Financial plans, whether personal or your organizations, serve a purpose – to identify, organize, and prioritize your financial goals for both the short- and long-term. One manages income and expenses, tracks progress, and outlines different strategies and tactics to support your goals.

And as a non-profit leader, the financial stability of your organization is a top priority. With constant changes in the economic landscape, it’s essential to adopt a flexible and robust approach to planning. Your organization’s financial plan must be able to adapt to conditions such as market fluctuations, inflationary pressures, and shifts in funding.

The (albeit, obvious) first step is having a documented plan. Then, the focus is on ensuring it’s aligned with the exact outcomes your organization is looking for. Let’s look at the dos and don’ts of making your plan as effective as possible to safeguard your non-profit’s financial future and ensure that your mission continues to thrive.

✔ Do: Make the three key assumptions that comprise a successful plan –

market returns, portfolio cash flows, and inflation – to determine an accurately forecasted outcome.

Non-profits often rely on investment portfolios, endowments, and other long-term assets to sustain their operations. However, market returns, portfolio cash flows, and inflation can significantly influence your organization’s financial forecast.

Unpredictable changes in the market can either create an influx or a shortfall of funds, which can impact your purchasing power over time. Your investment performance can fluctuate based on broader economic conditions, and if a significant downturn occurs it can lead to reduced returns.

Regular cash flows, or contributions, into your portfolio (e.g., grants, donations, investment income) are essential for covering operational expenses, so having an accurate withdrawal plan makes navigating the ups and downs easier.

Add on the fact that inflation rates may potentially be higher for longer, and the cost of goods, services, and wages may rise making it harder for your organization to maintain its current level of operations.

To safeguard against these factors, ensure your financial plan incorporates a mix of conservative and growth-focused strategies. Diversify your investments to reduce the risk and monitor your portfolio regularly to ensure it aligns with your long-term goals.

✗ Don’t: Plan once or for just the year ahead.

A successful plan isn’t static – it must be forward-looking, flexible, and regularly evaluated to account for changing circumstances. The irony of planning is that it should account for the unexpected, meaning it is monitored and updated on an ongoing basis.

This keeps tracking cash flows, fundraising performance, and expenses top of mind as economic factors like inflation, interest rates, and donor behavior change over time to adapt and make adjustments in real time, if needed.

✔ Do: Evaluate a range of possibilities.

Rather than relying on a single forecast, non-profits should evaluate a range of possible outcomes. What happens if inflation rises by an additional percentage point? Consider different scenarios, from best-case to worst-case, so that you are prepared for any hurdles that may arise.

By using scenario-based planning, you can better anticipate potential roadblocks and develop mitigation strategies all to be prepared to make decisions in the moment and not miss out on opportunities as they arise.

→ Learn more about how portfolio modeling can help your organization answer “What if?”

✔ Do: Brace for higher volatility.

Higher volatility in the financial markets and the broader economy is likely on the horizon. In recent years, we have seen markets react unexpectedly to global events, economic shocks, and geopolitical instability.

To minimize the impact of volatility, consider your asset allocation. Diversifying your investments across asset classes, as a well-differentiated portfolio can help cushion your organization against significant downturns while still allowing you to capture upside growth.

As the outlook for market volatility increases, it’s crucial that your financial plan incorporates strategies for risk management and diversification, providing resilience in the face of uncertainty.

✗ Don’t: Continue assuming a 2% inflation rate.

Inflation has been high, and there’s a strong likelihood that it may remain elevated for longer. Planning for higher inflation helps prepare for impacts to operational costs and purchasing power (for organizations and donors).

Every plan should account for inflation in the upcoming years. However, since we’ve experienced such low inflation after the Global Financial Crisis, many non-profit plans are continuing to plan for the 2% target, when that may not be realistic for what’s to come.

By proactively adjusting your financial strategy, you can help ensure that inflation doesn’t erode the value of your services or limit your ability to serve your community.

→ Learn more about managing inflation as a non-profit, and get free tools to help here.

✔ Do: Focus on your donors through planned giving campaigns.

Cash flows – both coming in and going out – are one of the few aspects of financial management that you can directly control. Planned giving campaigns are a proactive initiative to help with contributions and inflows into your portfolio.

A tremendous build-up in wealth over the last several years, especially among older generations, means that the “Great Wealth Transfer” is still alive and well. There will always be uncertainty as to donor confidence and gift timing (due to markets, inflation, taxes, etc.), but many donors remain ahead of their financial plan today and are therefore actively thinking about how best to leave a lasting legacy. Your team can identify and cultivate donors into loyal planned givers with an integrated planned giving campaign.

Now what?

Start by reviewing your organization’s current plan to see if it meets the criteria outlined above. Remember, in uncertain times, a well-crafted plan is not just a safeguard – it’s a tool that empowers your organization to remain resilient, adaptive, and mission-focused for the short- and long-term.

One way to do this is a fiduciary monitoring report (FMR).

An FMR is a tool that makes it easy for organizations to track their progress toward meeting their investment goals, as well as to determine if anything needs to change to stay on track for the future. It’s a great tool for board members to see their portfolio’s history, goals, and guidelines, all in one place (and as a bonus, it helps to maintain continuity as board membership changes). It can also provide a consolidated look at all of an organization’s investment accounts and portfolios (combined returns, combined allocations, etc.), and measure it against best practices to determine your plan’s likelihood of success.

→ We can help your organization create an FMR. Contact us today to get started.

At the end of the day, your organization’s plan will only be as successful as the amount of detail and care you put into it. With Manning & Napier as your partner, you’ll never have to do it alone. Our specialized services are customized to help your organization meet its financial goals.

The information in this paper is not intended as legal or tax advice. Consult with an attorney or a tax or financial advisor regarding your specific legal, tax, estate planning, or financial situation.