According to 2019 data, there were 1.54 million nonprofit organizations registered with the IRS. Charities are the way we, as Americans, support our fellow citizens. They’re also how we fund art and the humanities. These are all worthwhile endeavors, but nonprofits face operational challenges.
These unique third-sector hurdles can squash a nonprofit’s mission. Are you worried about how you’ll handle these nonprofit obstacles? You should be.
Read on to learn about the ten operations issues and how successful nonprofits deal with them.
1. Funding
The people attracted to the nonprofit sector aren’t working to make as much money as they can. The average nonprofit CEO makes $118,678. This number is, of course, only an average.
There are outliers, like the CEOs of large nonprofit medical organizations. CEO pay often coincides with the scale of the operating budget.
That said, all operating budgets come from a steady stream of funding. Organizations love to do fundraisers, but most nonprofits need grants and foundational donations.
Reduce these operations challenges by hiring a team of grant writers and fundraisers. These dedicated employees seek grants and other large donations.
2. Growth
Some nonprofits establish themselves as a product of their place and time. There is a specific need in society, and these organizations sprout organically to help fill the gaps.
Take the current COVID-19 pandemic. Though large nonprofits took a hit in funding, smaller nonprofit organizations dedicated to workers in service industry sectors were born.
Whether large or small, growth remains a considerable challenge for all nonprofits.
Growth Strategy
Like private businesses, nonprofits need a marketing strategy. How do you make the public aware of your cause? How do you generate momentum for donations?
Successful nonprofits market themselves in these ways:
- Professional email blasts highlighting current campaigns and donation updates
- Setting achievable and measurable short-term goals
- Active social media accounts on multiple platforms
- An updated website with a donation and volunteer portal
- Press relationships to garner valuable coverage
- Displayed results for successful campaigns
Successful nonprofits also keep a donor database. This database helps organization increase their repeat donors with targeted updates.
3. Staffing and Volunteers
Many nonprofits have paid staff in charge of campaigns, fundraising, and administrative duties. Unfortunately, the operational budgets of smaller nonprofits aren’t ideal for paid staff.
Most nonprofits rely on a steady stream of volunteers to stay afloat. Volunteers are unpaid labor and can be unreliable. People drift in and out of nonprofit volunteering depending on their time and dedication.
Successful nonprofits can keep volunteers and can attract more to the cause. They do this by:
- Making clear asks and calls for volunteers
- Highlighting volunteer activities on social media
- Posting calls on nonprofit volunteer websites
- Focusing on the benefits of volunteering
- Making it easy to sign up
- Offering varying levels of engagement
If you find you have trouble finding and retaining volunteers, you have to focus on why. Are you asking too much? Are you highlighting the benefits of volunteering?
4. Technology
So much of marketing and accounting is performed online and with modern technology. Having the capacity to go digital is one of the top nonprofit obstacles to operations.
Technology isn’t cheap. Ineffective or outdated software reduces campaign capacity and social media capabilities.
Advancements in technology are a budget concern. Nonprofits, on average, spend 3.2% of their budgets on technology. Successful organizations keep a technology budget that allows them to make purchases.
5. Taxes and Government Regulation
Changes in the tax code come with every new Presidential administration and new Congress. As the tax laws shift, long-term nonprofits have to keep up.
For example, President Biden recently proposed raising taxes on corporations and the wealthy. If these shifts become law, nonprofits must navigate how this will impact their donor base.
Will wealthy donors and corporations shrink their donations? If they do, how will your nonprofit pivot its strategy?
6. Audits
When you’re seeking large, foundational grants, you should expect an audit. A lack of preparation for these audits is one of the biggest obstacles to operating a nonprofit.
Independent Audits
These audits review a nonprofit’s financial documents. These documents include accounts, transactions, and accounting records.
Performed by an independent CPA, large donors request them to ensure their money goes to a legitimate cause.
Single Audits
Some nonprofits receive money from the federal government. If you receive federal grants and spend more than $750,000 per year, you’ll trigger a single audit.
These audits are more thorough than independent audits and are compliance measures. Preparation for a single audit requires meticulous and specific bookkeeping.
Tax Audits
These are typical IRS audits and are a gigantic hurdle for nonprofit organizations. They’re horrible PR, and they signal less than professional accounting methods.
Reporting inconsistencies and incorrect information trigger these audits.
Organized accounting is a necessity to keep your organization in the public’s good graces.
7. Burnout
Larger nonprofits with paid workers run like a business. Even though these workers receive compensation, it’s not comparable to private sector salary.
Smaller organizations might be completely volunteer-based. It’s hard to stay on task without compensation. You and your coworkers need a burnout prevention strategy.
What can you and your organization do to prevent this?
- Vacation time and dedicated unplugging
- Encourage self-care and empower workers to say “no”
- Search for outsourcing opportunities to lessen workloads
- Keep communication open
Too often, workers or volunteers at low wages fizzle from stress. If you’re grinding too hard, step back and breathe, and encourage your staff to do so as well.
Overcoming Nonprofit Operational Challenges
Operational challenges can compromise a nonprofit’s mission. To achieve your nonprofit goals, you need a steady stream of funding and volunteers.
Learning how to identify and overcome these operational challenges is the key to a successful mission.
Are you starting a nonprofit to address a specific community need? Raising money and helping people in need is a noble goal, but the nonprofit world can be challenging.
Request a meeting with The Charity CFO, and we’ll get you on the path to success.
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