The phrase "financial sustainability" in the nonprofit world generally refers to an organization’s ability to maintain its continuity over a long period with ongoing support for its core missions. In order for the organization to be sustainable, its leaders must know how to deliver programs and services that are affordable in line with fundraising revenues for the organization.

However, the ability of nonprofit organizations to make immediate improvements to their financial sustainability can be limited, especially as every institution must heed the opinions of various decision-makers. According to a report published in 2018 about the financial state of nonprofit organizations in the United States, for example, many organizations faced major financial crises, revealing data that 7 to 8% of nonprofits in the United States are technically insolvent and that their liabilities exceeded their assets.

Moreover, a significant percentage of 50% of nonprofit organizations operate with cash reserves of less than one month, and another 30% have lost money over three years.

Overall, these statistics should serve as a wake-up call for nonprofit leaders who must put in greater effort and focus more on improving financial sustainability by coordinating efforts to identify priorities and risk management strategies, and therefore nonprofits, organizers, policymakers, and funders must work to motivate each other and plan constructively under the name of sustainability.

The following three actions may help you make your nonprofit organization more sustainable now and in the coming years:

1- Seek alternative funding sources to cover general expenses:

Most nonprofit organizations rely on government funding to cover program costs. However, many grants and government contracts do not provide coverage for general expenses incurred during regular operations, such as indirect costs of service delivery, and therefore organizers, policymakers, and funders need to look for alternative funding sources for general expenses.

2- Establish a reserve or rescue fund:

Policymakers and nonprofit funders should set aside a reserve of funds to protect against financial risks or provide financial security during other financial hardship situations.

When establishing a reserve fund or a rescue fund, consider how these funds will be used and how to formulate policies that define the guidelines, or stick to the alternative option of designating a grant restricted for rescue situations, as doing so will significantly reduce risks and add more overall financial sustainability to the organization, making it a viable backup plan.

3- Consider regular restructuring operations:

In light of the economic and financial pressures resulting from increased competition, nonprofit organizations may need to consider fundamental and strategic changes in their organizational structures to remain sustainable. Since the responsibility of nonprofit boards ultimately revolves around discussing whether mergers, acquisitions, or divestments are financially sound, the restructuring process can be streamlined with the oversight of organizers, policymakers, and funders through collaboration in work, allocation of funding, and offering technical assistance in restructuring transactions, advancing financial approvals.

Nonprofit organizations that dedicate efforts to improving their financial sustainability can easily look at ways in which all decision-makers can help coordinate strategic efforts, and through interventions by stakeholders, nonprofit leaders can make informed decisions that strengthen the sustainability of the nonprofit organization’s mission and ensure the financial viability of its programs and services.

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