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Fundraising for Social Change, 7th Edition by Kim Klein

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chapter 32 What to Do in Case of Financial Trouble

Like most people, organizations get into difficult financial straits from time to time. Don’t panic. Panicking, searching for who is to blame, and whining will not solve your problem. What you must do first is carefully analyze the nature of the financial problem and how you got into it. This will help create a strategy for getting out of it.

Financial troubles range from simple cash flow problems to serious mismanagement or even embezzlement of funds. These major types of financial problems are discussed in the following sections. However, it is important to recognize that financial problems are usually symptomatic of deeper management difficulties. These difficulties usually show up first, and often most seriously, in the areas of fundraising and spending. The root cause may be the failure of the board of directors to plan the year thoroughly and thus anticipate the financial crisis, or it could be the reluctance of a staff person to discuss the finances of the organization honestly and fully with the board, leading the board to approve an unrealistic budget. Sometimes the deeper problem is that fundraising projections are inaccurate because not enough research was done to make reasonable estimates of income. Whatever the problem turns out to be, it must be addressed and solved. If only the financial problem is solved, however, and the underlying organizational issues remain unaddressed, the financial problems will recur, ...

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