Funders Demand More Information About Outcomes. Time Management & Expense Reporting Answer the Call

Nonprofits are under immense pressure as the prolonged pandemic significantly increased demand for their goods, services, and programs, while an uncertain economic environment has curtailed financial contributions in a major way.

This year, nearly 75 percent of nonprofits report declining contributions, and half of these organizations expect year-over-year donations to diminish by at least 20 percent. By the time the pandemic eventually subsides, The Washington Post estimates that one-third of nonprofits may permanently close, leaving vulnerable constituents without help and support when they need it most.

To meet the moment, nonprofits need to maximize their ability to retain existing funding and procure new opportunities, requiring a renewed emphasis on donor concerns. For leaders looking to develop more resilient, donor-friendly organizations, here are three questions potential funders are asking.

#1 Does the Nonprofit Organization Do Good Work?

Successful nonprofits have identified a problem, need, or challenge that their resources or expertise can address. Fundraising efforts tend to start there, engaging potential donors with messaging and advertising that conveys the problem and solicits their financial support.

However, donor trends indicate that potential funders require clear, comprehensive insights into organizational outcomes, not just mission, before committing to a financial contribution. For example, according to one report, 75 percent of potential donors are actively seeking information about a nonprofit’s impact. Meanwhile, an assessment conducted by Charity Navigator, a nonprofit assessment organization, and published by the Federal Trade Commission, found that only 2.5 percent of charities rated by the organization made outcomes-based results easily accessible on their websites.

Instead, nonprofits misconstrue activity, aspiration, and marketing with impact, creating a chasm between fundraising initiatives and donor demands. This presents a readily available opportunity for nonprofits to differentiate themselves, capturing and conveying outcomes for potential donors ready to support organizations that are doing good work and making a difference.

For example, the Nonprofit Leadership Center encourages nonprofits to identify and measure performance metrics that provide potential donors with clear insights into organizational outcomes, including:

• How is your nonprofit changing lives?
• How is your work creating positive change in the community?
• What are the milestones that measure success?

Simply put, donors want to know that an organization is doing good work before committing financial resources to a nonprofit. Providing insights into outcomes will help answer that question.

#2 Is the Nonprofit Fiscally Responsible?

Many donors are using overhead expenses as a quantifier for impact and value in lieu of outcomes-related information. With so many potential charities and nonprofits to support, donors want to know that an organization will steward their financial resources responsibly.

Specifically, nearly 70 percent of potential donors seek information on fundraising and overhead expenses. In response, nonprofits should embrace unparalleled transparency, earning the supporters’ trust and confidence and relying on their continued financial support.

In this way, exceptional governance in the form of time and expense reporting can be a gateway to demonstrating fiscal responsibility, earning donors’ trust, and maintaining operational continuity. For instance, enhancing time and expense practices allows nonprofits to account for:

• resource allocation. Let donors know how much financial and personnel resources are devoted to specific outcomes.

• overhead projections. Demonstrate fiscal responsibility by transparently and comprehensively reporting overhead projections.

• grant readiness. Many nonprofits don’t subsist on individual donations alone. Time and expense best practices position organizations to capitalize on other opportunities, like grants, that can support mission and outcomes.

High-performing, sustainable organizations are predicated on fiscal responsibility, which donors undoubtedly understand and assess when supporting nonprofits.

#3 Who is This Nonprofit Organization Helping?

To be sure, donor decisions aren’t purely data-driven. While anecdotes and individual testimonials can’t convey an organization’s big-picture impact, they are meaningful communication methodologies, allowing donors to connect with the cause in specific and interpersonal experience.

Nonprofits can enhance fundraising by connecting donor support with individual impact, combining outcomes and impact into a singular narrative. These efforts include:

• Storytelling. Stories help donors understand the value of their investment, creating intimate connections between financial support and individual impact.

• Data. Capturing and conveying the number of people served, outcomes reached, and lives changed can help donors appreciate the reach of their financial support.

• Sustainability. Donors want to support sustainable causes, not bloated organizations. Combining incredible individual impact with a sustainable or scalable business model conveys value at every level.

Ultimately, nonprofits exist to help people, and potential donors want to know that their contributions are achieving this critical outcome.

Conclusion

As nonprofits are strained by surging demand and diminishing financial resources, some will reduce capacity, scale back initiatives, or close altogether. However, some will use this challenging moment as an opportunity to strengthen donor relations by refocusing their on-the-ground efforts and funder-facing efforts to respond to the latest trends.

By conveying their great work, fiscal responsibility, and individual impact, nonprofits can enhance their fundraising efforts, procuring the resources needed to serve their constituents at this critical time.