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How to Find Nonprofit Financial Management Success


Learn why organizations must be smart with their money to maintain a high level of efficiency and good work.

By Bisk
How to Find Nonprofit Financial Management Success

For-profit and nonprofit organizations alike depend on strategic financial management to maintain their operations. Nonprofits, however, are especially reliant on skilled leadership to optimize resources and secure, manage and maintain funds. Further, nonprofit executives must be adept at navigating the singular terrain of their sector’s financial strategies and practices, which differ significantly from those of traditional corporate enterprise. 

For nonprofit executives, effective financial management entails continually evaluating a nonprofit’s overall financial health while securing resources and defining long-term financial strategy. Given the scope of effective nonprofit financial management, nonprofit leaders must demonstrate numerous professional competencies. 

Conduct Financial Assessments 

Nonprofit financial managers are responsible for both historical and ongoing financial assessments, which collect data in response to four core questions: 

  • What are the organization’s current financial management strategies, cash standing and revenue streams? 
  • What trends, strategies and obstacles define the organization’s financial history? Which management techniques have proven effective or ineffective? 
  • Can the nonprofit consistently and completely support all of its vital programs with existing funds allocation? If not, which organizational activities or services are neglected or over-funded? 
  • Which financial management strategies comprise the nonprofit’s current financial strengths and weaknesses? 

Analyze Cash Position 

A central feature of any organization’s financial portrait, its cash position describes its liquid assets, from cash itself to short-term government debt and certificates of deposit. As part of a comprehensive financial assessment, nonprofit executives should document the organization’s rent and debt collection status, current credit standing and payroll history. Understanding these key features is central to evaluating the organization’s fixed versus liquid asset management strategies and adjusting each accordingly. 

Raise Revenue 

Successful nonprofits usually rely on multiple streams of revenues, including program service fees, fundraising income, endowments and donations. The latter alone often require a multi-pronged funding strategy, most of which feature capital campaigns, planned giving and annual funds. 

Skilled nonprofit executives can manage various discrete revenue sources simultaneously while cultivating new strategies for income growth. Perhaps most importantly, nonprofit financial managers must exercise agility in resource allocation and fundraising initiatives by responding quickly to industry trends and organizational flux. 

Develop Funding Models 

Raising revenue and developing funding models are interdependent and concurrent activities for effective nonprofit financial managers. In general terms, an organization’s funding model defines initiatives and overall strategy for securing and maintaining healthy revenues. Three cornerstone elements characterize funding models: 

  • Funding Sources: Most often, nonprofit funding sources include corporations, individual donors and other nonprofits or grant-making institutions. Each of the three primary funding sources contributes from distinct motivations and responds most readily to disparate funding initiatives. Nonprofit financial managers should understand them all. 
  • Funding Decision-Makers: Among the core revenue sources nonprofits cultivate, funding decision-makers initiate every disbursement. Nonprofit leaders should establish direct relationships with these individuals, nurturing ongoing investment in the organization by recognizing each decision-maker’s unique communication style, values and reasons for giving. 
  • Funder Motivations: Nonprofit funding sources and decision-makers give for reasons as far-ranging as donor deductibility to social conscience, corporate visibility to institutional mandate. For instance, large corporations may support nonprofits to promote positive brand associations and curry lower tax rates. Individual donors, on the other hand, may be motivated primarily by personal convictions. Recognizing funder motivations and adapting financial management strategies and capital initiatives accordingly is central to maintaining the organization’s overall and ongoing financial health. 

Help improve your nonprofit’s chance of success by earning an executive certificate from the University of Notre Dame’s 100% online nonprofit programs.

 

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Category: Nonprofit Leadership