Next month's Dunedin Relay for Life had just over 90 teams registered, about 30 fewer than expected, he said.
The fundraiser, held every two years, raised more than $300,000 in 2009, providing about 15% of the society's revenue.
Registrations would be accepted until the last minute and if more teams signed before February 19, the loss would be less.
Teams, comprising 10 members, paid $100 to enter, and sought sponsorship from friends for their run.
He was heartened the Relay for Life being held for the first time in Oamaru in March was attracting a healthy level of interest, with more than 30 teams signed.
Mr Kernaghan said the society would cover the 2010-11 loss out of reserves if necessary, but could not do so year on year.
Compounding the financial problem was increased demand, which Mr Kernaghan put down to more public awareness.
"While it's great that more people understand the value of the services we offer and are making use of them, it means that unless we can generate more funding, we are facing a loss this year which means, potentially, a reduction in services we are able to provide."
Mr Kernaghan said the society was considering reducing the financial support it offered families affected by cancer.
Funds from the society's other major fundraiser, Daffodil Day, had been up 5%, in line with a countrywide increase that demonstrated the public still wanted to support the society's work, he said.
Mr Kernaghan attributed the funding shortfall to the financial downturn of the past two years.
