The COVID-19 pandemic is looking like a long, wild ride with far-reaching impact on the nonprofit sector. This situation is different from anything in recent memory, and many organizations feel like things are out of their control right now. Nonprofits worldwide are facing severe revenue loss and many fundraising events have been cancelled or postponed. Organizations serving those who are hungry or in need of shelter or healthcare face exceptional challenges to ensure the safety of their staff, volunteers, and clients. Many nonprofit staff do not have the option to work remotely, and those that do may be juggling childcare due to the closures of schools and daycare facilities.
In this time of uncertainty, there are still some things nonprofits can do to take back control and prepare for the days ahead. Here are three steps you can take immediately to understand your financial situation, determine your options, and communicate your plan for the future.
Understand Your Cash Flow
If your organization hasn’t recently done a cash flow projection, now is the time. A cash flow projection maps the actual money flowing in and out of your organization, and gives you a clear idea of how much cash will be “left over” at the end of the month. This will allow you to see if/when your organization will be forced to confront cash shortages. In your projection, be sure to include all cash that you have on hand at the beginning of the month, then add the revenue you expect to receive and deduct any anticipated expenses. Don’t forget to include uncleared checks from the previous month – you don’t want to be caught by surprise when a vendor cashes your check payment! If your projections show a cash shortage, you can try to speed up collection of receivables by reaching out to anyone who has an open or overdue balance owed to your organization. You may also be able to speak with funders to discuss converting restricted funds to unrestricted funds for general operations such as rent or utilities.
Determine Your Options
Once you have a good picture of your cash flow, you can begin to determine your options. Use your financial data to build realistic scenarios that will help guide your organization’s response. When will you need more resources? What sort of financing could you secure? At what point should you reassess your choices? Organizations that have been impacted by loss of revenue or a reduction in their workforce will need to anticipate how these interruptions might affect their programs or services. Be sure to discuss everything from best-case to worst-case scenarios and have a plan for each situation. This will help you make good decisions – not a best guess.
Communicate Clearly
Communication is key in situations like this. Make it a priority to communicate with your board, staff, funders, and supporters about how your organization is operating right now and what is going to be needed in the future. Use your cash flow projections and the scenarios you’ve developed to describe how COVID-19 might impact future operations. Board members can help spread the word and may be able to rally some additional resources to get you through these tough times. While no one can predict the future, the best way to confront uncertainty is to gather hard data, identify your options, and clearly communicate your plans.