COVID-19: What Nonprofits Should Do Right Now

Friday, March 13, 2020

Part 1 of a series

Assess your situation 

While still early days in the U.S., COVID-19 is already looking like a long, wild ride with far-reaching impact on the nonprofit sector. The disruptive effects from this pandemic are different than what nonprofits have faced in the past. Natural disasters are bound by geography and a recession is contained to the market, but a pandemic cuts across all sectors. Revenue loss is defined not by source of funding but tied to people gathering to receive or enjoy the services of our nonprofits. Organizations called to serve those who are hungry, are in need of shelter, or are in search of healthcare face exceptional challenges. They have to manage increases in demand amid constrained capacity, concerns for the health and safety of staff and clients, and availability of workers who don’t have the privilege of working remotely or who are unable to both work and care for children who are home because of school and day care closures.  

While NFF has considerable experience managing crises, we can’t fully anticipate what’s to come. So, we started with two questions: “What would be the most useful first step for the widest possible group of nonprofits?” and “What could every nonprofit do in a few hours?”   

We arrived at this:  

  • Understand your situation 
  • Determine and monitor your options 
  • Communicate and reflect  

We hope this is a helpful first step. We also want to know what is working for you – and what is challenging – and how we can help. Please share your feedback here.

Understand your situation: Cash flow 

Would you set out on a road trip without checking how much gas is in the tank? Of course not. Much like embarking on a journey, organizations are best able to make decisions when we have clear and accurate information, especially in times of change or crisis. If you haven’t done a cash flow projection recently, now is the time. An accurate projection lets the management and board see if and when the organization will face cash shortages so you can then have meaningful conversations about what to do.    

Unlike a budget, which looks at revenue and expense over a period, typically a year, a cash flow projection maps actual cash and expense as it is received and used in smaller increments, typically months. A good projection includes cash on hand at the beginning of the month, expected revenue, and projected expenses. Remember to account for proper timing of the release of any restricted grant dollars.  

If a cash shortage is expected, there may be options to consider. On the revenue side, might there be an option to speed up collection of receivables? Is there an opportunity to speak with funders to convert restricted dollars to unrestricted funds for general operations? Are (cancelled) event goers willing to convert the purchase price of their ticket into a donation? On the expense side, what is the impact of non-mission-critical expenses? Are they necessary?  

Once inquiries related to revenue and expenses are exhausted, organizations will better understand if they need subsidy and financing. Do you have access to savings (reserves) and sources of working capital such as a line of credit? If taking these measures we strongly advise including the board or board finance committee to ensure that the use is aligned with mission-critical services, there is a clear plan for repayment, and an alignment with your ongoing operating plan (see next section!)  

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