You might find math mysterious and scary, but you need to understand financial statements to do your job as a fundraiser, board member, and lots of other staff roles.
So, I'm going to get you started right now by debunking three myths about nonprofit finance...
Myth 1. Attention to finances detracts from the "real work." Many nonprofit advocates and program managers, not to mention board members, have bifurcated brains: program work on one side, money on the other.
Even fundraisers can silo their thinking -- having great focus on income and little on expenses.
Strong nonprofits strive to dissolve these internal barriers.
- Staff members can use financial data to track program results and assess their cost-effectiveness and efficacy.
- When board members understand this data, it enables them to provide appropriate oversight.
- And fundraisers should certainly have a sense of where money is spent in order to tell donors where their contributions are going.
None of this sounds like territory that should be ceded to your accountant.
It sounds like "real work" to me!
Myth 2. Only people who understand finances need to look at the numbers. Maybe you don't know anything about electricity, but you know to call an electrician when the lights go out. Throwing a party for fifty people? Find a good caterer. Planning your retirement? Hey, professionals can help with that.
In each of these situations, you don't have to solve the problem yourself. But
you need to know enough to be concerned, engaged, and ask good questions.- For example: Am I using too many appliances at the same time? If we feed everyone steak, how much will it cost? How much money do I need to save and invest each month to retire at age 65?
You don't need to be a CPA to do your job effectively. However, you'll want enough basic wisdom to participate in financial discussions, affirm good decisions, and raise concerns.
Myth 3. I don't understand the language; therefore, I can't understand the concepts. You understand more than you realize...
- If you know you don't have enough money to pay the rent or staff salaries until that foundation grant is received and deposited, then you understand the principle of cash flow.
- When a family member promises to send you $50 on your birthday, that's an account receivable.
- The $600 you owe on your credit card is an accounts payable.
- Want to know if your expenses are greater than the money you bring in each month? That's what you learn from a statement of activities.
While financial planning and budgeting combine all of our money taboos with the common phobia of math, you owe it to yourself and your cause to get over that fear and anxiety. Reading this got your started. Keep going! It really is easier than you think.
This month's issue of Keep the Change was adapted from The Board Member's Easier Than You Think Guide to Financial Management, a new book by Andy Robinson and Nancy Wasserman. Copies are available through publisher Emerson & Church and on Amazon.com.
