By the DBD Financial Management Team

    Nonprofit Chief Financial Officers were on the frontlines planning and implementing strategies to keep their organizations going during the pandemic and ensuing economic downturn last year. As we take stock for the year ahead, here are 9 things to consider in 2021.

    1. Stay nimble

    We will still be operating in a world of uncertainty in 2021. Finance teams will have to operate at a faster pace, with shorter reporting and planning cycles. Plans must be realistic, with a dose of optimism, but nonprofits must be quick to react if plans are not materializing. Consider implementing trigger points now for contingency plans to kick in later, allowing for a more dispassionate view of the consequences of such actions. Continue to use forecasts with short term adjustments and develop an operational modeling structure that is simple, data driven, that can produce high level information quickly to allow you to explore various business changes in an efficient manner.

    2. Communicate effectively

    The Finance team and C-suite members will have to communicate even more effectively to one another, to their committees, and boards. This may require the continued use of remote updates and meetings to ensure an open and transparent operating environment and strong governance. Be transparent with plan assumptions, operating results, and cash projections. Apply these principals to all community support organizations, such as United Way, foundations, major donors, and collaborative partners.

    3. Build on lessons learned

    In 2020 your organization likely ran multiple financial models; everything from business as usual to business closed. 2021 will require the same type of thinking. Many organizations adopted new ways to deliver their services and even added new services that generate both sustainability and impact. Future budgeting will certainly change as the old model of building from the bottom up using historical detail no longer meets organizational needs. Driving from the top down, based on resources and changing conditions and accounting for evolving regulations and opportunities will likely be more productive. Even as your organization begins to thrive maintain your newfound discipline around cash forecasting.

    4. Think about your staff

    Many organizations were forced to lay off staff and reduce salaries and benefits for remaining employees in 2020. How you approach staffing issues as the economy recovers will be crucial. As full-time staff lean in to expanded duties be aware of overtime rules. Consider whether wage and benefits reductions need to remain or if the business model can begin to support restoration. Hire or rehire staff cautiously to mitigate the need for yet another reduction in staff.


    5. Leverage your heightened profile in the community

    When the pandemic hit, your organization leaped into action. The community may have a newfound appreciation for the work you do and how vital your organization is to the fabric of the community. Leverage that appreciation to reach out to new funders, to seek new service opportunities and partnerships.

    6. Seek opportunities to collaborate and expand

    Consider collaborating with other organizations to deliver programs and share resources for stronger outcomes. Ensure that they have the same overall goals of serving the community as you do and beware of groups that might want to merely use the good name of your organization. Some nonprofits, or even for-profit providers, in your space may not have survived the pandemic. Be aware of these opportunities to expand your impact in areas of need. 

    7. Consider government funding sources

    Ensure that the duty of researching any possible new government funding from federal, state, or local sources is assigned to a specific team member, volunteer or department. Availability of funds, from any government source, is ever changing and will continue to be so in 2021. As governmental fiscal years end during 2021, do your due diligence on whether any existing multi-year contracts will see funding cuts in an effort to balance government budgets.

    8. Evaluate banking relationships

    If you have a mortgage on a building or an operating line of credit, communicate regularly and openly with your banking partners. Remember to never surprise those who provide financial support. You may also find 2021 to be a great time to refinance your obligations. Compare your existing interest rates, principal payment schedules and terms and conditions to what is currently available in the market. If your margins and/or collateral are strong, you may be able to improve both your monthly cash flow and your bottom line. Some lenders are open to period of interest only payments to assist organization in rebuilding liquidity.

    9. Maximize board engagement

    Now more than ever, nonprofits must make sure their boards are fully engaged and are supporting the work of the organization. Take initiative and be creative, especially if board members have not been expected to roll up their sleeves in the past. Executive committees are often empowered to make decisions when full boards are not available, but full board discussions and votes are better governance whenever possible.

    What about you? Do you have any finance advice for your nonprofit colleagues as we move into 2021?


    Photo by Héctor J. Rivas on Unsplash

    Posted by DBD Team on Jan. 18, 2021
    DBD Team

    Written by DBD Team

    DBD Group is made up of professionals from the non-profit world, leveraging their decades of fundraising, strategy, financial management and executive recruitment experience to help organizations thrive and make a positive difference in the world.

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