Connections for Success

 

08.20.20

Five Planning Strategies in Uncertain Times
Daniel Omahen

The COVID-19 pandemic, waves of civil unrest and rocky economic times have led to an abundance of external and internal forces for which many not-for-profit organizations have found themselves unprepared. Organizations are struggling to continue serving their constituencies while keeping their doors open, and their employees safe and employed.

The uncertainty makes it challenging to plan, but not impossible. The strategies below can help you navigate today’s turbulent waters.

  1. Change Your Approach
    Most organizations budget and forecast for time horizons of one to five years, but the current environment calls for much shorter increments. Reduce the window to one to three months, and plan for regular reviews and adjustments.

    Similarly, you might find that your long-term strategies have gone up in smoke due to the rocky COVID-19 world. It may make more sense to think tactically for now so that you can deal with how shifting social landscapes and economic developments affect your organization. Of course, even short-term tactics should reflect your mission, goals and values.

  2. Re-evaluate Your Programs
    Rather than making across-the-board cuts of a certain percentage to address budget constraints, take the time to perform a reassessment of your programs. Determine the impact and effectiveness of each, considering current and expected needs. Allocate your funding to the programs that are most desperate for funding first. Include as many stakeholders as possible in the evaluation process, including all levels of the organization and your clients.

    You may need to make the difficult decision to put some programs on hold and even eliminate others. This often is painful, but it will allow you to deploy the freed-up resources to other work that has the greatest impact on your organization and the community you serve.

  3. Explore Alternative Revenue Sources
    It is always preferable to maintain multiple revenue streams so you are less vulnerable to the loss of one. Many organizations have discovered this the hard way as COVID-19 either forced the cancellation of major fundraising events or led to virtual events that resulted in a significant decrease in revenue.

    If you depend largely on one or two funding sources, you should begin researching and reaching out to other potential donors. Many foundations have vowed to increase their grant making in response to recent events, and some local governments are approving emergency funding for organizations that support at-risk populations. You also could expand your high-impact services to more locations or populations or provide them on a fee basis (perhaps on a sliding scale or pay-what-you-can basis).

  4. Think About Joining Forces
    Smaller organizations, in particular, might benefit from working with not-for-profit organizations with similar values or constituencies (or even with for-profit businesses). A collaboration could be a merger, joint venture or something less formal. You might also consider cutting your rent expenses by sharing space.  You could see savings by sharing equipment or staff and consolidating certain purchases to obtain lower rates or discounts from vendors.

    Related Read: How Should You Approach Collaborative Arrangements?

  5. Establish a COVID-19 Crisis Management Team
    COVID-19 may get worse later in the year and will likely have a lingering effect on your organization for years to come. If you have not done so already, form a crisis management team to monitor internal and external virus-related developments. It should meet regularly to evaluate risks and opportunities and closely follow governmental and health care guidance to ensure compliance.

    The crisis management team also should take a hard look at how COVID-19 has played out so far for the organization. They should seek input from stakeholders on what has worked and what has not. As the team identifies gaps, it can devise solutions to improve future responses to pandemics and other crises.

    Related Read: Get Your Operating Reserves in Order

    Act now

    One thing is certain: You cannot afford to put off planning, as tempting as it might seem under current circumstances. The financial crisis back in 2008–09 demonstrated that those organizations that took prompt action were more likely to avoid the need for drastic measures later. Contact your ORBA CPA or accountant if you need planning assistance.

    Sidebar: Staying on top of the numbers

    Before making any critical decisions for the future, whether short- or long-term, not-for-profit organizations need to arm themselves with up-to-date information on their financial status, including their cash positions. In light of the current environment and potential decreases in funding, organizations should strive to maintain cash on hand to cover up to 3 months of expenditures.

    Ratios such as the current ratio — current assets divided by current liabilities — provide a snapshot of your ability to satisfy your short-term financial obligations, those due within the coming year. (A current ratio of 1.0 or higher generally indicates the ability to meet such obligations.) But the liquid funds indicator gives you a better understanding of how long you can survive without additional funding:

              Liquid funds indicator = Net assets less restricted endowments, land and plant, property and equipment /                          Average monthly expenses

    This figure shows the number of months before the not-for-profit organization will completely exhaust its liquid funds, assuming it receives no additional revenue inflows. To get a fuller picture, calculate the indicator running multiple scenarios that envision best-, moderate- and worst-case circumstances for receiving additional liquid funds.

    For more information, contact Dan Omahen at domahen@orba.com or 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.

Leave a Reply

Your email address will not be published. Required fields are marked *

Forward Thinking