Last month, the Stanford Social Innovation Review (SSIR) wrote about an interesting study conducted by the David and Lucile Packard Foundation in coordination with Fiscal Management Associates (FMA), which works with organizations around issues of capacity building.
The subject was how to help nonprofits achieve and maintain financial stability. Year in and year out, this continues to be the major issue facing our non-profit partners.
Fundraising and earned income play a big role in achieving financial stability, so the lessons from this two-year project are useful as we think about starting the New Year off on a strong note. FMA and the Packard Foundation found that three best practices made the biggest difference:
- Plan and budget for multiple years, not just the year ahead. Taking a short-term perspective will mean that you usually will come up short. And donors want to know their gifts are being used to move your organization forward, not just bailing you out at the end of the fiscal year.
- Use visual dashboards to track performance and inform Board and staff discussions. Dashboards help leaders, managers, and staff members more easily see key trends and make real-time plans for improving fundraising and financial performance. Tip: make sure Board giving is a key indicator on your dashboard.
- Have a policy for building an operating reserve—and follow it. Financial resilience means that you can survive in lean times, and a reserve fund, sometimes taking the form of a quasi-endowment, can make the difference.
To learn more, read the full SSIR article.