Questions to Ask When You First Become Aware of a Crisis
A major financial crisis can emerge from a revenue forecast that was off the mark, a tax levy that failed, a grant that was not renewed, a significant tax assessment, or perhaps embezzlement. Start with these questions to help you to respond quickly and constructively to a financial crisis.
- Have you taken immediate steps to buy time so that you can establish control over the current situation so you do not become a passive victim of additional evolving developments?
- Since it is prudent to expect to encounter more problems, have you established a process that will allow the staff and board to spot new and emerging problems as quickly as possible?
- Have you instituted changes in reporting and governance so that your ability to anticipate problems and respond in the early stages will be stronger next time?
Click here for a full checklist of questions to help you to respond quickly and constructively to a financial crisis. Email us with your suggestions for ways boards can intervene quickly and usefully in support of management!
Need more? Read how we can work with you or present a workshop to hone these ideas.
Unfamiliar terms? See our glossary.
Excerpts from Linking Mission to Money
When you do have to talk about spending reductions during tough times, you still must keep sustainability of services as your goal. It is critical that the budget cutting process be strongly focused on mission. This link from Chapter Sixteen Cutting Back Strategically provides useful guidance in preparing your board to approach future crises with a positive, strategic, and rapid response. Click here for an excerpt from Linking Mission to Money.
Click here for an inventory of ideas to produce temporary savings to contain your financial crisis while you assemble a lasting plan.
Click here for an inventory of ideas to restructure revenues and expenditures in ways that will produce permanent savings to get your organization out of its financial crisis.
Articles of Interest in Responding to a Financial Crisis
Balanced budget isn't most responsible plan argues that balancing the budget is a fiscal short-cut that is rarely a prudent directive.
Stay relevant but know when to shut down discusses how the stresses of a weak economy are easily labeled as solely financial, making it possible for nonprofits to miss signals about the continued relevance of their mission to the needs of the community.
Arts, cultural groups gaining fans, losing cash discusses the National Arts Index findings that Americans are more interested in the arts than ever before but the way they wish to experience it is changing dramatically.
Public funding: Other shoe drops on nonprofits/ Outreach: A Key Tool in Crisis argues that, in difficult times especially, it is in the nonprofit organization's interest to broadcast its financial situation openly and routinely. The biggest mistake is to keep its worries quiet or to rely on informal networking to make its concerns known.
Nonprofits in Recessions - Where the Buck Stops describes trends in government and philanthropic grant-making that have made nonprofits the services providers of last resort while at the same time weakening them financially and making them highly vulnerable in the current recession. Click here for a a slide show version.
Supply chain management lessons may help nonprofits in hard times argues that nonprofits increasingly serve a role as suppliers to philanthropies' service programs. In difficult times, supply chain management dictates that philanthropies must be responsive to the financial stress on their nonrprofit suppliers if they are to maintain their supply chain of services.
Steps to help get struggling nonprofit groups through trying economic periods highlights lessons from past recessions to help nonprofits sustain their mission in the face of widespread declines in revenues.
Mergers climb ladder of possibility as nonprofits battle slow economy explains that nonprofits should evaluate how they will sustain services over the coming years and consider collaborations ranging from shared staff to shared space or equipment to shared back offices to a pure corporate merger.
Tough economy offers perfect time to re-evaluate a nonprofit's mission discusses the challenge of knowing whether financial troubles are temporary or symptomatic of a general decline in a community's need or support for the nonprofit's purpose.
Managing Budgetary Pressure During Economic Downturns lays out six steps to take to maintain budgetary balance and service stability during a financial crisis.
Fixing accounting isn't enough to deter scandals argues that tighter internal reporting is essential in order for boards to see problems before they become crises.
What financial statements can never tell a director provides useful suggestions on ways to probe beyond what financial statements report.
Donors want more than a party from nonprofits explains the critical importance of regular, open, and frank communication with donors.
Helping non-profit boards get down to business: Essential Questions Concerning Financial Oversight for Non-Profit Boards is a useful guide to help you to evaluate why a problem became a crisis and how to prevent it from recurring. Contact the publisher, Greater Columbus Arts Council 614-224-2606 for a cop. Click here to see excerpts.
Other Resources
In Chapter 18 of Linking Mission to Money we argue that it is in the organization's interest to broadcast its financial situation openly and routinely. This is especially critical in a financial crisis, when a major challenge for the organization is to re-establish the trust of the community, its constitutents, and its donors. The Archdiocese of Boston responded to this challenge in 2006 by initiatiing its Full Transparency Project. You can see the results of its efforts here.
Many crises are created by failing to apologize quickly and sincerely. How to do so in a way that calms rather than incites is challenging. PerfectApology.com is a unique, commercial web site that provides ideas, guidance, examples, and tools to help you assess when and how an apology might be the first step in containing your crisis.
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