5 Proven Ways to Negotiate More Funding for a Nonprofit

   14 Jul 2022, Thursday      278       Finance
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5 Proven Ways to Negotiate More Funding for a Nonprofit

Nonprofits face unique challenges that for-profit organizations don't have to grapple with. First, nonprofits have to ask for money from people who don't directly use their services. Instead of customers, nonprofits rely on donors. Second, many donors insist on less spending on administrative and managerial tasks, yet these are the functions that make humanitarian efforts possible.

The two outlined challenges make negotiations for nonprofits different compared to for-profit negotiations. Consulting with negotiation training providers can provide nonprofits with negotiation tactics specific to their needs. Here are 5 proven ways you may get your donors to increase funding for your nonprofit.

Set the Right Tone

Donors and board members are your partners, and, in most cases, your organization desires a long-term relationship with consistent and increased funding over the years. Setting the right tone makes a huge difference in nurturing the funder-nonprofit relationship. You may want to convey a deep appreciation for your donors’ participation while at the same time being candid about the challenges you face in executing your mission.

As your partners, your board members and donors understand the importance of the mission. Ensure you provide regular progress reports that show how the partnership is making a difference. Let your passion for your mission show through when talking to your funders. Express your gratitude in person and in the organization’s literature so your funders are aware they're recognized and appreciated for making the mission possible.

Negotiate Full-Cost Agreements

Managers of nonprofits often quote the costs of a campaign minus the administrative costs that will support the campaign’s objectives. Negotiation workshop experience shows it makes better sense to include administrative and overhead costs in your funding proposals. Including overheads in your funding proposal increases the campaign’s chances of success. 

Overheads and administrative costs are a necessary part of any project and can't be wished away. Your nonprofit will need to employ and assign staff, administer allowances and per diems, process payrolls, pay for amenities, and smoothly run logistics. Let donors be aware of all costs pertaining to the campaign's objectives and your organization's mission.

Recover Indirect Costs

In executing its mission, a nonprofit often incurs indirect costs. Some projects require special costs that you may not encounter with other projects. Also, some donors may require special consideration that may come with additional costs. An example is special insurance cover required for a grant award.

Carefully go through the grant award details and the terms of the Request For Proposal (RFP). You may also point out The Office of Management and Budget's (OMB) Uniform Grant Guidance if the funder falls under state and Federal law.

If a donor requires any special consideration that results in extra costs, let the donor know that the cost may be invoiced as a direct and reimbursable cost. Most times, the donor may retract on the special requirement. Other times, the donor will agree to foot the bill and reimburse the costs.

Negotiate Favorable Payment Terms

Grants normally spell out terms and requirements for when invoices should be submitted. However, the terms may often be silent on when submitted invoices should be paid. While such a scenario is practically unheard of in for-profit circles, silence on payment terms is quite common in the not-for-profit environment.

When conducting a nonprofit negotiation workshop for a grant, it is important to train organization members to include terms for when payments should be made. For US Federal awards, quote the Code of Federal Regulations (CFR). Specifically, the CFR 200.305 and the Cash Management Improvement Act (CMIA).

Whenever possible, use negotiation training techniques to establish terms that ensure advance payments or net-zero payments. Otherwise, in most cases, your best chance would be to get Net 30 terms. Net 30 means funders should honor payments within 30 days of receiving an invoice. Get the agreed on terms written and included in the grant award.

Establish Performance-Based Terms

To lock in funders, it may be necessary to agree to terms of payment that are based on performance rather than cost. Your organization takes the risk of receiving less than you spend on services, but a performance-based payment plan increases the chance of achieving results at a lower cost.

Nonprofit performance-based contracts are made on the premise that your campaign gets to serve an agreed number of eligible people. In addition, these types of contracts offer acceptable services for an agreed-upon financial reward. 

Performance-based terms work best when your organization's capacity to provide required results is already established and the community you serve is already identified. Otherwise, the overheads and administrative costs may far outweigh the donor funds applied for.

Abhay Choubey

Mia Sosa is an award-winning contemporary romance writer and 2015 Romance Writers of America® Golden Heart® Finalist. Her books have received praise and recognition from Kirkus Reviews, Booklist, Library Journal (starred reviews), The Washington Post, Entertainment Weekly, and more.

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