Five lessons from the commercial sector can help nonprofits secure funding, reveals Australian Diabetes Council Chairman and accountant, Leo Tutt.
With the significant government spending cuts expected in the looming May budget, not-for-profit organisations need to think and behave more like commercial businesses to secure funding.
There are over 600,000 nonprofits operating across Australia, 189,000 of which are registered with the Australian Taxation Office. As the number of registered nonprofits continues to increase, their ability to compete and stand out from the crowd will be critical in attracting public support and funding.
Government departments are strongly promoting the ‘do it better, cheaper’ message.
We have a number of clients in grant renewal conversations that are being asked to demonstrate that their programs are competitive against those run by alternative bodies. Nonprofits are now effectively required to present a strong business case to support funding applications.
The attitudes and strategies of the commercial sector have much to offer nonprofit organisations of all sizes. Many worthy organisations are limiting their ability to compete for funding by focusing on short-term funding cycles and restricting investment in new processes and systems. In our experience, organisations with long-term strategies are better equipped to demonstrate their value proposition to gain funding.
In my role as a partner and national leader of the Audit & Assurance Division of William Buck, I have observed many inefficient nonprofit business practices which, with additional forward planning, could be improved.
Below are five lessons from the commercial sector that nonprofits should incorporate into their business model:
1) Demonstrate value to community funders
Commercial organisations that rely on continued shareholder support tend to have very astute corporate affairs teams. Nonprofits need to communicate their value through all channels, including annual reports. Step away from a focus on costs and minimum disclosures and demonstrate the value the organisation brings to the wider community. Real-life examples and data supporting where funding is spent can help achieve this.
2) De-risk income streams
Look for ways to reduce dependence on one or two key income sources. For example, a medical research organisation may secure a corporate sponsorship to fund their everyday back-office function, allowing 100% of funds raised from the public to go directly to research projects.
3) Take advantage of partnerships
Corporate mergers can offer a number of benefits including economies of scale, greater market reach and security of funding. While a merger may be off the table for some nonprofits , benefits are not. Nonprofits can reap these benefits by partnering with a complementary organisation.
4) Plan for the long term
Corporations plan for the long term. All too often, nonprofits focus on the next grant funding cycle or annual membership drive. Nonprofits need to start thinking about what sort of organisation they should be to respond to competitive and social pressures over the next five to ten years.
5) Make use of new technologies
Nonprofits generally make good use of new tools, such as social media, to communicate with stakeholders. However, they often lag behind their corporate counterparts when it comes to embracing technologies that enhance efficiencies. These could include cloud accounting software, client relationship management (CRM) systems or supply chain management.
Commercial businesses know that they need to strike a balance between short-term results and long-term sustainability. Some nonprofits continue to ignore this lesson at their own peril. The nonprofits that adopt a commercially focused approach to running their organisations are the ones that will greatly improve their chances of securing funding.
Leo Tutt is a partner and national leader of the Audit & Assurance Division at the association of accounting firms trading as William Buck across Australia and New Zealand. He is also chairman of Australian Diabetes Council and a Fellow of the Institute of Chartered Accountants in Australia and the Taxation Institute of Australia.