Growing Pains: How Fast-Growing Nonprofits Can Build for a Better Financial Future

As your nonprofit organization grows, maintaining its financial stability and organizational integrity becomes an increasingly bigger challenge. If you fail to proactively plan and build a solid financial foundation, you may derail even the most well-intentioned mission.

However, with care and attention to detail, you can set your organization up for sustainable, healthy growth in the years to come.

In this article, we’ll explore the common pitfalls growing nonprofits encounter. We’ll also provide actionable strategies you can adopt to grow sustainably while staying aligned with your organization’s core objectives.

Top Issues Faced by Fast-Growing Nonprofits

Nonprofits undergoing accelerated growth often face significant hurdles across several key areas. To overcome those hurdles, leaders must pay careful attention to their financial health and internal controls to maintain stability and organizational integrity.

Issue 1: Budgeting and Financial Planning

If nonprofit leaders aren’t careful, budgeting and financial planning processes might not keep up with the organization’s rapidly changing landscape.

To address this challenge, leaders must maintain tailored budgets that can grow and evolve along with the organization. In other words, if new challenges arise or you launch new projects, you need enough flexibility and forward planning to accommodate these shifts.

In practice, this could mean many different things. For example:

• Incorporating new revenue streams
• Maintaining accurate financial projections aligned with the strategic plan
• Developing multiple scenario-based budgets
• Implementing effective cash flow management, building reserves

Imagine a youth mentorship program rapidly expanding into new cities. Their budgeting processes fail to accurately forecast revenue from new grant sources and corporate sponsorships. As a result, they encounter cash flow issues that threaten operations.

To mitigate the issue, the organization partners with accounting experts to develop comprehensive, tailored budgets. They incorporate new revenue streams, align their financial projections with their strategic plan, and implement new cash flow management strategies to move their organization in a healthier direction.

Solution: Partner with Experts to Build a Better Financial Plan

Overhauling your budget or building a more thorough financial plan requires time, resources and expertise—all of which can be difficult to come by in a busy nonprofit. Outsourcing grants you access to objective feedback and expertise, while also freeing you to focus on bigger priorities.

James Moore’s nonprofit experts can analyze your current budgeting and financial planning processes. By  leveraging data analytics tools, they can help you create comprehensive, tailored budgets that incorporate your growth projections, new revenue streams and strategic goals. An expert advisor can also assist with cash flow management, scenario planning and identifying opportunities to diversify revenue sources.

Issue 2: Internal Controls and Processes

As nonprofits grow, the complexity of their operations increases. This necessitates robust internal controls and processes. Failure to update systems and procedures can lead to errors, compliance issues and potential fraud risks.

To mitigate these risks, nonprofits should establish rigorous internal controls. This may include hiring appropriate personnel, maintaining proper segregation of duties, providing cybersecurity training and updating IT infrastructure.

For example, imagine a rapidly growing environmental advocacy group. As the organization grows, it fails to update its accounting software. Because of this, they encounter errors tracking restricted grant funds and face compliance issues. Now the nonprofit risks penalties, loss of funding and even reputational damage.

To resolve the issue and prevent it from happening again, they outsource accounting functions, establish a new process to govern their software update and implementation, and provide updated training for their internal staff.

Solution: Leverage External Resources for Compliant Accounting Processes

Maintaining proper internal controls becomes increasingly challenging yet crucial as your nonprofit expands. Outsourcing accounting functions grants you access to expertise tailored to your organization’s evolving needs. It also allows you to rely on compliant accounting services without needing to build those functions entirely in house.

James Moore’s outsourced accounting services provide the robust financial controls, compliance proficiency and latest software solutions required to support your growth. Expert advisors can implement industry-leading accounting systems, processes for segregation of duties, and even manage day-to-day accounting functions like payroll — all customized to your requirements. This proactive approach mitigates risks, prevents errors and safeguards your financial integrity as your operations scale.

Issue 3: Audits and Financial Transparency

As your organization matures, audits become increasingly important as they instill confidence in donors, board members and stakeholders — all of which are essential to achieving your mission.

Audits satisfy board oversight requirements and prevent fraud as the organization scales. They also promote financial transparency by demonstrating a commitment to external oversight and accountability.

Imagine a large international relief organization that experiences significant expansion but lacks regular audits. The larger they grow, the more major donors raise concerns about financial transparency. Because of this, they risk losing funding opportunities and eroding stakeholder trust.

To address the issue, they engage independent auditors to instill confidence and satisfy oversight requirements. Then they leverage tools like the Form 990 to showcase their operations and build a reputation for integrity among their donor base.

Solution: Implement Regular Reviews with a Trusted Audit Partner

Partnering with an experienced audit firm grants you access to independent oversight tailored to your organization’s needs to grow sustainably. It also enables you to demonstrate ongoing commitment to transparency and external accountability, without losing focus on your central mission.

James Moore’s nonprofit auditors provide independent audits, reviews and compilations customized for the nonprofit sector. Our team can help to ensure your financial reporting adheres to all relevant standards and leverages best practices specific to tax-exempt organizations. Your advisor can also guide you in strategically using Form 990 as a marketing tool, ensuring accurate, compelling reporting that showcases your operations and builds trust with existing and potential donors.

Issue 4: Policies and Procedures

As nonprofits expand, the internal landscape becomes more complex. With larger teams comes increased HR obligations. And if organizations want to continue attracting talent, reduce turnover and stay compliant with labor regulations, their HR systems need to stay up to date.

To address this issue, nonprofits should:

• Regularly update HR policies and training guidelines
• Ensure continuity of key services in case of staff turnover or absences
• Consider outsourcing HR services or seeking policy evaluations from experts

For example, imagine a community health clinic that undergoes rapid growth without updating its HR policies. Because of their outdated policies, they experience staff turnover and disruptions in patient care, risking compromised service quality.

To address this critical issue, the team reviews and updates its policies, training programs and procedures. They also implement cross-training initiatives to avoid complications down the road. Additionally, they might consider outsourcing some of their HR functions to ease the burden on the staff.

Solution: Leverage HR Consultants to Identify Opportunities and Streamline HR

Navigating the complexities of HR management can divert valuable resources and focus away from your nonprofit’s core mission as you grow. Partnering with experienced HR consultants grants you access to expertise tailored to your organization’s evolving needs. This in turn allows you to concentrate on bigger priorities.

James Moore’s HR consulting team can conduct a comprehensive review of your current HR policies, training programs and procedures. They then provide tailored recommendations to align your practices with growth objectives, ensure legal compliance and promote employee engagement and retention. If needed, you may also fully outsource some or all of your HR services.

Take a Proactive Approach to Building Your Financial Foundation

If you want to grow, you need a comprehensive strategic plan that aligns your financial goals with your mission and growth objectives. This plan should include clear goals, timelines and resource requirements. It should also undergo regular reviews and updates to adapt to changing circumstances.

Proactive, up-to-date planning won’t eliminate every single issue. But it will set a solid foundation and enable you to overcome obstacles more easily. To ensure your plan is effective and current, leverage internal and external expertise, and set a regular review cadence — i.e., every three to six months — to ensure you capture all the most pertinent concerns.

Grow Your Nonprofit Sustainably with James Moore

At James Moore, we understand the unique challenges faced by fast-growing nonprofits and offer a range of services to support their financial stability and growth. From budgeting and financial planning to audits, cybersecurity assessments, HR consulting and strategic planning, our team of experts provides tailored solutions to help nonprofits build a solid financial foundation.

Our deep expertise in the nonprofit sector enables us to provide valuable insights and guidance, helping organizations navigate complex grant restrictions, leverage tools like the Form 990 for donor outreach, and implement best practices for internal controls and risk management.

For deeper insights on how to grow your nonprofit, contact James Moore today.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.