The goal of the session was to demystify financial statements for Board and staff leadership with minimal financial training and to help these leaders make smart decisions based on key financial indicators. Understanding financial statements, knowing where the money goes, and measuring financial health are key concerns for all nonprofit organization leaders—staff, board members, and volunteers. The workshop provided a guide to understanding what staff and board need to know and to training board and staff to focus on the things that matter most.
We believe that managing money helps manage and stay true to mission and that nonprofit leaders should not feel intimidated or overwhelmed by financial statements, accounting terms or professional accountants. After all – most of us manage household budgets or checkbooks or personal cashflow – so we do understand the basic concepts.
“The biggest barrier to good financial management isn’t mathematical ability or accounting know-how, it’s attitude” -Institute for Conservation Leadership
Co-led with Dan Moors of Armanino LLP, a CPA with many years of experience with nonprofit audits and consultation, our session focused on five areas:
- Interpreting Nonprofit Financial Statements – Both balance sheet and statement of activity are important. Define and demystify financial terms, help participants recognize financial priorities and learn how to identify primary indicators.
- Explaining Financial Ratios and Percentages – Some of these include assets to liabilities, cost to raise a dollar, operating reserve – identify and track those that are meaningful to you and to those monitoring your progress.
- Who’s Looking At Us and What Are They Looking At? What are rating organizations and donors looking for? Understand how you are being rated – American Institute of Philanthropy (www.charitywatch.org), BBB Wise Giving Alliance (www.give.org), and Charity Navigator have published scales and metrics. Your donors and institutional funders are watching your financials too – so remember to approach your financial presentation from a donor’s perspective. And whether you have a full annual audit, an annual report, or just internally generated annual financials, your 990 is a significant opportunity to tell your story. This public document now has room for program narrative and impact statements – USE IT – funders are reading it.
- What’s the Big Fuss About Dashboard Reporting? Make it easy for your leadership and Board to monitor key indicators of financial health with a simple dashboard – check out this article for a guide to creating your dashboard: http://www.blueavocado.org/content/nonprofit-dashboard-and-signal-light-boards
- Does Your Organization Have Critical Governance Policies in Place? Even though small organizations may have a challenge separating financial functions be sure to know what the minimal legal requirements are in your state.
Dan and I enjoyed a lively session with a smart group of nonprofit leaders from Santa Clara County with great questions and even some laughs! Financial management can be fun too! The workshop was hosted by Silicon Valley Creates (www.svcreates.org). For additional resources we recommend:
- Andy Robinson’s book“The Easier Than You Think Guide to Nonprofit Finances” from the Emerson Church Gold Standard in Books for Your Board series.
- Chronicle of Philanthropy https://philanthropy.com/article/What-Operating-Reserves-Are/190577 (and other articles).