Challenges and Opportunities for Nonprofits in 2014

The past year shook up the nonprofit sector—often in surprising ways. Notable policy changes, a government shutdown and a transforming donor landscape all made headlines in 2013. They also contributed to our readers’ sentiments: according to our December reader survey, “financial management” and “reputational risks” were the two most-cited concerns for nonprofits in 2014. To help quell these anxieties, we’ve put together our list of the biggest challenges and opportunities for nonprofits in the year ahead:

Attracting and retaining donors: Securing individual donors and winning their loyalty will remain one of the top priorities for nonprofits in 2014—particularly for small and midsize organizations, and especially at the beginning of the year, when money tends to be tight. A recent study from the Urban Institute and the Association of Fundraising Professionals found that while giving is rising overall, donor drop-off has become a considerable issue. To help understand and mitigate this attrition, organizations should focus more comprehensively on how they benchmark fundraising success. Net gains and losses are important, but Boards and management need a wider lens if they want to know where and when to devote more resources. Understanding donor retention more acutely provides key insights into the ongoing effectiveness of an organization’s messaging and community engagement. Keep in mind, encouraging a current donor tends to be more cost-effective than acquiring a new one, but both require nimble and targeted marketing efforts.

Social Media: Speaking of effective messaging, the year ahead should see more nonprofits carefully developing their social media strategies. Fundamentally, social media aims to create more human connection—a powerful tool for nonprofits that know how to use it well. For relatively little investment, social networks offer the ability to 1) communicate and spread a nonprofit’s mission, 2) identify and build lasting relationships with donors and 3) demonstrate success through disseminating evidence of results. As donors often view their donations as investments, highlighting real results with your online community be can a highly effective way to materialize donors’ “social dividends.” With increasing competition for donations, nonprofits that actively leverage social media are better able to stay ahead of the pack. Of course, before jumping into it, what’s most important is that your organization’s social media strategy aligns with its overall mission.

Changes to financial reporting standards: In late December, the Financial Accounting Standards Board (FASB) continued its deliberations around improving expense reporting processes for all nonprofits. The debate centered on the fundamental question of whether organizations should be able to report expenses by nature, function or both. We discussed the Board’s tentative decisions earlier this month, but looking forward, all nonprofits should keep a careful eye to pending updates, as they may present both challenges and opportunities in terms of how organizations communicate their stories and objectives via their financial reporting.

New regulations: As we highlighted last week, the Federal government recently issued its omnibus OMB A-133 Circular—or Supercircular—that aims to consolidate regulations and offer a greater degree of consistent guidance and transparency for the recipients and issuers of Federal grants. With the new changes, both parties should reflect on their grant practices under the scope of the new system in order to re-evaluate their alignment and determine where possible opportunities and trouble spots exist.

As we’re now one month into the New Year, what opportunities and challenges are top of mind for your organization in 2014?