We explored some of the impacts and concerns of Australian NFP’s along with some potential solutions on our recent webinar, and include some of them here.
Not-for-profits play a vital role in providing critical services and building healthy communities. In FY21 we saw the Australian NFP sector employ over 1 million people and generate $174 billion revenue, playing an important role in our economy. For an NFP, sustainability means to be able to continue at a particular level for a period of time to ultimately achieve its mission.
Where are NFP’s now?
In a recent webinar hosted by Grant Thornton, we asked attendees a simple question: where are you now? They could choose from the following options:
- Survival: meaning the organisation only receives ‘grant funding’.
- Stability: meaning the organisation receives some recurrent funding to cover basic operations.
- Security: meaning the organisation has a strategic approach to diversified funding, integrating impact and financial health.
- Sustainability: meaning the organisation has diversified and consistent revenue, assets and investments (with assets leveraged at greater levels).
The results saw 18.2% of participants were in ‘Survival’ mode; 38.6% considered their organisation to be ‘Stable’; 18.2% said they were in ‘Security’ mode and 25% of participants considered their organisations to be ‘Sustainable’.
What is keeping NFP leaders up at night?
The following factors have a significant impact on the financial sustainability of a NFP organisation:
- The funding landscape for Australian charities has changed dramatically, with the introduction of the National Disability Insurance Scheme (NDIS) and transition of services to organisations which previously administered by government.
- Impacts of these changes include the requirement for not-for-profits to deliver the same or increased services to its clients, with the same or decreased level of funding, which has forced organisations to restructure their operations and reduce their costs.
- The demand for services have increased, as the social and economic costs of the COVID-19 crisis take hold and Government supplements reduce.
- Sadly there has been a high incidence of natural disasters such as droughts, floods and bushfires, which has led to donor fatigue. COVID-19 resulted in a number of fundraising challenges due to lockdowns causing workforce shortages, and lack of face to face interaction.
- Cost control is forecast to be the biggest challenge, particularly as higher regulatory compliance costs and rising wages continue to erode profit margins.
In the same webinar, we asked attendees what financial sustainability challenges concerned them the most? Most considered NDIS/Aged Care reforms and costs the most concerning at 40.5%, followed by 33.3% worried about diversification of income streams, 11.9% selected maximising fundraising and only 3.8% were concerned about communicating overheads to donors.
What actions can be taken now to remain sustainable?
The path forward to ensure financial sustainability can be broken down into three actionable steps:
- Self-reflection: Start by asking the question – how much money do we need to accomplish our goals? Then analyse and build organisation capability through leveraging existing resources and strategic data reporting.
- Re-invent: Plan and innovate funding sources. Consider current business model and new business models and diversify revenue streams.
- Collaborate: Leverage collaborative partnerships to deliver financial outcomes in a competitive landscape.
If you would like to discuss your organisation’s financial sustainability, we are here to help.