It’s no secret that the pressure on nonprofits to prioritize financial sustainability is intensifying amid economic uncertainty. Consider the following insights from the Nonprofit Finance Fund’s research into the current economic climate in the sector:

36% of nonprofits ended 2024 in an operating deficit.84% of organizations with government funding expect cuts to that funding.Over half of survey respondents (52%) have 3 months or less cash on hand, and 18% have one month or less cash on hand.

However, achieving financial resilience is more than cutting costs—it requires strategic foresight and robust financial systems. This guide presents strategies for building nonprofit financial resilience, even in times of economic uncertainty.

Access Outsourced Expertise

To achieve financial security, your nonprofit must first acquire necessary support through fundraising activities. Then, your team must manage and allocate those funds effectively.  

However, many small- to mid-sized nonprofits lack the financial expertise needed to strategize in these areas, and they certainly lack the funds to hire a full-time, in-house expert. Instead, nonprofits can consult with specialized professionals, such as:

A fractional CFO: A nonprofit CFO manages your organization’s broader financial strategy. According to Chazin’s overview of nonprofit CFOs, outsourcing this responsibility provides deep financial knowledge and strategic assistance on an as-needed or scalable basis, keeping costs manageable..A fundraising coach: Your nonprofit can also benefit from fundraising advising through a dedicated coach who provides tactical guidance on strengthening and diversifying revenue streams. A fundraising coach will help you develop a resilient strategy that maximizes your organization’s revenue potential, ensuring your income is secure even in times of uncertainty.

The return on investment (ROI) for these outsourced services greatly outweighs the cost of hiring someone in-house or tackling these strategies alone. Not only does a professional’s expertise set your team up for success, but they also provide an objective perspective of your nonprofit’s approach and make suggestions based on their years of experience in the sector.

Practice Strong Financial Tracking and Reporting

To evaluate your nonprofit’s finances and identify areas for improvement, start by organizing your financial data. Financial statements summarize key financial figures, making them helpful tools for assessing your organization’s income and expenses.

These reports each detail different aspects of your nonprofit’s financial health, and they’re essential for completing most 501(c)(3) organizations’ Form 990 tax returns. Understanding the various types of statements is the first step toward using them strategically:

Statement of Activities: This statement presents your organization’s revenues and expenses over a specific period of time, detailing the sources of your funding and how you’ve used those funds.Statement of Financial Position: This statement, also known as a balance sheet, provides an overview of your nonprofit’s assets, liabilities, and net assets at a specific point in time. Statement of Cash Flow: This statement details how cash moved in and out of your organization over a period. It categorizes your nonprofit’s transactions by operating, investing, and financing activities.Statement of Functional Expenses: This statement categorizes expenses by function (i.e., management versus fundraising costs) to clearly show stakeholders how your nonprofit allocated funds to support its mission.

Beyond supporting internal budgeting decisions, financial statements also make it easy to communicate your financial performance to stakeholders. The nonprofit financial landscape is unique in that accountability and trust should be your organization’s end goal. Transparency is a key factor in acquiring support through effective fundraising appeals, as well as securing buy-in from your board, staff, and external stakeholders for various operational decisions.

Diversify Revenue Streams

A common pitfall for many nonprofits is relying too heavily on a single funding source. While scouring the best grant databases for one substantial source of funding or securing a major government contract can lead to significant financial support, relying too heavily on that revenue can leave your organization in dire straits if it goes away.

When economic conditions are uncertain, a lack of revenue diversification directly threatens mission continuity. To safeguard against potential funding lapses, nonprofits should utilize their financial data to determine which programs are most sustainable and identify gaps in potential revenue streams.

Identifying untapped revenue opportunities will require your team to think creatively. Consider alternative giving methods, such as:

Non-cash donations , such as contributions of food for your beneficiaries or discounted marketing services from a professional agencyRecurring giving, through which donors may commit to contributing at a recurring frequency, like monthly or quarterlyEvents, which may raise funds for your mission through admissions, concessions, activities, or simply promoting your donation pageCorporate giving, such as event sponsorships, matching gifts programs, or other forms of support, through which a corporation aims to improve its social impact Various types of planned gifts , like bequests or charitable gift annuities (CGAs)

Revenue diversification creates a safety net that can be further strengthened by effective operating reserve policies. Set aside a “rainy day” fund for your organization, ensuring you have the cash on hand you need to manage unexpected shifts in the economic environment.

Again, consulting a fundraising professional and a financial expert is invaluable here. A fundraising coach can offer strategic guidance for exploring new revenue streams, and a professional accountant can help ensure that your financial systems are ready to accurately track and report new fundraising dollars.

Building financial resilience is a strategic effort that requires proactive decisions in three core areas: securing expert guidance, maintaining rock-solid financial transparency, and actively diversifying your funding streams. This approach enables you to establish a solid financial foundation, resulting in better-informed, more impactful decisions.

Review your current financial processes and conduct a full financial assessment of your organization. When your financial house is in order, your organization can move past funding stress and focus entirely on the mission it was created to fulfill.

About the Author

Jackie McLaughlin, CPA, Quality Control and Learning Manager at Chazin & Company

Jackie is a seasoned accounting professional with over 35 years of accounting experience, 18 years specific to nonprofit accounting. She started her career as an auditor with KPMG where her client base consisted of tech startups. From there, she worked for Fortune 500 companies in audit management and internal audit.

Returning to her passion for startups, Jackie has since dedicated her training and expertise to the nonprofit sector. She is currently responsible for quality control, training, and financial reviews, through which she helps nonprofits achieve financial integrity and operational excellence.

The post How to Build Financial Resilience in Times of Uncertainty appeared first on FundraisingCoach.com.