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Making sure that your nonprofit is going to be around long-term requires financial leadership. This means creating a financial vision for your organization and planning how you’ll get there.
Financial Leadership for Nonprofit Executives gives you the framework, specific language, and processes to lead with confidence. With it, you’ll learn how to protect and grow the assets of your organization and accomplish as much mission as possible with those resources.
The good news is you don’t have to be a trained accountant, earn an MBA, or have run a for-profit business in another lifetime. You already have many of the skills it takes to be a financial leader. This useful guide makes the process understandable and doable.
Logical, clear, and well-written, you’ll find clear, logical steps to learn how to:
1. Get accurate financial data—in a format you can understand
2. Use financial data to evaluate your organization’s health
3. Plan around a set of meaningful financial goals.
4. Communicate progress on these goals to your staff, board, and external
stakeholders
You’ll also find:
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Five foundational financial leadership principles
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Three overarching questions every financial leader needs to be able to answer (and where to find those answers)
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Two fundamental budgeting principles
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Five steps to building a strong annual budget
Table of Contents:
Introduction: How to Use This Book
CompassPoint’s Finance Philosophy
Who This Book Is For
How to Use This Book
1. Defining Financial Leadership
Mission or Money?
Financial Leadership
Five Leadership Principles
1. Move beyond mission-versus-money thinking
2. Cultivate financial leadership on both staff and board
3. View the nonprofit business as an interdependent set of programs and activities
4. Recognize the relationship between strong infrastructure and strong programs
5. Set a tone of financial accountability and transparency
Evaluate Your Financial Leadership
Summary
2. Getting Financial Data You Can Trust
Staffing
Accounting Practices
1. Treatment of restricted contributions
2. Functional classification of expenses
3. Employee time tracking
4. Allocation of common costs
5. Accrual basis accounting
6. Capitalization and depreciation
Accounting Systems
Evaluate Your Staffing, Practices, and Systems
Summary
3. Assessing Your Organization’s Financial Health
The Financial Leader’s Key Assessment Questions
1. What are our immediate financial strengths and vulnerabilities?
2. What are our long-term financial strengths and vulnerabilities?
3. Do our constituents perceive us as efficient and competitive?
Evaluate Your Organization’s Financial Health
Summary
4. Financial Planning
Guiding Principles of Effective Budgeting
Building the Annual Budget
1. Define the planning context and goals
2. Estimating costs
3. Forecasting income
4. Striking the balance
5. Approving the Plan
Evaluate Your Financial Planning
Summary
5. Communicating Progress
Match the Message to the Audience
Program managers
Development director
Management team and board finance committee
Full staff and board
Funders
Constituents
IRS and regulators
Evaluate Your Communication of Financial Progress
Summary
Conclusion
Appendix A: Key Terms
Appendix B: Red/Yellow/Green Evaluation Forms
Appendix C: Resources
Figures
Figure 1. Financial Leadership Model
Figure 2. Financial Leadership Model
Figure 3. Financial Leadership Self-Evaluation
Figure 4. Finance Functions, Specific Tasks, and Qualifications
Figure 5. Statement of Activities (March 31, 2005)
Figure 6. Statement of Financial Position (March 31, 2005)
Figure 7. Functional Classifications of Expenses
Figure 8. Statement of Functional Income and Expenses (March 31, 2005)
Figure 9. Depreciation Schedule (March 31, 2005)
Figure 10. Accurate Financial Data Assessment
Figure 11. Statement of Financial Position (March 31, 2005)
Figure 12. Budgeted Statement of Activity – Unrestricted (March 31, 2005)
Figure 13. Statement of Functional Income and Expenses – Summarized (March 31, 2005)
Figure 14. Activity by Funding Sources (March 31, 2005)
Figure 15. Dual Bottom-Line Matrix
Figure 16. DV’s Dual Bottom-Line Matrix
Figure 17. Income Trend Analysis (March 31, 2005)
Figure 18. DV Restricted Funds Detail (March 31, 2005)
Figure 19. Financial Health Assessment
Figure 20. Budgeting Process
Figure 21. Budget Calendar
Figure 22. 2005–06 Budget: Goals and Objectives (April 15, 2005)
Figure 23. 2005–06 Budget: Staffing Plan – FTE (April 22, 2005)
Figure 24. 2005–06 Budget: Staffing Plan – Salaries (April 22, 2005)
Figure 25. 2005–06 Budget: Shelter Program Direct Costs (April 29, 2005)
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