Someone recently asked me how and why I got interested in of all things, nonprofit financial management.
Hmmm, had to give that one some thought:
- Because it is so fulfilling, and people are so appreciative of the help I offer
- Because of the status, pay and perks, not to mention the internal honor and respect I receive from the organization
- Because it is so fascinating and interesting
- Because it sounds so damn sexy
None of those answers really resonated, so I guess I can go with the truth: because so many good, caring and important nonprofits have no idea what they are doing, and get in their own way. Finances are nothing but critical and essential and all the flowery and urgent language in the world will not help if there IS NO MONEY.
Finance – not as scary as you think
There are many good causes out there that desperately need and want to do good and do it well: it almost seems to many that having to focus on money and reports is simply not fair. These groups are saving lives, providing access, preserving history or rights, and many other important things, and to do so, understanding and working with finance is not an elective, nor the least important priority on the desk.
Ok, fair enough, now what? That is where I come in and find myself wanting to stay. I want you to do well, make an impact, difference, change. I want your passion undimmed by excel spreadsheets and notes on a P & L. That is not to excuse having to do them, I want to de-mystify this area and take away the fear and loathing.
The documents – who needs to see what?
Surprisingly, everyone ends up seeing this document:
- The IRS, just because you don?t pay taxes, don?t think they don?t read this document. Should there be any questions raised about your activities, fundraising and spending, this is the legal document you have filed. This is also a public document, part of the deal for paying no taxes; it is available for all to review.
- Any potential donor: especially those with larger possible gifts or sponsorships. Most corporations require both budgets and 990s to consider donations.
- Possible partners for various types of programs or projects.
- Reporters doing a story, pro or con.
- Possible competitors or future employees, board recruits and anyone else with a computer.
And remember what those same people might suspect were you unable or unwilling to show these documents.
Your internal financial records
Traditionally this includes a profit and loss statement, a balance sheet, reconciled bank statements and notes. Pledges, bequests, promissory notes and other documents are often also part of these records.
I my experience, everyone looked at the first two pages, usually two in the room understood, everyone else jumped to the notes and then asked me to offer a summary so they wouldn?t have to read it?.we spent far more time talking about event entertainment
These are the raw materials that the 990 is made from so again important that they be reliable. These documents are not necessarily public and sometimes need to be revised based on changes during the month.
This is a moment in time, a snapshot of your status, but it is also part of a slide show of the year. It can show trends, holes and piles of loot, you should be so lucky. This is also the key to making so many decisions; what can you afford, how much you need to raise, how much to keep the doors open and the website live? Contrary to either belief or desire, finance is not dull and boring; it is vital and dynamic and can change in an instant.
Although this is just the tip of iceberg you can see that already it isn’t that scary. If you’d like help making sense of it all and freeing your time up so you can get back to the program management, call me on 310 828 6979.
Read Fear & Loathing: Non Profit Finances (Part 2)
Cindy Lauren is the Principal of Lauren Associates – non profit consulting
As well as advising Executives and Boards on all aspects of nonprofit management, the firm specializes in developing fundraising solutions for all sizes of organizations.