The growing impact of inflation on not-for-profit organizations

While inflation is often associated with individuals, families and the increased cost of living on a year-over-year basis, the concept certainly has significant relevance to companies and not-for-profit (NFP) organizations.

In particular, NFPs need to be cognizant of inflation – where it is today and where it is likely heading in future years – and the primary areas of their organization that it impacts.

To begin, what is inflation exactly?

The Federal Reserve defines inflation as the measurement of the increase in prices of goods and services over time. Inflation is not measured by any particular good or service cost increase, but rather as a general increase in the overall price level of goods and services in the economy.

Changes to inflation are monitored by several price indexes, including the consumer price index (CPI). The CPI, which is released by the Department of Labor each month, measures the average change over a period of time of prices paid by consumers for a market basket of goods and services.

This topic is particularly relevant in 2022, as inflation is at a general 40-year high. Inflation levels peaked in May 2022 at a level not seen since December 1981. Inflation showed a small decrease since March and is currently at 8.6% for the 12 months ended May 2022. And as inflation rises, so too does the demand for not-for-profit goods and services – and so too does its potentially negative impact on organizations of all shapes and sizes.

Source: Current U.S. inflation rates: 2000-2022 | U.S. inflation calculator

With that in mind, what factors should NFPs consider in order to stay ahead during a period of high inflation? We have highlighted four key areas in the following section.

Inflation impact areas to consider

Revenues