Not-for-Profit sector report

Common concerns compared to commercial enterprises

While Not-for-Profits tend to have different goals and purposes to commercial entities, they do share some commonalities. This is especially true when looking at the business pressures impacting these organisations. Funding shortages and increasing costs are leading concerns for Not-for-Profit leaders, reflecting the financial pressures we’re seeing across other New Zealand business sectors.

View journalist Paddy Gower's conversation with Matt Coulter, BDO Not-for-Profit Sector Leader.

High inflation levels and global situations influence financial concerns

Looking at what’s driving financial concerns for leaders in this space, public sector cuts are causing nationwide uncertainty over the future of Government funding, and Not-for-Profits are not immune to this.

Meanwhile, New Zealand’s ongoing high inflation levels are putting pressure on other income streams, including donations due to the reduction in discretionary spending. With the high cost of living impacting many Kiwis, there can be less money left over to donate to charities and for-purpose organisations. Then there are the Not-for-Profits themselves facing increasing operating costs. This is no different to the pressures experienced in the commercial sector, where there has been pressure on salary costs and general operating expenditure.

The availability of grant funding from various sources is becoming more constrained as we see the tightening economy continue to impact market conditions. The current economic environment is making it increasingly difficult to attract, secure, and maintain corporate support, and Not-for-Profits are being forced to think about different funding options. Diversified income streams are beneficial for Not-for-Profits but are not always straightforward to develop.

Finally, wider uncertainty around the economy and global politics and conflicts means there is a lack of clarity over the reliability of investment markets for those entities that rely on income from management funds and other sources.

Tips for Not-for-Profit business leaders

We’re seeing some Not-for-Profits consider viable alternative funding options in order to diversify revenue streams. Diversification of income streams is a positive step to reduce the reliance on any one source and help keep NfPs financially viable.
Look at your existing corporate sponsors and donors and consider ways to develop and strengthen your relationship with them. Retaining existing funding is key in tough market conditions.
Utilise your statement of service performance (SSP) and impact reporting to help tell your entity’s story and make sure it stands out when applying for funding. Read more about how your SSP can support your funding journey here.
Take a close look at your strategy and ensure it’s fit for purpose in the current environment. What made sense a few years ago may not be the best approach in today’s operating conditions. Look at your numbers and make sure time is being spent in the right areas.

Further support:

Expert thoughts

Matt Coulter

Audit & Assurance Partner, Technical Director - Assurance for BDO New Zealand, National Not-for-Profit Sector Leader

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"As in all sectors, Not-for-Profit entities are being negatively impacted by New Zealand’s tough economic conditions. High costs of living and high inflation mean there isn’t always the money to go around for donations and funding, and increasing operating costs are further exacerbating the situation. As with all organisations, when times are tough it’s important to know your numbers, have plans in place, and forecast for different situations. On top of this, Not-for-Profit leaders should look to their networks and advisers for support in getting through challenging times."

Matt CoulterBDO Not-for-Profit Sector Leader