Increasing Post-Pandemic Cash Flow at Nonprofits

Accountants working for a nonprofit need to not only help clients save money during the COVID-19 pandemic, but also to assist them in increasing their cash flow.

Oct 2nd 2020
President Perceptive Business Solutions Inc.
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The non-profit world loves accountants. Some are on the payroll, but many are volunteers, serving on the finance committee and as board members. Museums come to mind, but religious organizations, community theater groups and animal shelters also qualify. They have many people with ideas how to spend money, far fewer understanding how to raise it or manage it. Let’s assume you are in the latter role.

A nonprofit should be run like a business. Income is supposed to exceed outflow. Although they might have the advantage of an endowment, that should be treated like an individual would their retirement assets: A funding source of last resort.

In the early stages of the pandemic you likely did what accountants do best, bringing down expenses to align with income. This included the following:

  • Furlough Non-Essential Staff: This is painful, but wages and salaries are often the largest expenses for the organization.  
  • Defer Capital Spending: If you don’t have the money to cover day-to-day expenses, you can’t afford to expand.
  • Cancel Upcoming Events: Let's say you have a theater company. A blockbuster show might cost $500,000 to stage, with the expectation of bringing in $1,000,000 in ticket sales. It costs $100,000 to cancel. If all performances are cancelled, there’s zero in ticket sales. You bite the bullet, paying to get out of the contract.

It’s easier to reduce the bottom line compared to driving the top one. Many people in the nonprofit world feel because their cause is noble, everyone should open their wallets, regardless of their personal circumstances. The reality is charitable contributions are the easiest nondiscretionary expense for individuals to cut.

Accountants might not be known for their marketing or sales acumen, but this is your opportunity to shine. You know you are heading into a competitive situation where every other organization is going to be looking for money.

Start by thinking top down:

  1.  Federal and State Grants: Ask your client whether they've applied for these, as well as loans. For example, Pennsylvania put the  Covoid-19 Cultural and Museum Preservation Grant Program into place. As an accountant, you see the bigger picture. Get them to file and try to get their fair share.
  2. Earmarks: State representatives often have the ability to include direct funding for worthy projects in their districts within the state budget. They sometimes have discretionary funds, commonly called “Walking Around Money” (WAM), they can allocate. If the accountant is a board member, they know “who knows who.” Get them to get your organization on the radar.
  3. Online Presence: People won’t give you money if they can’t see you. Many non-profits have moved to virtual programming, putting lectures and performances online. You can recycle materials. The people you are asking for money need to see you are making an effort.

The organization’s big push must be to get the financial support of the local population. This means fundraising, but someone needs to tell the organization how to drive the top line and increase cash flow. Here are some suggestions:

  1. Ask for Big Gifts: The easiest way to raise a million dollars is to get one person to write a check for that amount. Your organization has major donors. You need to ask for help. It’s rare, but sometimes, they step forward unasked. For instance, one of our local philanthropists realized restaurants were struggling. He made a list of fifty and mailed them each a $ 1,000 check. Sadly, in most cases, you need to ask.
  2. Match Gifts: Other big donors don’t want to shoulder the burden alone. Get the board to find an established donor who will fund half your lofty goal if the board and other donors raise the other half. Here’s an obvious point for the accountant in the room to raise: Board members are stewards of the organization. Before they ask for money, everyone needs to write a significant check. It shows 100 percent board participation.
  3. Collect Lapsed Memberships: If this was one of your local business clients, you would tell them to focus on collecting account receivables. In the nonprofit world, this equivalent is lapsed memberships. The organization can run a campaign to remind people to pay.
  4. Request Membership Renewals: Magazines do this all the time. Accelerate your requests for renewals. Offer an incentive to renew early. Although their membership expires in three months, they can renew now and get an extra three-month extension. Many members want to help. Give them a way.
  5. Set Up an Online Gala: We’ve received at least one invitation. Entry level tickets are $600 per couple, top tier sponsorships are $ 100,000. They supply the food. You stay at home and “attend the event” via a password protected link. It’s been said people don’t want to dress up and go out, but feel they must be a supporter. Let them stay home in 2020.
  6. Choose the Right Honoree. Your gala showcases someone. They supply a list of wealthy friends. The organization staff solicits them for tickets by surface mail, e-mail and phone calls. They write checks because they want to show respect for their friend, the honoree.
  7. Host a Virtual Run or Ride: You’ve seen the sponsored walks for charity. A friend enters, asking you to pledge a dollar amount per mile covered. They race through a park. The virtual version has the participant on their treadmill or Peloton instead. The people who sponsored them in 2019 will likely do it in 2020.

Novices in the cultural world often look at assets and say: “Lets sell some stuff.” However, museums are not allowed to work that way. Donors don’t gift paintings so they can be sold to pay the power bill. Deaccessioning is a specific procedure, and the proceeds are often required to only be added to collections.

Accountants can lower the bottom line and drive the top line at nonprofits.

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