Nonprofits must discuss financial health with funders

March 6, 2014

Nonprofits must discuss financial health with funders

It's a shame that many nonprofits still find it taboo to discuss the financial health of their organizations with donors, because it is the area that often needs the most help. An organization's services are only as strong as its own budget and abilities. While many funders may even understand the need for making sure some money is directed back into the organization, a recent study shows the dialog is not happening.

The Nonprofit Finance Fund's annual "State of the Sector Survey," found only 34 percent of respondents said their organizations have an open dialog about the funding needs of the facility and only 30 percent about financial services. The majority of the conversation – 60 percent – was about how to use funding and grants for program expansion. Even more surprising, 17 percent of nonprofits said they can have no discussions at all with funders about financing topics.

Nonprofits need healthy budgets to survive
According to The Chronicle of Philanthropy, a failure to realize the importance of having frank discussions about finances will eventually stifle the organization's ability to grow and advance its mission. Because donors are more likely to give when they believe their contribution will go directly toward the cause, they often don't realize shoring up funding for needed building improvements is an important way of putting their money in action.

The burden of expressing this need falls on those who organize fundraisers and they must have a clear understanding of how to engage donors with this information. The best tactic is to show causation. Explain that a small financial reserve can help nonprofits deliver on their mission during recessions, when funding is generally lowest and need is the highest. While the purchase of a new building may appear like a cosmetic investment to some donors, explain that it will allow the organization to feed or shelter a number of more people.

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