How Does Inflation Affect Your Organization


Best Practices to Stretch Every Dollar

If you watch the news or read any writing in the financial realm, you’ve likely heard talk about inflation. With recent months continuing the trend of rising prices, worries about coming inflation—and the impact of it—are everywhere. If you’re not in the financial industry, it can seem like a far-off problem. So what do nonprofits need to know about inflation?

Why Inflation is a Problem for Nonprofits

For many nonprofits, the biggest challenge in this area is how inflation shrinks your nonprofit’s budget. Inflation can squeeze your nonprofit’s budget on both ends, making your money less able to buy what you need and making people give less. Inflation can make it harder for your nonprofit to have an impact.

It’s important to understand both what inflation is and how to know when it’s coming. The only way to protect your nonprofit and maximize your impact is by being prepared and aware.


How to Track Inflation for Your Nonprofit

The most common way that inflation is tracked uses the consumer price index. This index, which officially began in 1919, uses the price of various commonly purchased goods to track the value of your money. By tracking when the cost of those goods increases, the consumer price index estimates the relative value of a dollar in the current economic market. Inflation, or when the relative value of the dollar decreases, means that those costs have increased.

For nonprofits, inflation can show up in the creeping costs of goods and services. This can make a balanced budget difficult, as last year’s line items increase in cost until you either have to increase budgets or cut services. That’s a choice no nonprofit likes to make, as increased budgets mean a need for increased fundraising—which can be especially challenging in times of inflation, as your donors are seeing the same pinch in their budgets that your nonprofit is experiencing. 


Common Mistakes Nonprofits Make Around Inflation

Inflation is a fact of life. The cost of goods and services is drastically different than 20 years ago, and this trend is unlikely to change. Planning for inflation generally is always a good idea, but certain periods of time show unprecedented growth in inflation that can devastate a nonprofit’s budget. Many nonprofits in these times stumble into critical mistakes in dealing with inflation.

Asking Donors for the Same Amounts

Often in fundraising, the best practice is to ask most donors for a similarly sized gift to their last donation. While you may try to convert some smaller donors to mid-level donors, most of the time you send people asks in a very similar range to previous gifts.

During periods of inflation, it’s important to look at your donor base strategically. For small donors, keeping them giving to your nonprofit at all during times of inflation is a win. Stick to asks that emphasize how your nonprofit is helping others right now, and strike a tone of understanding and softer asks—by acknowledging that many people may be experiencing challenges, you’ll ingratiate yourself to your donors. 


Ignoring the Signs of Inflation

Sticking your head in the sand and ignoring the signs of inflation is the worst thing you can do as a nonprofit leader. Inflation is real and will have an impact on your nonprofit. Rather than ignoring rising prices or dismissing them as a short-term challenge, make proactive changes to insulate your nonprofit from the challenges of inflation and address those issues head-on. By planning ahead, you can prevent a serious crisis that may require you to take more drastic action.


Cutting the Wrong Costs

Since inflation drives up costs for nonprofits, one of the easiest ways for nonprofits to survive inflation is by finding ways to cut costs. We’ll cover more of that below, but there’s an important warning to mention first—not all costs are equal. Being too quick to cut costs in certain areas can create a snowball effect of issues that will only make the impact of inflation worse. For example, cutting salaries or positions is often the first step many leaders take to reduce costs. However, the long-term impacts of such a decision on the capacity of the organization and the morale of the team members who remain can be much more detrimental than you estimate. This step should only be taken if those long-term impacts have been analyzed and accounted for.


Ways Nonprofits Can Fight Inflation

While there are plenty of mistakes nonprofits commonly make when dealing with inflation, there are practical steps your nonprofit can take to address inflation. Surviving inflation is all about making your money go further.


Cut Costs

The most important way to survive inflation is to reduce your costs. There are many ways you can approach this, including looking at new vendors, cutting discretionary spending, and asking for more in-kind donations of items you regularly need. One quick way to help your nonprofit survive inflation is to reduce the fees you pay for various services, including your fundraising vendors.

Events software that helps with tasks  like your silent auction or event management can be one area where fees chip away at your profits from fundraising. By using low-cost and free options that still have robust capabilities, you can help stretch your money further and fight the effects of inflation on your nonprofit. Tools like Events.org actually have free versions with options of buying more extended capabilities or promotional tools if you need it—giving you the chance to maximize fundraising but get more help if it makes fiscal sense. For silent auctions, cutting down on unnecessary fees taken out by your software can make a huge difference in the amount of money your nonprofit takes home. Check out tools like iBid to get the most out of your upcoming in-person or virtual auction. 

Another important thing to keep in mind when cutting costs—your decisions signal a direction to your employees. If you start first by cutting positions and laying off people, many of your team members are going to read that as a sign the organization is heading towards crisis and may not make it, which in turn will make you more likely to experience turnover. If layoffs or cutting benefits are necessary, having your leaders take the first hit can go a long way to building camaraderie among the team and showing them you’re still committed to them. Consider cost cutting measures like forgoing bonuses for executives or having your leaders take a cut to their salaries for a period of time. Even if you still end up having to eliminate positions to fight inflation, being proactive and showing your leadership is willing to sacrifice will go a long way to boosting morale and keeping your employees engaged.


Build Out Your Benefits

One of the challenges from inflation is how it makes your current compensation package for your employees less impactful. When money is worth less, their salaries and benefits don’t go as far. While you are likely hurting for cash and can’t afford to pay people more, think about other benefits you can set up that might help boost morale. Perhaps you give people an extra vacation day or two as thanks, close the office for longer near the holidays, or even announce that remote work will be extended for those who can. Any of these tactics can go a long way to encouraging your team. 


Find New Revenue Streams

Maybe your nonprofit hasn’t done many events in the past and would like to try new streams of revenue. Tools like Events.org or iBid can help you set up new events that allow your supporters to do the same thing you’re trying to do—make the money go further. 

Try partnering with a local business for an event where a portion of the proceeds is donated to your cause, which allows your supporters to get something out of their donation as well as support the work you’re doing. To top it off, the business will be glad for the exposure and revenue themselves! Thinking of creative ways to raise money is an important part of surviving inflation as a nonprofit. For nonprofits to survive inflation, you have to innovate.

Become More Efficient

Finding ways to be more efficient can help nonprofits survive inflation. Streamlining your processes and cutting down on manual, analog work frees up your team to focus on what’s important—and can help prevent having to outsource tasks and spend more money. Try finding software tools to make your work more effective, like automating some of your event management with Events.org or streamlining your silent auction with iBid. Any way you can get work done more efficiently goes a long way to fighting the impact of inflation on your team.


Surviving Inflation Matters, So Be Proactive

Controlling inflation at a large scale is out of your nonprofit’s hands. However, you can take proactive steps now to survive inflation at your nonprofit including cutting costs, creative fundraising, and finding new vendor partners that will help support your mission cost-effectively. Check out some of the tools mentioned above for cost-savings and new ideas on how to reach your donors and partners, including through events using Events.org and turnkey online silent auctions through iBid.