health support are facing increasing demand for their services. Australians under financial and emotional stress are seeking help such as employment services, housing assistance, financial counselling and other counselling services. This increasing demand is putting even more pressure on a sector that was already facing significant constraints before the global pandemic.
Not-For-Profit organisations are spending more time and resources on managing relationships with major donors and partners, as well as working closely with their organisation’s Boards to manage uncertainties. Organisations also have to dedicate more resources towards marketing to increase the awareness of the issues their organisation addresses, which put added pressure on their already stretched resources.
Adapting to rapidly changing fundraising challenges for non profits
The Centre for Social Impact, and Not-For-Profit organisation Social Venture Australia, forecasts a massive revenue drop and more than 200,000 job losses in the Not-For-Profit sector. These organisations will struggle further once the Australian Government ceases stimulus packages which many fear is artificially keeping some organisations afloat.
It is more important than ever for Not-For-Profit organisations to manage the resources they have carefully, and to adapt to the rapidly changing fundraising opportunities that are available.
The Future of Not-For-Profit Fundraising and Donations has Changed Forever
The ‘Australia’s health 2020’ report shows one in five Australians reported they had a mental or behavioural condition in 2017-18, and it is expected that the impact of COVD-19 will see an increase in these numbers. Lifeline reports the pandemic has created a $5 million funding gap, as demand on its mental health services grows.
With live events cancelled temporarily, many NonProfits are focusing on a digital future, and digital events are a way to safeguard their funding streams as they seek alternatives to close the funding gap. Not-For-Profit organisations need the ability to manage these digital fundraising events effectively, including being able to accept donations and sell merchandise and tickets online.
With the ability to accept donations online, Not-For-Profit organisations can create a robust online presence with an online e-commerce store that seamlessly integrates into their accounting, marketing, ordering and inventory management systems. They can also allow donors to choose the amount they want to donate, reducing the likelihood of donor fatigue.
The success of any new technology adopted by an organisation often depends on making sure the technology is put to its fullest use. An important lesson we have learned from 2020 so far is that every business must be digital, and that work is no longer a ‘place’, so employees must have the tools to work and deliver results from anywhere. Through Netsuite innovative nonprofit technology which is helping them be ready to scale, Not-For-Profits are revolutionising the future of fundraising and donations by shifting away from short-term transactions to a more sustained impact.
Non profit challenges and COVID-19
There are several new COVID-19 related grants available from the Australian Government and individual States. These grants may take some of the pressure off Not-For-Profit organisations if they have the right systems in place to manage these temporary relief measures. These include:
- Supplementary Volunteer Grants of $1,000-$5,000 to volunteer involving organisations across Australia to support the efforts of volunteers in building stronger, more resilient communities.
- Community Support Package: an additional $100 million worth of support to more than 300 charities.
- VicHealth is offering between $3,000 and $50,000 for local organisations who can support young people or Victorians experiencing disadvantage.
- QCOSS The Mercy Foundation Grants to End Homelessness are available Australia-wide with amounts between $5,000 – $50,000
- Sport Australia has grants and funding opportunities available for sporting organisations
To manage these temporary grants effectively, Not-For-Profit organisations need complete control and visibility over their spend management. Organisations need to establish budget and spend controls to ensure they comply with organisational and grant policies.
How to Overcome Strategic and Funding Issues Facing Not-For-Profit Organisations
Many NonProfits are fighting for their lives with COVID-19 wreaking havoc on their bottom lines and making it difficult for them to support vulnerable Australians. So what actions can be taken now to support and protect your Not-For-Profit? Here are some which can be taken:
1. Know your current trading and cash flow position
Understanding exactly where your organisation stands when it comes to trading and cash flow will help identify areas that could have a potential impact to operations. With the future still uncertain due to the pandemic, identifying these areas will help your business know how to respond.
Understanding what cash reserves are tied to grants, and which resources can be drawn upon if required, is vital. Not-For-Profit organisations need a detailed understanding of expenses in the business so decisions can be made on where to adjust spending to improve the projected cash position.
2. Have full visibility of your funding agreements and expected milestones
Some funding agreements have milestones tied to them, such as the number of participants, which have been heavily impacted by the global pandemic and the implementation of social distancing measures. Not-For-Profit organisations may not meet all the requirements for their funding grants, and there can be profound implications if the government and non government donors reinforce the expected milestones – which may not be manageable or even possible.
Funding sources may be at risk if programs or fundraising events are cancelled or postponed causing, through no fault of their own, Not-For-Profit organisations to miss critical funding agreement milestones. Having a clear view of the grant life cycle with the ability to track terms and conditions will help mitigate the risk of missing a funding milestone.
3. Deploy your employees and volunteers where they’re needed the most
With fewer resources, Not-For-Profit organisations need to look for innovative ways to deploy their employees and volunteers to areas of the organisation where they’re needed the most. With increased competition for funding, successful Not-For-Profit organisations need to optimise their resources and make them work smarter, not just harder.
Using business technology can have a significant impact on your organisation’s ability to manage costs and make better use of volunteers by breaking down information silos. Employees and volunteers alike can help strengthen relationships with existing donors and seek new supporters by creating projects that generate additional income.
In 2020, Not-For-Profits are more important than ever. Employees and volunteers associated with Not-For-Profit organisations are motivated by enthusiasm and passion. However, leaders of these organisations should not lose sight of the need to provide the adequate tools for their organisation to function so that it can meet the mission of the organisation. Not-For-Profits looking to increase their fundraising effectiveness should adopt a culture of digital innovation to overcome the challenges they face as a result of the COVID-19 pandemic.
Data is becoming vital to Not-For-Profit organisations operating on tight margins. Data must be used to inform their fundraising strategies, or risk reducing the effectiveness of their activities and wasting valuable funds on activities that don’t work. This means tracking the performance of marketing activities on social media, email and blog, and taking the time to assess what is, and isn’t, working. Social media has simplified fundraising and is an incredibly easy way to access new donors if done correctly. With the right nonprofit specific technology from Netsuite, Not-For-Profit organisations can increase the effectiveness of their fundraising activities and meet the rising costs of supporting vulnerable communities.
CEOs and CFOs need to reimagine their Not-For-Profit organisation to survive 2020 and the COVID-19 crisis. While they may be overwhelmed with the ever-changing conditions and sense of uncertainty, it is necessary to implement the changes they need to make now so they can still have an impact on the future despite fundraising challenges. Leaders who view the pandemic as an opportunity to change for the better, will find ways to reinvent the way they operate, and to not just survive, but thrive.
Taking action now as economies open back up means Not-For-Profits will be poised and ready to act on any funding challenges they face. Now, more than ever, Not-For-Profit leadership must realise the power of their expertise to engage and mobilise to build a connected digital experience for their employees, volunteers and donors.
Download our “7 Actions Businesses Need to Take Now” playbook to discover how the right technology and processes can support your Not-For-Profit organisation to meet the Challenges in 2020.
