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Managing Your Not-for-Profit for the Long Term

The length of the current economic expansion, coupled with recent volatility in the economy and the financial markets serve as a reminder that organizations need to keep a long-term view as they strive to continue fulfilling their missions.

Charitable Giving Trends and Your Donor Base

The impact of the 2017 Tax Cuts and Jobs Act on charitable giving remains uncertain. On the positive side, charitable giving has continued on an overall upward trend over the past few decades. Statistics suggest that 70% of individuals give to charity, while only about 30% have itemized their deductions on their tax returns. This indicates that a large portion of the population gives to charity at some level without receiving any tax deduction for their donations. With the increase in the standard deduction and the limitation on deductions for state and local taxes under the Tax Cuts and Jobs Act, it is anticipated that the percentage of individuals who will itemize their deductions will drop to 10%. Will this impact charitable giving in a significant way? Time will tell.

Regardless of the impact of tax laws and economic cycles on giving, not-for-profit organizations should continue to be proactive in understanding, growing, and communicating with their donors.  Steps to consider include:

  • Develop a keen understanding of your donor base
  • Tailor fundraising to generational differences
  • Identify what economic conditions affect your donors
  • Share your stewardship story effectively with your donors
  • Maintain a strong base of unrestricted giving
  • Strengthen relationships with key donors
  • Don’t remain overly dependent on a few donors over time

Financial and Operational Management

Maintaining strong financial and operational management is critically important to long-term sustainability. Challenge yourself to maintain best practices such as:

  • Prepare timely and accurate monthly financial statements
  • Measure actual performance against budget
  • Monitor your organization’s financial trends over a multi-year period
  • Increase financial discussions among management and the board
  • Utilize a rolling multi-year financial plan
  • Maintain adequate liquidity by determining reserve levels appropriate to the timing of your income streams and your operating cycles, and then monitor reserves on a monthly basis
  • Maintain the purchasing power of your endowment
  • Utilize debt sparingly
  • Keep fixed costs low
  • Consider what revenues are most vulnerable to change and diversify revenue sources where possible
  • Measure your own outcomes and the cost of those outcomes
  • Challenge the effectiveness of each program
  • Understand the true costs of each of your programs (considering both direct and indirect costs)

While most organizations are considering and acting on portions of this list, now is the time to review and prioritize these recommendations for your organization. If you have questions or need guidance on how to incorporate these suggestions, please contact Annmarie Novotney (anovotney@blueandco.com) or your local Blue & Co. advisor.

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