Addressing Financial Challenges

It can happen to even the largest and most established organizations: the financial picture darkens quickly - or sometimes over an extended period of time. It’s easy to ignore these challenges and hope that things turn around. Non-profit organizations exist to fulfill a mission not to achieve financial results, and acknowledging financial challenges can be agonizing. But financial problems left unaddressed can lead to a serious financial crisis, which can in turn spiral into an existential crisis. Here are some rules of thumb when your organization is facing financial challenges. 

First, get in front of the challenge. The job of a leader is to be looking ahead in anticipation of both opportunities and problems. Unlike fine wine, financial problems do not get better with time, only worse. A longer runway will be a great friend in resolving the issues. 

Second, determine if the challenge is a short-term problem or a long-term structural issue. This will inform the solution. 

Third, develop a road map forward and do it in a timely manner.  A credible and clear plan is better than no plan. A plan of this nature does not need to be etched in stone and will inevitably change with changing circumstances. Should special giving be required, potential donors will want to see a plan for the path forward. 

Fourth, develop a plan that is realistic. Any organization has natural limits on its revenue both structurally and in terms of short-term special fundraising. Be realistic about whether your plan also requires expense reduction. Expense reduction is almost always painful but sometimes necessary. Donors will see through unrealistic financial plans. 

Finally, develop a clear message for internal and external constituencies, especially your donor community, a message that is a blend of realism and optimism.  It should paint a compelling picture of what can be accomplished once the organization has shored up its financial foundation. Financial health is not an end but only a means for sustained mission fulfillment.