Ralph Vasami, Esq., is president of Kellen in New York City.
The global pandemic has thrown the budgets of even the most financially conservative planners into disarray. Consider these three strategies to lessen the impact of this crisis on your 2020 budget and beyond.
This year was off to a great start—you had approval on your budget and programs and hit the ground running. But the best laid plans were no match for the COVID-19 pandemic.
While we won’t know how severely it affects the economy until we are on the backend, we can anticipate further disruption in 2021 from reduced member renewals, budget cuts, event cancellations, decreased programs, and more.
While progress for the year may have been interrupted, taking these three steps can help prevent COVID-19 from further derailing your budget now and into 2021.
Unforeseen challenges can materialize in many forms—from a pandemic to reputational crisis mitigation to new legislation requiring increased advocacy efforts. Regardless of the challenge, budget reallocation can be used to keep your year on track.
Any unbudgeted expenses you want to reallocate funds for should ideally be evaluated first with a committee or task force and then presented to the finance and/or executive committee before going to the board.
Ensuring that changes to initiatives align with strategic objectives is the most important criterion for determining programs to pursue or changes to your plans caused by factors beyond your control. Asking these 10 questions will provide context and help you determine if an initiative or new expense fits into your current fiscal year:
If changes to initiatives and requests require additional funding, association staff should work with their leadership to identify potential sources, including:
Sponsors or underwriters who can cover or subsidize costs. Also, if appropriate and not a competitive program, consider inviting a strategic partner or partner coalition to join in the initiative to help reduce costs for everyone.
Operating reserves, or an organization’s unrestricted assets used to support its operations in the event of an unanticipated revenue loss, can be tapped. It is recommended that all nonprofits have six months of expenses in reserves. If your reserves exceed the recommendation, and you deem a one-time special project worthy of investment, this is a viable source to consider.
Increased dues or special assessments can be used, but strongly consider how an increase would affect member retention and growth prospects.
Regardless of the challenge, budget reallocation can be used to keep your year on track.
In this current crisis, many associations have pivoted from in-person to virtual meetings. While virtual events help organizations continue with education delivery, governance requirements, and member engagement, they do not automatically fulfill the budgetary expectations.
Since working through the pricing of these online offerings is a new process for most associations, consider the net revenue expectations to help determine whether to charge for the event and, if so, how much.
If considering postponing or canceling a face-to-face meeting without a virtual event to replace or supplement it, ask yourself these seven questions before making a decision:
There is also the potential for a surplus if your in-person event was not designed as a revenue generator. When Kellen worked with the Myasthenia Gravis Foundation of America to switch from an in-person to a free virtual conference, the organization netted a significant gain in budget savings by going virtual, while engaging with nearly 1,300 attendees from 42 different countries.
Ultimately, every association’s budgeting process will differ depending on its structure. However, best practices remain consistent that maintaining financial governance processes, aligning spend with strategic objectives, and avoiding discretionary or “knee-jerk” expenses in a crisis will help your organization stay on track fiscally and strategically.