4 Ways to Promote Financial Stability at Your Nonprofit

It’s no secret that the nonprofit landscape has been changing rapidly in recent years. From the rise of new technology to shifting donor expectations and turbulence in the economy as a whole, your organization has likely needed to adapt and evolve to continue furthering its mission.

One area where it’s important for your nonprofit to stay grounded, though, is in its financial management. Maintaining as much financial stability as possible through changing times helps your organization continually make an impact and sets it up for potential future growth.

In this guide, we’ll discuss four strategies for promoting financial stability at your nonprofit, allowing you to lay a strong foundation that can weather any changes that come your organization’s way. Let’s get started!

1. Diversify Your Revenue Streams

Your nonprofit has many options for bringing in revenue, and taking advantage of several different funding sources can push your nonprofit toward financial stability. When you have multiple revenue streams, it’s easier to recover if one source falls short of expectations or you incur unexpected expenses.

Here are a few of the most common nonprofit revenue sources you could pursue, as outlined in Jitasa’s nonprofit financial management guide:

• Individual donations include all monetary gifts from individual supporters, whether they’re small, mid-sized, major, or planned. Event revenue and in-kind donations of goods, services, and assets (stocks, real estate, etc.) also fall under this category.
• Corporate philanthropy encompasses all nonprofit contributions from for-profit companies. These may come in the form of employer matching gifts, volunteer grants, sponsorships, payroll giving programs, or other internal fundraising activities.
• Earned income is more often associated with businesses than nonprofits. However, it’s legal for your nonprofit to generate some revenue for your cause through channels like membership dues, merchandise sales, and service fees.
• Grants typically come from government agencies or foundations and can provide critical funding for your organization’s most important programs and projects. To secure most of these opportunities, you’ll need to compete with other organizations and write a standout proposal showing why your nonprofit is most deserving of the grant.

In addition to creating a safety net, revenue diversification can prompt more stakeholders to engage with your nonprofit, since they can do so in ways that align with their needs and preferences. This way, you’ll cultivate a larger, more loyal support base that will also contribute to your organization’s financial stability.

2. Treat Your Operating Budget as a Living Document

Your nonprofit’s operating budget is its master financial plan that predicts all of its annual revenue and expenses. Although you’ll create this resource from scratch once a year, effective budgeting isn’t a set-it-and-forget-it activity. Instead, you should meet with all relevant personnel (including organizational leadership, board members, and financial professionals) at least once a month to review your financial information and make budgetary adjustments as needed. 

You should try to adhere to your budget as much as possible, but sometimes unforeseen circumstances arise that necessitate revisions. Although the aforementioned challenges of revenue shortfalls and unexpected expenses will affect your budget, positive shifts can also happen. For example, you might exceed your revenue goal for a fundraising event, receive a planned gift you didn’t know about in advance, or discover a new marketing platform that offers the same functionality as your old solution for a lower monthly fee.

Your nonprofit’s monthly cash flow statements and treasurer reports are helpful resources for evaluating your expenses and revenue generation in these meetings. Your accountant can also create budget vs. actual comparison documents that explicitly show how much you’ve spent and brought in alongside your year-to-date projections for an even clearer overview of your progress.

3. Build up Your Reserve Funds

Also known as operating reserves or savings, your nonprofit’s reserve funds serve as an additional safety net for emergencies and a nest egg for future growth. Start developing your organization’s reserves as early as possible, and ensure your team is aligned on how much you want to save and when you can withdraw these funds.

The first step in building up your reserve funds is to ensure your total budgeted revenue exceeds your total projected expenses. It’s a common misconception that this approach is illegal for nonprofits—because your organization by definition can’t turn a profit, many people assume your operating budget has to break even. In reality, “nonprofit” just means that you need to reinvest all of your funding into your organization and its mission. Therefore, you should budget for a revenue surplus whenever possible so you can put some funding into savings each year.

Additionally, Infinite Giving’s nonprofit cash management guide recommends following these tips to steward your reserve funds:

• Keep 6-12 months of operating costs on hand to cover basic expenses during times of capacity building or financial hardship.
• Store your savings in a sweep account, a type of brokerage account that provides more FDIC coverage than you could access with a normal bank account.
• Invest in low-risk, high-liquidity vehicles like certificates of deposit (CDs), treasury bills, and mutual funds to grow your reserve funds while ensuring you can still access them if needed.

The returns you get by investing your reserve funds can become another revenue stream for your nonprofit—not necessarily the most lucrative one, but still a way to bring in extra funding. Your organization is also allowed to make more ambitious investments in stocks, bonds, and even cryptocurrency, but do so at your own risk.

4. Prioritize Retention Across Your Organization

When key players stick with your nonprofit long-term, it’s more operationally stable and less expensive. Make sure you have strategies in place for retaining your organization’s:

• Donors. On average, nonprofits spend $1.50 per dollar raised to acquire a new donor, but only $0.20 per dollar raised to retain an existing one. Donor retention requires striking a balance in your communication—you need to send enough messages to keep your mission top of mind, but not so many that they feel overwhelmed and stop giving.
• Volunteers. As of 2024, the average value of just one volunteer hour was $34.79, and more experienced volunteers can provide even better service to your organization. Like with diversifying giving methods, offer lots of volunteer opportunities that cater to different interests and schedules so volunteers can always find a way to serve that works for them.
• Employees. Hiring a new staff member costs more than just paying for one additional salary and set of benefits. There are also expenses associated with recruiting, equipment, onboarding, and reduced productivity while the employee gets up and running in their role. To reduce turnover, check in with existing team members regularly so you can see how they’re feeling in their roles and brainstorm ways to boost satisfaction together. 

There are some times when acquiring one or more of these groups is necessary to accomplish goals or improve processes at your nonprofit. However, try to keep your efforts as cost effective as possible by leveraging resources like free and low-cost marketing tools, word-of-mouth promotion, or outsourced services (which tend to be more budget-friendly than hiring).

Author Bio

Since joining Jitasa in 2010, Jon Osterburg has helped hundreds of nonprofits around the world effectively manage their finances through tailored, outsourced bookkeeping and accounting services. He currently serves as Jitasa’s Chief Operating Officer, is a member of two nonprofit boards, and has earned a certificate for Executive Education from the Yale School of Management.