Sometimes, nonprofit organizations end their fiscal year in a deficit. This means that they didn’t gather enough funds to make up for the costs of their operations for that year. When this happens, nonprofits should have a plan of action for how they will continue to operate even with reduced revenue.
For many nonprofits, this means building infrastructure that allows them to respond to changes in demand or funding sources. Specifically, this involves finding new ways to generate and sustain revenue without increasing expenses.
This article will cover common types of funding cuts and five tips you can use to keep your nonprofit going strong. Let’s get started.
Common types of funding cuts
First, let’s explore the most common types of funding cuts nonprofits might encounter and what they mean for your organization:
- One-time deficit. Usually, this means that there was a singular, unexpected issue that resulted in a large cost. For example, if your sprinkler system malfunctions and damages your office’s computers, you would need to pay to fix the sprinklers and replace your technology. One-time deficits are usually resolved quickly and aren’t symptomatic of a larger issue.
- Recurring lack of funding. If your nonprofit consistently lacks the necessary funding to cover your operations, you’ll need to re-evaluate your strategies and day-to-day spending.
- Loss of government or grant funding. Some nonprofit organizations rely on government funding or grants to cover their overhead costs. However, if an organization decides not to offer funding, your nonprofit will need to get that revenue from somewhere else.
Determine what types of funding cut your nonprofit is facing, and adjust your operational strategy accordingly. Be honest about which funding issues may have deeper underlying causes, so you can create proactive plans to address them.
5 tips for nonprofit funding cuts
If your nonprofit is facing funding cuts, you can adopt certain strategies to make your nonprofit more sustainable. Here are five tips for addressing your funding cuts:
- Cut unnecessary costs. Assess your current operational costs and determine if there are any expenses you can reduce. For example, you could consider moving to a remote work model, eliminating the cost of renting an office space.
- Enlist volunteers. Ask your supporters if they’d be willing to volunteer to help your nonprofit. This might mean that your next event will be staffed by volunteers or that you’ll have a volunteer handle administrative or office tasks.
- Discuss with your board. Meet with your nonprofit board to discuss your current strategy and how you should change it for the future.
- Accept in-kind donations. In-kind donations are contributions of goods and services. If you need items, such as tables or tablecloths for your next event, consider asking for them to be donated instead of purchasing them with donations.
- Emphasize donor retention. Improving your donor retention can help you raise more by increasing each individual donor’s value. Ensure that you are performing donor stewardship and showing your gratitude for every gift made.
Focus on implementing strategies that will set you on a path to stable and diversified revenue. That way, if anything happens to one of your revenue streams, you will still have other sources providing funding.
The key to nonprofit funding cuts: Staying flexible
Tackling funding cuts helps your nonprofit stay afloat and come out as a stronger organization. Stay focused on implementing strategies that allow your nonprofit to be adaptable. That way, you’ll be able to weather funding cuts now and any other obstacles that occur in the future.
