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Organizations that don’t evolve run the risk of becoming obsolete. Most for-profit corporations are aware of this need to evolve and develop strategic plans. Many nonprofit organizations don’t anticipate and respond to market demands like their for-profit counterparts. This leaves nonprofits at risk of losing relevance.
Here are a few tips nonprofits can learn from the business world:
For-profit companies generally operate from a strategic plan consisting of both near- and long-term goals. It is important that non-profits follow a strategic model as well. If your nonprofit does not have a strategic plan or is not committed to a current one, it is essential to prioritize this planning.
Plans will depend on the nature and size of your non-profit, but there are several basic principles that should be applied to most. A few of these basic principles include:
- You should set objectives for several time periods. This includes a one-year, five-year, and ten-year plans.
- Pay attention to the return on investment gained from each strategic goal. For example, consider the resources required to implement a new contact database relative to the time and money saved in the future.
Approaching budgets differently
An annual budget is standard, but when budgeting you should be taking how well the budget follows your strategic plan. For-profit businesses use their budgets to support their strategic goals, increasing resources given to higher priority projects.
It is also common for businesses to carry debt on their balance sheets with the belief that it takes money to make money. Nonprofits typically don’t practice this carryover and avoid operating deficits. Operating too leanly can cause it to be impossible for your nonprofit to meet its mission. Practices such as applying for a loan or creating a for-profit subsidiary could provide the funds for your nonprofit to thrive. Building your endowment also could help to provide the discretionary cash needed to carry out strategic opportunities.
Transparency is key
While nonprofits are required to disclose financial, operational and governance-related information on their Form 990s, they are not held to as high a standard as public companies which are subject to the Sarbanes-Oxley Act and other regulations. Consider going the extra mile to meet the highest standards of transparency with your nonprofit.
You should be engaging an outside expert to perform annual audits, and make audited financial statements available upon request. External audits allow stakeholders to have confidence in the accuracy of your financial data, and ensure that you are following correct accounting practices and internal controls.
We can help your nonprofit in adopting for-profit business practices that will make sense given your organizations need. We can also fill your audit needs. Contact us at 818-334-8623 or click here, and we will contact you.