Sage, the leader in accounting, financial, HR, and payroll technology for small and mid-sized businesses, released the second part of its annual Grow Together report, which found that Canadian nonprofits express optimism about their financial outlook but struggle with rising costs and securing skilled talent to help drive strategic initiatives including digital transformation.
As a follow-up to the Annual Grow Together report released in April 2023, which looked at charitable giving in Canada, the 2023 Grow Together: Building value for nonprofits in a digital economy – conducted by Léger – surveyed 120 decision makers in nonprofit organizations in April 2023 to gleam how financial pressures are affecting nonprofits and what barriers they are facing to optimize operations. The survey found that while financial pressures have eased, rising costs and closing the talent gap remain a challenge:
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- Nonprofits are cautiously optimistic, seeing signs of a positive financial outlook with 42% of nonprofits experiencing an increase in revenue over the past 12 months, followed by 34% where revenue remained flat YtoY. Whereas, nearly one in five (18%) experienced a decrease in revenue.
- Largest increase in funding came from governments, with 28% of organizations experiencing an increase in the past 12 months while the biggest decrease came from corporate (25%) and individual giving (23%).
- More than half of respondents (53%) indicate that the cost of programs has increased over the past 12 months
To continue driving success in 2023, they are prioritizing improving their internal systems; as well as increasing their brand awareness and expanding their program offerings to better engage with current and prospective donors and volunteers. Updating their systems is vital as online donations make up the majority of funding, yet almost one in five (19%) do not have an online donation option.
“As Canadians are re-evaluating how they support charities, nonprofits need to examine how to make best use of the operational dollars available to meet the increased demand for services at an increasing cost.” Said Mark Hickman, Managing Director of Sage in Canada. “To maintain and grow their share of funding, they must advance brand awareness but also show operational efficiency.”
Prioritizing efficiency and demonstrating value
Both individual and corporate donors state that a clear alignment to values is in the top reasons of why they choose an organization and nonprofits are looking to increase their brand awareness and expand program offering. Additionally, in the first part of the report, 86% of donors and volunteers are more likely to donate to a charity if they know the charity is operating efficiently, while 73% believe charities that are taking advantage of available technologies are operating more efficiently. In response, nonprofit organizations have had to evolve key processes on how they engage and demonstrate impact to better meet today’s donors’ expectations.
“The use of digital technologies in the nonprofit sector is no longer optional. To succeed in this tech-driven world, nonprofits need a digital footprint to build awareness of their brand and program offerings,” Chantal Edwards, Manager, Public Policy, Imagine Canada. “As governments and funders continue to focus on efficient program delivery, the adoption of digital technologies will allow nonprofits to automate processes resulting in reduced program costs. Investments in digital technologies will be essential to ensure nonprofits can continue to deliver high-quality programs and services to communities in need.”
As in many industries, nonprofits are facing economic challenges, a rise in operational costs, a significant increase in demand for their services, as well as general inflation challenges. Nearly two in five (39%) respondents say that more and more Canadians are turning to their services, resulting in more than a third (38%) of organizations increasing the number of programs to keep up with the demand.
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Digital transformation is becoming a necessity for success
Nonprofits agree that technological advancement is seen as a strategic necessity, but a large percentage do not have the people to make it a priority with nearly half (48%) experiencing staffing shortages.
The report found that only 18% of nonprofits are fully digital-first. Provincially, Quebec nonprofits are far outpacing their provincial counterparts as 40% say they are fully digital. Nearly half (48%) of nonprofits are in the process of digitizing key aspects of their organization, while 20% have not begun their digital transformation journeys yet.
Due to staffing shortages of skilled workers and budget constraints, many nonprofits have taken a staggered approach, prioritizing systems that can deliver the greatest ROI. Over half (55%) have completely digitized their financial processes; followed by people management (37%); marketing activities (34%) and donor and volunteer communications (27%).
The report found that organizations lack staff with critical skill sets to manage digital transformation (35%), financial systems and processes unable to keep pace (18%) and lack of process automation leading to organizational inefficiencies (17%).
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