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5 Challenges for Nonprofit FP&A — And How to Solve Them

November 27, 2023
Budgeting
Forecasting
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As businesses, nonprofits have a unique set of needs and challenges. Nowhere is that more apparent than in financial planning. Budgeting and financial forecasting are two of the most important business activities for nonprofit FP&A.

Many nonprofits deal with issues in managing and planning their financials largely because they don’t have access to solutions that can help them overcome these problems. There are innovative ways to solve the five biggest challenges to financial planning faced by nonprofits today. Let's explore the 5 main challenges nonprofit financial planners & analysts face, and how formula- free FP&A software provides a solution.

1. Lack of clarity

When making decisions, nonprofits need clarity and assurances that the means to back those decisions exist. Unfortunately, with budgeting tools that have a limited scope, like spreadsheets, making choices about purchases, hiring, or program spends can be complicated by the budget instead of clarified by it.Budgets should be a tool in your financial toolkit, not an inflexible artifact that can’t guide or advise. Modern and affordable nonprofit FP&A software offers easy integrations and automatically updates financial data, so you have current information at your fingertips when it's time to make critical decisions.

2. Can’t afford to be a financial planning “mechanic”

Nonprofits are said to "run lean”: nonprofits operate with minimal resources, including team members. For a nonprofit using spreadsheets or a budget point solution, that means many hours spent setting up formulas, fixing data errors, inputting information, and digging in to create reports.The financial team should be moving the organization forward, but often nonprofit FP&A professionals are seen as budget mechanics, always under the hood. Instead of settling for a rigid financial planning solution or one that requires time and specialized knowledge, nonprofits should opt for FP&A software that automates much of their day to day, and empowers them to create dashboards and reporting for data-driven decision-making.

3. Need to create a big picture with small picture tools

While tools like spreadsheets are easily available, and budget point solutions are, on the surface, cost-effective, they are limited in scope and view. For instance, scenario planning in these tools is complicated, if not impossible. What does the financial plan look like if donations suddenly drop? What if there is a delay in government grants? What if a catastrophe causes a sudden need in services?While what-if scenario planning is a powerful tool for most businesses, it’s absolutely essential for the nonprofit. With scenario planning, a nonprofit can rapidly grasp the impact decisions will have on the business, today and in the future. Any financial planning software solution that a nonprofit chooses should include simple scenario creation.

4. IT support is a non-starter

As mentioned, nonprofits run lean — and that doesn’t end with the finance team. Technical resources are also at a premium. An FP&A software solution that requires a lot of upkeep — installation, updates, help desk support, etc — will simply add to IT’s burden. Worse, if your nonprofit doesn’t have dedicated IT resources, a higher-maintenance financial software solution may not be an option.Software-as-a-service (SaaS) solutions all but remove the need for IT intervention. FP&A SaaS applications are hosted in the cloud, and updates and security are handled automatically by the vendor. Some applications simplify more complex technology options, like integrations with other applications, so nonprofits can get enterprise-grade solutions with minimal IT resources. (Read more about consulting your IT team's needs when considering adopting nonprofit financial forecasting software: How to build a business case for FP&A software.)

5. Unique business needs, inflexible tools

Both opportunities and disasters are critical decision points for companies, but they are the stock and trade of the nonprofit. Add to that the fact that a nonprofit’s financial plan cannot be set in stone, and financial planning and budgeting becomes more complex than some Fortune 500s. Flexibility is key, but the tools typically used for nonprofit FP&A are anything but.FP&A software for nonprofit financial planning and budgeting must facilitate frequent change and offer dependable, accurate reporting and direction. Real-time changes are a necessity, and what-if planning must be easy to accomplish with minimal work.

A formula-free approach to nonprofit FP&A

Conditions are constantly changing in the nonprofit world. The nonprofit office of finance's financial planning and budgeting software needs to keep up.Rigid, complicated, high-maintenance FP&A software can negatively impact a nonprofit’s ability to pivot and make data-driven decisions. There are affordable nonprofit FP&A software solutions that remove the burden from the financial team and others within the business, while also enabling fast, forward-thinking planning.

Centage's FP&A software is used by nonprofits to project unpredictable cash flow years into the future, create consolidated financial reports to quickly deliver actionable info to budget managers and leadership, and achieve better scenario planning and hiring decisions with detailed personnel forecasting enables.Interested to learn more about how your nonprofit can benefit from modern FP&A software? Book a demo.

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