What’s Your COVID-19 Response?

Denise Henning

How Should Your Non-Profit Respond to the COVID-19 Threat to Your Organization?

It seems not everyone has an official COVID-19 Response statement.  COVID-19 hit fast. The news reported a case in Seattle, then Chicago, Phoenix… Flights to China were stopped. By mid-March, most of the US was in quarantine, unsure of the outcome for our families, jobs, and economy as a whole. Now, though restrictions seem to be lessening, the debate and a potential virus resurgence loom. Some leaders suggest COVID-19 will continue to impact US life until a viable vaccine is found. Given all of this, what should a non-profit do to stay afloat in these uncertain times and be positioned to recover as quickly as possible when things open up?

How to Design Your COVID-19 Response

When faced with a threat, without fail, success is determined by response. Though more than 95 percent of nonprofits expect a drop in contributions this year (some expect a drop as high as 47 percent according to Philanthropy News Digest in their recent article The Voice of Charities Facing COVID-19), your response can lessen an expected decline. Donors rally around a common concern and interest in helping others, and that need continues—even more so now for non-profits caring for the less fortunate among us. Human service organizations are more essential now than ever. Your first response should be to remember your purpose, the good that your organization does, and the help you can provide.  Remind your staff, board, and community of your story; write down your COVID-19 Response and share it internally and externally.  Then continue your mission by taking action to stay fiscally healthy.

Here are the first few steps to a successful financial COVID-19 Response.

First Step for Success: Accelerate Cash Inflows

Your immediate priority should be forecasting and managing cash flow over the weeks and months ahead. Start by taking a look at, or creating if necessary, a cash flow forecast to quickly see expected cash flow projections. (Basic instructions to create a cash-flow forecast are included at the end of this article.)

Once you have a handle on your cash flow projections, begin to accelerate cash inflows. Here are the top three ways to quickly increase cash inflows.

  1. Determine how your non-profit can receive more electronic donations or payments. The best way to accomplish this is by either utilizing accounting software or using email to invoice electronically and ask for electronic payments.
  2. Be sure that all social media postings have a DONATE NOW link to your electronic payment system.
  3. Make sure to share with all of your donors exactly how you are aiding those affected by COVID-19 and how your organization is meeting the needs in your community.
  4. Another way to boost cash flow is to work with your bank to enhance your line of credit. Having extra cash on hand will help during the lean months when donations drop.  Give your bank, or an affiliated board member, a call to determine the best options.

Other effective methods of increasing cash flow include taking advantage of new funding programs at the state and federal levels. Also look for funding from new sources, like foundations currently bypassing their normal processes and rules to grant funds to offset pandemic effects.

Finally, now is the time to engage your development team to increase donations. You might even consider redirecting discretionary spending to invest in development right now. A healthy development program is the backbone of every non-profit. It is crucial to pay attention to this element of your COVID-19 Response. Ask your team to identify weaknesses, and gaps, and ask board members to help fill these gaps by reaching out to ask for contributions.

Second Step for Success: Slow Down Cash Outflows

Okay, some spending is necessary, of course. But your next step should be to take a look at where money is being spent and eliminate any excess. Here are the top ways to slow cash outflows.

  1. Stop ACH (automatic) payments. Instead of paying automatically online, mail checks to stay in control of payment timing.
  2. Lengthen payment terms when possible. Do not pay early (with the exception of employee reimbursements).
  3. Review all discretionary spending and eliminate the fluff.
  4. Defer FICA payments short-term¹.
  5. Talk with vendors and let them know you are non-profit and impacted by the pandemic. Vendors will often work with you to decrease costs.
  6. Review facility expenses, especially utilities. Determine if you can reduce usage based on vacancy.
  7. Though it might be painful, consider temporary staffing changes. Operating with fewer employees might be difficult, even painful to do, but leaner payroll may be necessary for the short term, as this can boost cash flow for programs or other critical operations. The good news is that state and federal assistance is available right now for furloughed employees.
  8. Consider cost-sharing arrangements – consolidating accounting, HR, and administrative functions with another organization.

In the coming weeks and months, it is crucial to remain vigilant and react accordingly to mitigate a potential financial blow. It is just as important to be proactive, as your success will be determined by a planned, continued response. Your non-profit board, committees, and donors, along with the community you serve, depend on your financial health. Make sure your COVID-19 Response includes communicating your needs and responding to them regularly. Their creativity and ability to help just might be surprising.

Creating a Cash Flow Forecast

If you have not created a cash flow forecast in the past, keep it simple:

  1. Begin by reviewing your current financial statements and budget.
  2. Adjust the numbers for abnormal expenses (e.g. large annual or quarterly payments)
  3. Identify any additional sources of cash (e.g. Payroll Protection Loan or new grants)Identify common weekly or monthly income and expenses.
  4. Highlight any trouble spots – weekly or monthly periods where inflows do not meet the need.
  5. Update your cash flow forecast weekly – this is a good practice to continue, moving forward.

Getting Assistance with your COVID-19 Response

As always, we are available to assist with anything you may need to help establish your COVID-19 Response.

¹Deferral of payroll-related Social Security payments due (but not Medicare) under the CARES act  (enacted March 27, 2020), for 2020 liabilities – ½ due 12/31/2021 and ½ due 12/31/2022. Consult with a tax advisor!  Not available to those who receive debt forgiveness under the PPP Loan program.