As association leaders navigate COVID-19 and its effects on all aspects of revenue, they are making important decisions to ensure the long-term financial health and viability of their associations. Here is a look at some strategies and best practices they can deploy.

Use Reserves for Revenue Gaps

Associations that rely heavily on the revenue from their events may be in a more challenging financial position as in-person events are canceled and replaced with less-lucrative virtual events. “Pivoting to a virtual event may be the answer when in-person events aren’t possible, but it may not be the best financial solution for the organization,” said Mike Pulik, CPA, CFE, CGMA, Association Headquarters’ (AH) chief financial officer. “A virtual event may not be a successful replacement for an in-person event, and, in some cases, the financials reflect that.”

The key to weathering that storm, according to Pulik, is having sufficient reserves from which to pull to cover financial obligations during challenging times. Without that pool, leaders may find themselves hard-pressed to meet the association’s financial obligations without pressure. “Typically, it's recommended that an association or nonprofit have a minimum of three months’ worth of operating reserves, though we advise they have six months or more,” said Pulik.

Affiliates or sister organizations may be another source of emergency funding. An association may choose to leverage that relationship to secure a line of credit or, if they are a region or section of a larger organization, seek financial support either as a loan or a budget increase.

While reserves provide a way to cover expenses when projected revenue streams contract or other unexpected financial pressures arise, controlling costs is a vital component. “There's only so much an association can do to recoup lost revenue when a normally lucrative event is canceled,” said Justin Martin, CPA, director of client financial services at AH. “Where they're really going to have the most control is going to be on their expense side to manage those losses.”

To cut costs, associations may look to outsource portions of their operations but need to balance that with their requirements under the Paycheck Protection Program (PPP), if they qualified for and obtained the funds, which are designed to help pay employees at nonprofits affected by the pandemic.

Seek New Revenue

Associations are prone to over delivering benefits and services when compared to the membership dues they charge. Pulik advises scrutinizing membership revenue and pricing against the services delivered. If there’s a disconnect—either the association doesn’t collect enough in dues to cover the cost of services or dues far exceed the value of services delivered—a dues adjustment may be warranted.

Affiliates or sister organizations may be another source of emergency funding. An association may choose to leverage that relationship to secure a line of credit or, if they are a region or section of a larger organization, seek financial support either as a loan or a budget increase.

Finally, associations can look at the content they produce to bring in revenue. “We've seen a lot of associations rolling out new virtual learning opportunities, leveraging existing or new content in many ways to maximize the earning potential,” Martin said. If your organization is sitting on “old” content that still has relevance—such as videos from past meetings, content in need of an update, or content that can be repackaged into a new offering—you could be sitting on hidden opportunities to bring in revenue.

New products and services also present rich opportunities for sponsorship, offsetting the cost of producing the content while earning revenue that would otherwise be lost as in-person education events are canceled.