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Nonprofit Fiscal Planning: Sustaining the Work That Is Bigger Than Us

Photo of author, Drew Tardy, CLU®, ChFC®.
Drew Tardy, CLU®, ChFC®
Regional Manager and Financial Strategist

At McKinley Carter, our approach to discovery discussions and goal-planning with clients starts with connecting money to meaning. What exactly does that mean? Essentially, we help our clients think beyond simply getting a positive return on their investments to help them focus on what it means to get a positive return on life.

Our work with nonprofit clients is no different. In the seven years since I joined the firm, I have had the pleasure to work with many clients in this space, and it is one of the most rewarding aspects of the work I do. In our collaboration with nonprofits — board members, executive directors, staff members, and constituent groups — we have become a part of something much bigger than ourselves... something that truly impacts the lives of hundreds, maybe even thousands of people in our local communities.

As advisors, we not only provide guidance in a variety of important areas of nonprofit operations and finance (investment management, governance, and fundraising, to name just a few), we also contribute to the overall mission of our nonprofit clients and their positive community impact, in perpetuity. How? Through an alignment of our goals — the most important of which is sustainability. Without a doubt, sustainability is critical for a nonprofit’s long-term viability, effectiveness, and service to constituents.

Sustainability and fiscal planning go hand-in-hand. So what should nonprofit staff and board members consider in their fiscal planning?

  • Budgeting and Financial Management: Thoughtful budgeting helps nonprofits manage cash flow, plan for future expenses, and identify potential sources of revenue or funding gaps. For nonprofits with endowments or reserves, it is important to prudently allocate dollars from these resources to support the budget.
  • Diversified Funding Sources: To assist in budgeting, nonprofits should aim for a diverse range of funding sources to reduce reliance on a single donor or funding stream. In addition to the standard funding sources of individual donors, grants, sponsorships, and events, consider branching out to include community partnerships, crowdfunding, and major gifts/legacy programs. Major gifts and legacy programs can also potentially help build up your reserves and endowments and contribute to sustainability.
  • Reserve Funds: Building and maintaining a reserve fund is prudent. This fund can serve as a financial cushion during challenging times or when unexpected expenses arise. Often, our nonprofit clients will find it advantageous to have more than one reserve fund account, each with specific goals and allocations within their investment policy statement. One account is invested more conservatively should those reserve funds be needed for specific spending guidelines. The other account is invested in a way that is focused on the long-term growth and sustainability we are working to achieve.

Undoubtedly the work nonprofits do on a daily basis helps improve the world around us. When these organizations are committed to fiscal planning, we see positive results not just in their portfolio returns but also in their board rooms — in the form of robust communication, financial transparency, and a greater confidence in the long-term viability of their mission.

If you work for a nonprofit, we encourage you to seek the expertise of a financial professional in helping you design a comprehensive plan for sustainability. You’ll be glad you did. If you’re interested in learning more about McKinley Carter, our Nonprofit Advisory Team is ready to assist. Start the conversation today!

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