Posted in NewsNotes Archive
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Nonprofit Finance 1.02
Financial Intelligence Nonprofit leaders do not start their organization hoping to spend a lot of time doing accounting and finance, but rather doing what they do best, to fill a mission-driven unmet need. All professional and lay leaders, however, need to have a high enough level of financial intelligence to know they are making the best possible decisions for their business. In addition, the more financial intelligence their employees have, the better the decisions of the organization will be as a whole. Financial intelligence, although it is a recently defined term, has its roots back in 1954, when the management guru Peter Drucker wrote in his groundbreaking book, The Practice of Management, “[The worker] should know how his work relates to the work of the whole. He should know what he contributes to the enterprise…if he lacks information, he will lack both incentive and means to improve his performance… it is in the best interest of the organization that the worker has the information”. One piece of this information that Drucker was talking about is financial information. It is not enough that the employee has the information, but that the employee knows what it means and what to do with it. Proponents of financial intelligence in organizations believe that if all employees understood financial information and how it is measured, then they would make decisions and take actions based upon this financial understanding to the benefit of the organization. If everyone knows the mission and goals of the organization and knows how the decisions they make help achieve these goals, the organization would be far better off. Financial intelligence relates to the knowledge and skills of accounting and financial principles. It is not just theoretical knowledge, however, but requires practical real world application and experience. Overall financial intelligence requires understanding four key attributes: 1. The Foundation: One must understand the basics of business measurement including the Income Statement, the Balance Sheet and the Cash Flow Statement. It also requires knowing the difference between cash and profit (there is a big difference), and why a balance sheet balances. 2. The Art: Finance and accounting are both art and science. The two disciplines rely on estimates, assumptions, and rules to accomplish the end result. Financial intelligence ensures that one can identify where assumptions have been applied to the numbers and how applying different assumptions can lead to different conclusions. Understanding the assumptions behind a budget or forecast is critical to helping you make adjustments to your business when things don’t turn out the way you thought. 3. Analysis: Financial intelligence means you know how to analyze the numbers to gain a deeper understanding of their meaning. This includes the ability to calculate surpluses, leverage, liquidity and various efficiency ratios and key indicators. When you understand the factors that make a program generate healthy surpluses, and how that factors into the overall success of your organization, you make better strategic decisions. 4. The Big picture: Financial intelligence means you can understand your nonprofit business’s financial results in the context of the big picture: the overall economy, the competitive environment (other nonprofits and for-profit companies), regulations, and changing client needs. Nonprofit leaders, managers, and employees in general who understand these principles and the effects of their decisions on the organization, will provide a competitive advantage to their organization. Ed Allon is a trusted advisor to small and midsized organizations and part-time CFO focused on making businesses more profitable and successful. He is a partner in B2B CFO® , and a featured resource in NEW’s online Resource Directory. Ed would welcome the opportunity to speak to you, and to conduct a no-cost, no-obligation analysis of your nonprofit business. He can be reached at 248.677.1159 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it . You can see his complete profile and other articles on his website. |
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Online Matching Service for Nonprofits and Private Foundations
Foundation Source Access is a new service from Foundation Source. This provider of services to private foundations has developed an online database to help funders find and fund charitable projects that match their philanthropic missions. Access also helps nonprofits find potential funders more easily and cost efficiently.
View the official IRS announcement. See the list of Michigan charities.
Nonprofit 911 Webinar Series
Webinar: Underdog: How Small Charities Can Land Big Gifts
Nonprofit Training: Building Your Board
Board Chair 101 NEW presents a panel discussion that will help you think about different ways of measuring your social impact as well as what resources to explore for funding. Come learn from experienced local and national nonprofit professionals about how to increase capacity and implement evaluation and performance measurement in meaningful ways. Panelists: Brian Dates, Director of Evaluation and Research - Southwest Counseling Solutions; John Seeley, Co-Founder and Currently a Consulting Partner- FERA; Teri Behrens, Editor in Chief – The Foundation Review, Dorothy A Johnson Center for Philanthropy.
See more trainings and events on the Michigan Nonprofit Association website. Share Your Views on Redesigned Form 990 The IRS is seeking public comments on 11 specific issues and frequently asked questions involving the redesigned Form 990. Starting July 15, Independent Sector will be hosting a two-week online forum where you can talk to your colleagues about 990 issues, offer your ideas for changes, and provide input to IS's submission to the IRS. Learn more, including how to submit your comments directly to the IRS.
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Call 800-765-1259 for details. There is no limit to the offer. Purchase 6 Dell Desktops and get 2 free Dell laptops! Purchase 9 MS Office licenses and get 3 free Dell Laptops! Nonprofit Discount Computers. Expires July 28, 2011.
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