Debunked! Three Myths About Nonprofit Financial Management

Really pleased to share this informative and encouraging post by Andy Robinson and Nancy Wasserman, excerpted from The Board Members Easier Than You Think Guide to Nonprofit Finances.

Myth 1. Attention to finances detracts from the “real work.” So many nonprofit advocates and program managers, not to mention board members, have bifurcated brains: program work and advocacy on one side, money on the other. Our goal, with this book, is to dissolve that barrier and help you integrate your thinking.

Skilled staff members use financial data to track program results and assess their cost-effectiveness and efficacy compared to other options. As a trustee, access to this data helps you provide appropriate oversight. If you can’t track and measure your impact, how will you know if your work is working, or whether you’re using funds as effectively and efficiently as you’d like?

Myth 2. Only people who understand finances need to look at the numbers. Maybe you don’t know anything about electricity, but you’re smart enough 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?

You don’t need to be a CPA or Wall Street wizard to be an effective trustee. However, you’ll want enough basic wisdom to participate in the 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 (and why did you buy that giant television anyway?) Accounts payable. How about if your expenses are greater than the money you bring in each month? That’s what you learn from a statement of activities. So don’t be intimidated by the words; focus on the concepts.