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The phrase “financial sustainability” in the context of nonprofits generally refers to an organization’s ability to sustain itself over an extended period of time in support of its central mission. To be a sustainable organization, its leaders must know how to deliver affordable programs and services in alignment with the enterprise’s fundraising revenue.
Yet, a nonprofit’s ability to make direct improvements to its financial sustainability can be limited, particularly because each organization must navigate the opinions of multiple decision-makers. According to a 2018 report on the financial health of America’s nonprofits, many organizations are facing major financial crises.
The data revealed that 7 to 8 percent of nonprofits in the U.S. are technically insolvent, with liabilities exceeding assets. Moreover, a significant 50 percent of nonprofits are operating with less than one month’s cash reserves, and another 30 percent have reportedly lost money over a three-year period.
These statistics should act as a wake-up call to nonprofit leaders, who, in addition to prioritizing risk management strategies, can make a more concentrated effort to improve financial sustainability by coordinating efforts.
Nonprofits, regulators, policymakers and funders must work to incite constructive planning in the name of sustainability. The following three actions may help to make your nonprofit more sustainable now and in the years to come.
Nonprofits that are dedicated to improving their financial sustainability will readily consider the ways in which all decision-makers can assist in coordinating strategic efforts. With input from their stakeholders, organization leaders can make informed decisions that promote the longevity of the nonprofit’s mission and the financial viability of its programs and services.
For more information, contact your Marvin and Company, P.C. representative.