By Jerry Henry, Partner
Nonprofit financial planning typically includes where you’ll raise money, which grants you’ll apply for, whether you’ll do events, and how you’ll spend that money.
You think about the things that affect the organization’s mission: Programs, personnel, and direct services.
What you don’t plan for are the major expenditures no one wants to fund, but desperately need attention.
An organization we work with has to raise funds for “deferred maintenance.” For a number of years, the board has delayed installing a new roof, updating its heating and air systems, and taking care of other physical plant needs.
Instead, they have taken a “Band-Aid” approach of just doing the basics. They’ve patched the most urgent problems and covered things with a coat of paint. Throughout the years, the board has made the decision to spend their dollars on things that directly affect their mission, and certainly, no one could argue with that.
The board members decided they would worry about the larger capital issues, the major repairs, and other major expenditures later.
Well, “later” finally arrived!
Now, the organization finds the roof leaks, which causes other interior facility problem,s such as mold and mildew. The heating and air system is beyond repair and needs to be totally replaced. And, in surveying the physical plant needs, asbestos has been uncovered in the old building and requires a very expensive abatement process.
They maintained the status quo and are now faced with significant challenges.
This could happen to you at any time. Are you prepared?
To begin to think through nonprofit financial planning, ask yourself these questions:
- How are you dealing with the current shifts from direct mail to online giving?
- Is your development office one that has depended on phone solicitations for a portion of your annual fund? (Don’t you just hate caller ID?)
- Is your telethon no longer effective?
- How have you noticed things have changed during the past few years?
Just as someone may choose to ignore an aging roof, you may be choosing to overlook some things in your development program that could cause a bigger problem “later.”
Nonprofit Financial Planning
Of course, during nonprofit financial planning, you are much more interested and passionate about thinking about who you can approach to support new programs and new opportunities. Donors are excited to help you enhance your mission programmatically. They’re less interested in the old, broken things.
Just like you have insurance, you need a plan for major expenditures. They might not happen now, tomorrow, or even five years from now. But they will happen.
Murphy’s Law dictates the second you have a plan, the less likely it is you’ll need it. But wouldn’t you rather be prepared than not?
Look around your office, plant, or facility and determine what could eventually need repair. Maybe you’ll want to move in a few years or remodel or buy the space next door to expand. Use the example included here to help you think through the things that could go wrong. Ask your team what repairs they see around that eventually will need to be fixed.
Create a list, put a timeline against it, and begin to plan for how you’ll raise the funds to pay for it all.
You need a specific plan for future major expenditures. That plan needs to be revisited and reviewed regularly. You must budget for these major expenditures and plan for the inevitable.
There is no time like the present! Don’t wait for later to arrive.