3 Steps To Addressing Financial Turmoil
The red lights are flashing and the sirens are sounding.
Seldom are nonprofit financial crises met with the same dramatic sights and sounds as a capsized ship, but the panic that sets in among organization financial professionals can come close. If such an incident were to take place at your organization, would you freeze with fear? Would you run for the doors?
Spencer Conroy, vice president for finance at the University of St. Thomas, and Stuart Miller, a partner at Crowe Horwath LLP, discussed some of the warning signs and the importance of liquidity during their session “Not-for-Profit Financial Sustainability” at the 2018 American Institute of Certified Public Accountants (AICPA) Not-For-Profit Industry Conference in National Harbor, Md. During their presentation, the speakers outlined three steps to responding to instances in which the alarm bells sound:
- Engage key constituencies. Develop a dialogue with primary finance and audit committee members. Create a communication mechanism to share information with board members. Think about who comprises your roster of key constituents and work to get them on your side. At the same, recognize that if you have a perfect understanding of the technical or financial issue at hand and have a strong strategy to address it, it doesn’t matter as much if you have supporters’ backing;
- Understand your liquidity position. What is the true deficit your organization faces? Identify potential liquidity streams such as, for example, graduate programs or online courses for a university, and determine solutions. Map out your plan;
- Communicate the plan. These communications should take place with the organization’s executive team, board members, finance committee members, creditors, and funders. As the plan is implemented and progress information trickles in, these same groups should also be provided updated data.