Nonprofits – Battling Inflation Part 1
Inflation and a pending recession continue to be dominant factors facing nonprofits and all our clients.
PBO Advisory Group’s consulting CFO Rick Dahlseid, CPA was recently asked by the Professional Nonprofit Networking Group (PNNG) to speak to the public about strategies for battling inflation and the looming recession.
With nearly 19 years of providing CFO expertise to nonprofits, Rick shared the following valuable insights:
According to Rick, many nonprofits currently have a good supply of extra cash, in part from various government loans and grants established during the COVID pandemic. This cash can be a lifeline in battling inflation and a recession, if managed properly. If your nonprofit currently doesn’t have a reserves policy, or if that policy is not clear and robust, now is the time to establish or revise your policy regarding how to utilize reserve funds.
Now, more than ever, nonprofits need accurate and timely financial information. Surprisingly, many don’t, and this is a red flag for Rick. Without good data, your organization cannot respond effectively to the challenges of inflation and recession. Take steps now to ensure that your financial reporting is thorough, complete, and correct.
With good financial reporting, you are better able to evaluate the best places to cut costs, if needed. Typically, a nonprofit’s payroll and benefits run about 80 percent of its overall budget and are a likely place to decrease expenses. Consider which employees are underperformers and/or are currently not needed to run your organization.
Supply Chain Challenges
The pandemic caused many nonprofits to adjust or discontinue services due to supply chain issues and for some, these challenges continue. Inflation and a recession may also cause new shortages. Nonprofits must evaluate where they are vulnerable to supply chain issues and mitigate potential shortages before they happen.
Every organization has some level of risk. Nonprofits must assess all the risks they face and take countermeasures. In Rick’s experience, this usually means purchasing insurance to avoid exposure. The number one place where Rick sees potential risk for nonprofits is cybersecurity.
Check out part 2 of Nonprofits: Battling Inflation, where we’ll share Rick’s strategies for weathering the inflation and recession storm.