Let's get real about stewardship and sustainability.
CDP's tag-line for nonprofits is "Get organized. Get funded." Be sustainable. We encourage nonprofits to work toward the long-term viability of their nonprofits. Resource development is a marathon, not a sprint. We don't want nonprofits just treading water year after year but really desire charitable organizations to work toward building sustainability for the long-term. How? Consider this path:
Move beyond the checking account mentality. Cash in, cash spent. More cash in, more cash spent. This is the pattern of many nonprofits as they grow their organizations. The bigger the resources, the bigger the expenses. It's similar to living paycheck-to-paycheck. We call this a 'first layer exchange' and nonprofits need to move beyond it.
Establish a cash reserve. Saving is good stewardship. Having a cash reserve to support cash flow is just good business. 3 - 6 months of expenses is sufficient. While the impact side of us may cringe at the thought of earmarking some donations for cash reserve instead of automatically going into additional programming, it is responsible to set aside cash reserves. Blogger Peter Brinckerhoff calls cash oxygen. "Cash buys you time to think, is insurance against funding cutbacks, lets you sleep at night assured you can make rent at the beginning of the month. Cash lets you manage rather than just survive." First we have to get our expenses covered, but second step on the path to strong sustainability is getting that cash reserve in place.
Plan for the future. This is where planned giving comes into play. After expenses are covered and the cash reserve is in place then comes planned giving. There are many tools to consider but let's start with an endowment. An endowment is one example of what we call a 'second layer exchange.' This is where your money works for you. Endowment funds are invested and you benefit from the growth of that investment. Think of it as a 401k for your nonprofit. Most communities are served by a community foundation that specializes in setting endowments up and managing them. Many financial institutions also have a trust department that can help with set up and management of endowments. Find the best partner and explore your options but consider setting up an endowment.
The path to long-term sustainability takes planning, goal-setting and a commitment to move toward thinking into the future. As we consider today's impact, let's challenge ourselves to be great stewards of today's dollar while positioning our organizations to successfully serve the community for years to come.
-Mindy Muller, CFRE, President/CEO of CDP
