Evaluating Nonprofit Financial Health

Your board chair just asked if you have a backup plan for federal funding cuts. Here's what you should have told them. "We don't need a backup plan. We're building a primary plan that creates sustainable funding regardless of government changes." The current federal funding uncertainty is forcing every nonprofit to confront a fundamental question: How do we build financial stability that doesn't depend on political cycles? Your board chair is asking the right question. Now you need the right strategy. The organizations thriving through funding disruptions aren't just creating backup plans. They're building diversified revenue engines that work in any environment. This moment is your opportunity to transform how your organization approaches sustainability. Pull up your current funding mix. If more than 50% comes from government sources, this crisis is actually your catalyst for building something stronger. The most resilient nonprofits I work with use this approach: They treat government funding as project funding, not operational funding. They invest any federal dollars in building private fundraising infrastructure. They use government contracts to demonstrate impact that attracts private donors. They build relationships with supporters who care about mission, not politics. Your board chair's question reveals an opportunity to lead your organization toward sounder financial health. Instead of just answering their question, use this moment to propose a strategic shift: "Here's how we're going to build funding that survives any political environment." Show them a plan that creates multiple revenue streams, develops loyal donor relationships, and builds capacity that grows regardless of who's in office. This funding disruption isn't just a crisis to survive. It's a chance to build the financial foundation your mission deserves. Because the strongest nonprofits don't just weather storms. They use them to build better ships.

82% of nonprofits struggle financially in downturns, but only 14% do this one thing that could save them. Revenue diversification. For a sector focused on resilience and impact, that’s a dangerous gap. Relying on a single revenue source, like grants or donations, is like walking a tightrope without a safety net. Startups learned this lesson years ago. They thrive by building scalable, predictable revenue models. It’s time nonprofits did the same. What diversification really looks like: 1. Earned Revenue: Online courses, workshops, or product sales. (Example: A nonprofit teaching financial literacy offers a paid certification course.) 2. Corporate Partnerships: Strategic sponsorships, cause marketing, or licensing. (Example: Partnering with companies for a percentage of sales on branded products.) 3. Grants: Yes, still valuable, but don’t make them your only lifeline. Why it matters: When the economy tanks, donations are the first to dry up. Diversification = flexibility, stability, and growth, even in hard times. Your Action Step: 1. List your top 3 funding sources. 2. Brainstorm one new revenue opportunity. (Hint: Think about assets you already have, knowledge, networks, or tools, and turn them into revenue.) Nonprofits need to stop thinking small and start thinking scalable. You can’t rely on fragile funding. With purpose and impact, Mario

Some nonprofits obsess over the wrong numbers. Open rates. Social likes. Event RSVPs. And then wonder why 𝘳𝘦𝘷𝘦𝘯𝘶𝘦 𝘪𝘴 𝘧𝘭𝘢𝘵 and donors are disappearing. Here’s the truth: 𝗡𝗼𝘁 𝗮𝗹𝗹 𝗺𝗲𝘁𝗿𝗶𝗰𝘀 𝗮𝗿𝗲 𝗺𝗼𝗺𝗲𝗻𝘁𝘂𝗺. I call them 𝘃𝗮𝗻𝗶𝘁𝘆 𝗺𝗲𝘁𝗿𝗶𝗰𝘀 𝗶𝗻 𝗺𝗶𝘀𝘀𝗶𝗼𝗻 𝗰𝗹𝗼𝘁𝗵𝗲𝘀. They look good in a dashboard. But they don’t move the mission. Here’s what high-performing organizations track instead: 𝗗𝗼𝗻𝗼𝗿 𝗿𝗲𝘁𝗲𝗻𝘁𝗶𝗼𝗻 Because keeping a donor is cheaper—and more powerful—than chasing a new one. 𝗦𝗲𝗰𝗼𝗻𝗱 𝗴𝗶𝗳𝘁 𝗿𝗮𝘁𝗲 Because a second gift turns interest into belief. 𝗟𝗶𝗳𝗲𝘁𝗶𝗺𝗲 𝘃𝗮𝗹𝘂𝗲 Because impact multiplies when donors stay, grow, and refer. 𝗖𝗼𝘀𝘁 𝗽𝗲𝗿 𝗱𝗼𝗹𝗹𝗮𝗿 𝗿𝗮𝗶𝘀𝗲𝗱 Because sustainability matters more than the hype of “big numbers.” 𝗗𝗼𝗻𝗼𝗿 𝗲𝗻𝗴𝗮𝗴𝗲𝗺𝗲𝗻𝘁 𝗱𝗲𝗽𝘁𝗵 Not how many saw it. How many felt it. Shared it. Acted on it. Data should serve decisions, not just presentations. The best fundraisers don’t just measure what’s easy. They measure what 𝘮𝘢𝘵𝘵𝘦𝘳𝘴. 𝗪𝗵𝗮𝘁 𝗺𝗲𝘁𝗿𝗶𝗰𝘀 𝗱𝗼 𝘆𝗼𝘂 𝘁𝗿𝗮𝗰𝗸 𝘁𝗵𝗮𝘁 𝗺𝗼𝘃𝗲 𝘆𝗼𝘂𝗿 𝗻𝗼𝗻𝗽𝗿𝗼𝗳𝗶𝘁 𝗳𝗼𝗿𝘄𝗮𝗿𝗱?

"What's your fundraising ROI?" is the wrong question. Here's what smart nonprofit leaders track instead: • Cost per dollar raised (by channel) • Donor retention rate (by segment) • Lifetime value (by acquisition source) • Second gift conversion rate • Average gift growth year-over-year These metrics reveal the true health of your fundraising program beyond simple ROI calculations. The most valuable insight? Understanding which donors stay with you longest and increase their giving over time. What metrics have been most valuable for your organization's fundraising strategy?

Nonprofit CEOs: Are you forced to tap into your line of credit every year at the same time? If you’ve wondered if fundraising can fix your CASH FLOW, you’re asking the right question. But, nobody’s really talking about this issue, but it’s a top 3 concern among nonprofits leaders I work with. If you know you know… 📆Reimbursement from Gov Grants are ridiculously slow 📆Program revenue floats you for about 10 months (but month 11 & 12...) 📆Project-based money is great for THAT project but $ restrictions cause other problems (hello, payroll) So, can your fundraising team fix your cash flow issues? 👍🏼Yep. And, can they help prevent tapping into your line of credit every year? 👍🏼Yep. Can your cash flow get fixed with traditional fundraising activities like appeals, events, and campaigns? 👎🏼Nope. Your nonprofit’s cash flow will get fixed ONLY if you: 1. Create an honest multi-year, needs-based budget as your north star 2. Use a high-ROI funding model to influence every aspect of your business that touches revenue 3. Train your team to attract, lead, and secure large unrestricted gifts Can I be blunt? All of this advice means your #fundraising team MUST know how to have investment-level conversations. They must answer the numbers questions well. Intimately know your finances. Understand your multi-year projections. But, I rarely see this. I see too many fundraisers depending on emotional appeals. The story. The heart-strings. They must do that too. But, investment-level donors need more. Fix this and you’ll see the #money you’ve been leaving on the table. Fix this and you fix your cash flow. How about you? Are you talking about cash flow?

If you’re leading an org and ignoring your cash flow, you’re flying blind. Your mission runs on cash — not pledges, not grants, not good intentions. Most non-profit CEOs focus on budgets and income statements. But the statement of cash flows tells the real story: Can you fund your mission today — not just on paper, but in cash? Here are 3 tips to simplify how you read it and explain it to your board: ⇨ Start with Operating Cash Flow Is your core mission generating or burning cash? Restricted gifts, pledges, and grants don’t always show up here — watch the actual cash movement. ⇨ Know the 3 Sections Cold Operating → Program and admin activities Investing → Facility upgrades, major equipment Financing → Loans, lines of credit Summarize it like this: “Here’s what came in, what we invested in, and how we financed the gap.” ⇨ Focus on Trends, Not Just One Year One surplus year is nice. Sustained negative cash flow → Program cuts Sustained positive cash flow → Flexibility and growth Non-profits don’t fail because of bad missions. They fail because they run out of cash. How often do you review your cash flow statement — and what’s your biggest challenge explaining it to your board? ____________________________________________ Hi, I’m Neil, and I’m a serial interim CFO for Education Non-Profit Organizations.   In addition to doing this very important and purposeful work, I host the Non-Profit CFO Roundtable, where non-profit finance leaders meet virtually twice a month to solve their challenges and seek advice from one another. See the link on my profile or send me a LinkedIn message to learn more. 

Investing in Nonprofit Capacity: The Key to Long-Term Impact Nonprofits are expected to solve complex social challenges, yet many struggle with underinvestment in their own capacity. To be truly effective, nonprofits need more than just program funding—they need resources to build strong, sustainable organizations. What Is Nonprofit Capacity Building? Capacity building is the investment in people, systems, and infrastructure that enables a nonprofit to fulfill its mission efficiently and effectively. It includes: • Leadership Development & Staff Training – Strengthens teams, builds internal expertise, and reduces turnover. • Financial Management & Fundraising Capacity – Ensures fiscal health, improves grant readiness, and diversifies revenue streams. • Technology & Data Systems – Enhances service delivery, enables impact measurement, and streamlines operations. • Strategic Planning & Evaluation – Aligns mission with measurable goals and improves decision-making. • Operational Efficiency & Governance – Strengthens internal processes, board effectiveness, and overall sustainability. The Benefits of Capacity Building When nonprofits have the resources to strengthen their infrastructure, they can: • Increase Mission Impact – Stronger organizations deliver better services and reach more people. • Achieve Financial Sustainability – Diversified funding and sound financial management reduce dependency on a single source. • Improve Staff Retention & Leadership Stability – Investing in people creates a healthier workplace and prevents burnout. • Adapt to Change & Scale Solutions – Capacity investments allow organizations to innovate and respond effectively to new challenges. • Demonstrate Measurable Outcomes – Data-driven nonprofits can show funders and stakeholders their true impact. Why This Matters Many funders restrict overhead, yet nonprofits need at least 30% of their budgets for core operations and capacity building. If we truly want to see change, we must shift our funding approach: • More unrestricted, multi-year funding • Support for infrastructure and leadership • A mindset shift: Overhead isn’t waste—it’s essential Nonprofit sustainability is mission sustainability. Let’s invest in organizations, not just programs. #NonprofitLeadership #CapacityBuilding #MissionDriven

The $50,000 Nonprofit Mistake That Changed My Approach Forever. It all started with a grant check that arrived three months late. My client at the time chased a six-figure grant for months while her nonprofit's bank account dwindled to zero. By the time the check arrived, it was too late. I don't understand," she told me. "We followed all the nonprofit playbooks—chasing big grants, maintaining a large reserve goal, investing in expensive financial tools. Yet we're weeks away from missing payroll. As a nonprofit ED, you know the constant juggling act: delivering programs, managing your board, fundraising, community engagement—all while trying to keep the lights on. In this whirlwind, smart financial management often takes a backseat until crisis hits. After I helped her secure emergency bridge funding, I showed her that succeeding financially as a nonprofit means focusing on what truly matters while avoiding common distractions. We implemented these three critical priorities: 1. Cash Flow Management - Created rolling cash flow forecasts to anticipate gaps - Negotiated flexible payment terms with vendors and donors - Diversified revenue streams beyond just grants 2.Budget Transparency - Developed simplified quarterly financial reports - Used visual tools to show program vs. administrative spending - Built stronger stakeholder trust through open communication 3. Financial Resilience Planning - Started gradually building reserves during surplus periods - Diversified funding sources to avoid over-reliance on any one stream - Implemented contingency plans for cash flow emergencies Your nonprofit's mission deserves to thrive for decades, not just until the next funding crisis. Here are 4 Things You Should NOT Worry About as an ED (And 3 You Absolutely Should).