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COLLATERAL FACTORS

Collateral factors are indirectly related to financial sustainability. The collateral factors either (a) influence the planning, implementation, or monitoring of financial sustainability; (b) facilitate greater long-term viability; (c) help create an external or external environment that fosters financial sustainability initiatives or activities; or (d) help maintain a path toward financial sustainability. Collateral factors of financial sustainability include, but are not limited to:

- Governance

- Leadership

- Strategic planning

- Human resources and job satisfaction

- Needs assessment

- Asset mapping Community relations

- Service delivery

- Technology

- Program evaluation

- Social marketing

- Organizational transformation

Governance

Governance resides in the power entrusted to the board of directors of a nonprofit organization to oversee activities and operations on behalf of the target population. Board members must ensure that a nonprofit organization generates enough revenue to support its mission and that funds are used to provide the maximum units of services possible to beneficiaries. Effective governance fosters conditions that anticipate risks and plan for reserves, in order to protect the organization from financial downturns and liabilities, which have direct impact on financial sustainability. Financial sustainability depends on the strength of governance practices within a nonprofit organization. A nonprofit organization can manage its way toward financial sustainability based on its ability to govern, lead, and manage itself in a manner that can always gather public support and create its own metabolism to manage and resolve conflicts, take decisive corrective actions on mistakes, and anticipate and neutralize systemic crises.

Leadership

Leadership helps make sound financial management decisions in ways that can produce the best return on investment possible. Leadership can make a difference in addressing chronic financial issues that can negatively affect the financial sustainability of a nonprofit organization. In one example, Barbour (2013) wrote, "Chronic money problems have led officials with Norfolk's Associated Marine Institute, a nonprofit education organization, to close its doors after nearly 20 years of teaching troubled teenagers." The organization was serving a target population that really needed help: troubled teenagers. However, it was faced with "chronic money problems." When an organization is dealing with a chronic lack of financial resources, it is not a question of whether it will survive, but only how long it will survive. Effective leadership can help turn around such issues through organizational redesigning, streamlining of operations, mobilizing monetary and in-kind support, deferring or eliminating discretionary costs, developing collaborations for cost sharing, changing fund-raising and spending patterns, and other similar initiatives.

Strategic Planning

With strategic planning, a nonprofit organization develops strategic clarity for internal and external stakeholders through organizational mandates and adoption of strategic priorities or key programmatic areas. Having a clear focus helps identify more reliable funding sources and provides arguments to convince donors and the public to support the vision and mission of a nonprofit organization. Strategic planning is an antecedent to financial sustainability. A nonprofit organization that does not have a culture of strategic planning cannot be on a path for financial sustainability or become financially sustainable.

 
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