What nonprofits need to know about inflation

Navigating inflationary conditions and the uptick in talk of a recession can be daunting for nonprofits. Nonprofits are particularly susceptible because, unlike businesses, they cannot simply raise prices to offset added expense.

Whether you’re a member of the business community serving on a nonprofit board, or leading a nonprofit, there are some guideposts to be mindful of while navigating the current economic landscape.

What’s on the horizon:

Senior Vice President – Institutional Wealth, BOK Financial, Evan Walter.

• We’re going to see the economic conditions impact donor confidence (if it hasn’t already). This is an invitation to diversify your donor base. If you’ve relied solely on a limited group of corporations, individuals, and foundation giving, now might be time to seek out and engage a broader pool of individual donors.
•       Depending on the nature of your nonprofit, there’s likely going to be an increase in need, so operations and planning might need to adjust accordingly. Nonprofits may consider revisiting their case for support in their solicitations for general operating expenses.
•       Anticipate an increase in capital costs, especially for expenditures that were unbudgeted (like replacing an HVAC system). Things will simply cost more in the next fiscal year. Consider creating, in addition to an operating reserve and permanent endowment, a conservatively managed emergency fund for significant, unbudgeted expenses.
•       Nonprofits should consider adjusting overall fundraising strategies to make donors more aware of the impact of inflation on their mission and efforts.

In times of economic uncertainty, we often see an impact on donations. With high rates of inflation and talks of a recession, donors may choose to postpone making larger gifts until things feel more stable. We know people are going to be more likely to make purchases that are personal rather than philanthropic.

With this in mind, consider added levels of transparency and communication with your current donors and community. This is also a good opportunity to attempt to engage a new generation of charitable donors. Be willing to share your mission, challenges, and how economic shifts are impacting your day-to-day.

This economic shift is an invitation to focus on building a solid foundation as it relates to finances. If your organization doesn’t have one, you should consider implementing an investment policy statement and a spending policy to govern and make best use of every dollar. Additionally, boards and committee members should be educated on these financial policies and best practices; and review them on a regularly scheduled basis.

Through all of this, it’s so valuable to have a strong relationship with a financial partner that knows and is empathetic to your mission and your challenges.

Evan Walter has more than 20-years of experience in nonprofit, foundation and investment management.