As the leaves begin to fall here in northern Nevada, those of us in the nonprofit realm are now several months into the fiscal year for many grants, and it’s not uncommon for the leaves on our proverbial money tree to be looking rather sad as well. One of the biggest challenges in nonprofit work is that money doesn’t flow consistently like a stream; it grows and fades like the seasons. A Christmas fundraiser brings in cash and nonperishable food, a new grant opportunity in the spring is awarded, but then reimbursements are delayed, donations dwindle, and costs continue to rise.
An important consideration for everyone concerned with helping others – nonprofit leaders, grantors, donors, regulators, and legislators – is the nature of reimbursement-style funding. There is great emphasis in the nonprofit sector on “grant writing,” but less understanding that being awarded the grant is only the beginning! Small nonprofits can struggle to stay solvent when funding takes weeks or months to arrive, even though staff have been hired, services provided, and expenses already incurred. Payroll is due, utility bills still need to be paid, and the doors need to stay open. The timing of revenue and expenses can make all the difference between having funding on paper and having money available to operate.
So, how can nonprofits and their funding partners work toward greater financial sustainability?
- Diversify funding: Nonprofits can pursue a mix of grants, fundraising, and individual donations rather than relying too heavily on one funding source. Large grants can reduce administrative burden (a patchwork of small grants is challenging in some ways), but the organization takes a risk by relying too much on one source.
- Prioritize timely payments: Funders should establish reasonable reimbursement timelines and communicate delays, while nonprofits should submit requests promptly and accurately, being good stewards of the resources entrusted to them. Working together as partners is key.
- Cover the full cost of services: Funders can take the lead by ensuring that they cover the true cost of running programs. Funders and nonprofits can then coordinate to maximize appropriate direct-service reimbursement and ensure adequate indirect cost recovery. Administrative expenses, facilities, and operational support are essential to delivering services, too.
- Look beyond the budget: Leadership must understand that a balanced budget doesn’t necessarily mean cash is available when bills are due. Monitoring cash flow and planning for gaps is essential.
- Put people first: Organizations succeed when they prioritize staff and clients alike, strengthen their systems to support employee retention, and get creative when unexpected financial challenges arise.
Ultimately, financial sustainability is about more than keeping the lights on. For the people we serve, continuity matters. A young person aging out of foster care shouldn’t have to worry about whether a program, housing support, or the person helping them navigate adulthood will still be there next year because a grant wasn’t renewed. We can’t always predict the seasons, but we can work together to build organizations that are better prepared to weather them.
Are you a nonprofit professional or in a similar field? What strategies have helped your organization navigate unpredictable funding and reimbursement delays? Please share below!
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