For a non-profit organization, financial sustainability is important to ensure that it remains fully able to fulfill its mission and support its members in the foreseeable future.
As the leader of your sports club, you need to know not only the costs it entails to deliver your programs and services but also the means to raise enough money to cover these costs. This way, you will be able to avoid The Nonprofit Starvation Cycle — a situation wherein the organization is always trying to catch up to cover its costs without having enough resources to do so. In these cases, the organization likewise does not have the funds necessary to invest in its infrastructures, such as its fundraising processes, skills training for staff and volunteers, and information technology systems.
Many nonprofit organizations face financial instability as they encounter various challenges, from restrictions on funding to misconceptions about sustainability and growth. To ensure the financial sustainability of your organization, here are some points to consider:
Understand the Costs Behind Your Programs and Services
Aside from overhead costs that are directly related to administrative and fundraising expenses, make sure that you also take into account the applicable indirect costs, such as training, office supplies, accounting, marketing campaigns, or employee benefits.
Identifying your direct and your indirect costs will give you a thorough understanding of all the expenses associated with the successful operation of your organization. As such, you will have a good starting point with your budget plan.
Build a Better Budget
While creating a budget might seem like common sense, too many clubs don’t invest the right amount of time in ensuring that they have it right. They base it off on what they did last year, but they only look at the budget, not the actual spending.
Each year when you prepare your budget, you should be looking at last year’s expenses along with the current objectives. When looking at last year’s expenses, you will have an idea of the items you missed in the previous budget. Once you understand what was missed, you can include them in this year’s budget.
Then when looking at your objectives, whether it’s something simple or a major capital project, a complete and thorough review of what is needed should be done. While it will never be perfect, it will be close and you will have fewer surprises.
In preparing your budget plan, keep in mind that for most nonprofits, costs such as utilities, rent, and technology are considered indirect costs, or overhead. To help you better define these costs, you can use an overhead cost definition worksheet.
Nonetheless, you may still opt to use the classification that works best for your organization, and avail of a Program Budget and Allocation Template to ensure that all of these costs are accounted for.
Schedule a Strategic Planning Session
A sound strategy is one of the success factors for nonprofit organizations. Planning the year’s strategy for success is a great way to keep your board, coaches, and other volunteers invested and moving in the same direction. All too often clubs simply repeat what they’ve done in the past year or maybe even in the past several years. There is nothing wrong with that except you will never move the needle for your members and be able to deliver on any objective if you don’t plan on it.
Shooting from the hip reaps very little reward.
Your Sports Resource offers quite a few resources on strategic planning including webinars and consulting services. If you can’t find what you need on the website, contact us at info@yoursportsresource, and will be happy to help you.
Establish Internal Controls
By establishing financial management practices that prevent the misuse and misappropriation of assets, you can avoid instances of theft or embezzlement within the organization. Regardless of whether you are managing large or small amounts of money, it’s best to have several policies that serve as “checks and balances” on board members, volunteers, and coaches.
This could be as simple as locking the office door (or cash drawer) when no one is monitoring the entrance to your office, or something more complex, such as the segregation of duties — wherein a different team member reviews all the check payments prepared by another or requiring two signatures on any expenditure over a certain amount.
Be Aware of the Indicators of a Financial Crisis
Former president and CEO of Nonprofit Finance Fund Clara Miller says that there are Four Horsemen of the Nonprofit Financial Apocalypse — these are conditions that make nonprofits particularly vulnerable. By knowing which particular situations to avoid (such as maintaining too much real estate, too much debt, negative liquidity, and difficult workforce dynamics), you can take extra precautions before these happen to your organization.
Start Taking the Steps for Financial Sustainability
As leaders of your organization, it is important to understand the importance of taking immediate actions for financial sustainability. Whether your club is just starting on its financial sustainability assessment, or you already have certain policies in place, it is beneficial to conduct a periodic review of your financial standings and prepare a strategic plan based on your findings. Doing so will allow you to see any opportunities to improve and potential financial problems that need to be resolved to ensure the long-term continuity of your organization.
Find out why all Board members are responsible for the Financial Stability of the club.