Running an organization, nonprofit or not, is hard work. With millions of tasks and concerns to keep track of, on top of meeting fundraising goals, team players tend to wear a lot of hats. This can be dangerous, especially when one of those hats is that of a financial advisor.
Luckily, the team at TrustCore is here to help.
Financial planning for nonprofits and foundations is one of our specialties here at TrustCore, and in our experience, some of the difficulties of running a nonprofit can be easily avoided.
When it comes to financial planning for nonprofits, we see 8 common mistakes.
1. Unclear Goals
Like any plan, financial or otherwise, goals are what drive your critical decisions. If your nonprofit has goals that aren’t specific, quantifiable or time-based, your mission can suffer. For example, while you may have a fundraising or membership goal, simply stating “increase membership,” or “grow revenue,” is not enough. Take this a step further, so your staff members can effectively engage your donor base.
With clear, actionable goals, your fundraising activities, and your organization’s strategic decisions, will be much more focused and effective.
Financial planning that’s emotionally driven can be dangerous. While intentions may be good, fear, or even panic-based financial decisions may inadvertently have an opposite effect, which can thwart your long-term growth due to heavy short-sightedness.
As important as your organization’s mission is, proper planning comes from looking at your goals and needs with a balanced perspective, not encumbered by fear, panic or overly excessive optimism. Your organization is likely made up of people with big hearts, but even positive emotions can lead your organization down the wrong path.
Keeping your emotions at bay can be hard for anyone, which is one of the reasons working with a financial advisor can be so beneficial. Having an outside, unbiased, educated opinion can help you remain balanced when forming your strategic plan.
A positive outlook is important for goal-setting, but your goals and activities can be rendered moot if your expectations are unrealistic. When setting your fundraising goals, be sure to keep them realistic, even if they can be classified as “stretch goals.”
To keep your goals accurate and realistic, first understand where you are. Take a look at the structure of your nonprofit and many of its key aspects. Ask yourself and your team, “Where do we want to be?”
Does your organization have a vision or value statement? What are solid, but attainable goals that you can reach based on where your organization is right now? What do your senior team members and members of leadership want to achieve in the next six to 12 months?
Try to organize your goals by timeframe. If you can’t estimate a specific timeframe, categorize them as short-term and long-term at the very least.
As financial advisors in the Nashville-area that specialize in the unique financial challenges nonprofits and foundations face, we see two common problems when it comes to investment management.
First, and perhaps the most dangerous, is putting someone in charge who lacks the right knowledge to prudently invest the foundation’s core resources. Even small oversights can have a big impact.
Secondly, when these roles are passed on to someone else, often times core goals are overlooked.
An Investment Policy Statement (IPS) is a foundational document that establishes guidelines and parameters for your investment portfolio. But it needs to stay up-to-date.
At TrustCore, we help clients with the design and implementation of this document. We also make sure to review and update it as needed to safeguard organizational assets. This is a very specific task that requires particular knowledge. If you’re unsure about how to get started, don’t be afraid to ask for help!
Though qualified nonprofits are tax-exempt, it doesn’t mean you should stop thinking about taxes.
To begin, a nonprofit’s tax documents and information must be well-organized, following a repeatable recordkeeping process over time.
What’s more, it’s important to stay mindful of your tax status. To keep your qualified status, nonprofits need to stay on top of paperwork filings, never missing important IRS or state deadlines. Failure to do so can cause you to lose your tax status, requiring you to pay corporate income taxes. This is a mistake that is more common than you might think. Working with a financial advisor can help ensure you don’t miss important deadlines.
Though your organization’s mission is paramount, taking on too many initiatives can spread your resources too thin. If you your organization is still relatively new, try to prioritize your efforts on a smaller number of goals. This added focus can help your staff remain cohesive, encouraging a stronger, concerted effort toward your goals.
If you have too many projects in your internal pipeline, your team risks operating on different pages, and your financial planning, marketing and outbound fundraising efforts can fall out of alignment. Try focusing on a shorter list of important to-dos so no one gets bogged down by a myriad of tasks. Get outside help with the responsibilities that don’t find themselves on your list.
Your organization’s aim is to help others. But does your organization need help to achieve its mission? Does your current team have the bandwidth and capacity to take on all facets of your mission? This can apply to a number of different competencies.
For example, your CRM might have a steep learning curve, but can make a big difference for your organization. Do you have the personnel available to optimize your CRM tool? The same question goes for your tax filing, financial planning, insurance needs and bookkeeping.
At TrustCore, our team has developed relationships with CPAs, lawyers, grant writers, even Realtors who can help. Pretending you’re equipped to take on some of these specific tasks on your own can lead to costly mistakes over time.
To see if you’re really qualified to take on your financial planning needs, check out our new guide: Financial Planning for Nonprofits.
Not all financial advisors are created equal, and when you’re running a nonprofit, it’s crucial that you work with a financial advisor who specializes in your specific needs. Financial planning for nonprofits can be complicated, so this value-add can be a game-changer.
Make sure your financial advisor is able to account for all sides of your organization’s financial equation, balancing organizational expenditures with donor revenue, plus the underlying investments to help your accounts grow. Choosing to work with an unspecialized financial advisor can be disastrous for your organization, as they navigate a completely different financial world, and yours is one they’re likely not familiar with. Working with a financial advisor who does have the right experience, on the other hand, will give you both a financial and strategic advantage, boosting your nonprofit’s efficiency and efficacy.
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