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Fiscal Fitness: August 2006

Editor's Note

This month’s issue of Nonprofit Fiscal Fitness is devoted to the changing role of Finance at nonprofit organizations. By better demonstrating how proper financial management enables your overall mission, the finance department can be a tool for change for your entire organization.

The following is a reprint of an article by Vince Hyman, publishing director of Fieldstone Alliance. The article highlights some key points from the recently published book Financial Leadership for Nonprofit Executives: Guiding Your Organization to Long-term Success by, Jeanne Bell Peters and Elizabeth Schaffer. This book offers some terrific insight into better communicating and illustrates how Finance benefits the entire organization.

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  »   Blackbaud's 2008 Conferences
  » Building a Better World
  » The Dual Bottom-line Matrix
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Blackbaud's 2008 Conference planning has already begun, and this year’s events will be more exciting than ever! Packed with new educational content, unlimited networking opportunities, and a strong focus on technology for nonprofits, Blackbaud’s annual conferences offer learning experiences you won’t want to miss! Registration is now open for the Conference for Nonprofits in Montreal, scheduled for April 30 – May 2. The Conference for Nonprofits in Charleston will take place November 16 – 19, and registration opens June 1.
Building a Better World — One Balance Sheet at a Time
From Vince Hyman, Publishing Director, Fieldstone Alliance

Keys to helping your organization thrive — not just survive
If you have a leadership role in a nonprofit — as a program manager, a board member, or an executive — you probably came to it with little financial background.

Yet here you are, learning to make sense of the month's balance sheet, cope with cash flow, set budget assumptions, whatever. If it has a dollar sign attached, you wind up looking at it in some form.

For too many of us, financial details are a recipe for heartburn.

That's too bad, because finance should be a tool for fueling social change.

Enter Financial Leadership for Nonprofit Executives: Guiding Your Organization to Long-term Success, a wonderful new book by Jeanne Bell Peters and Elizabeth Schaffer, which has been co-published this with our partners at CompassPoint Nonprofit Services.

The book defines your role as financial leader — a person running a nonprofit business in a way that balances the organization's deep passion for mission with a pragmatic concern for the role of money in accomplishing that mission.

It shows you how to use finance as a tool for protecting and growing your nonprofit's assets, so that you can accomplish as much mission as possible with those resources.

The authors, both longtime financial trainers and consultants, observe, "We have seen the difference a financial leader can make in the health and impact of a nonprofit organization over time. Indeed the most dangerous thing a nonprofit executive can do is to put his or her head in the sand about money."

Assess your financial leadership
Peters and Schaffer note four essential components of financial leadership:

  1. Ensuring that decision makers have timely and accurate financial information
  2. Using that data to assess the financial condition of your organization's activities
  3. Planning that involves meaningful financial goals
  4. Communicating progress on these goals to staff, board, and external stakeholders.

There's a chapter devoted to each of these components, and a running example, complete with multiple spreadsheets, helps you learn how to read, interpret, and act on financial information.
At the end of each chapter, you'll find a "Red-Yellow-Green" evaluation to see how you and your organization rank among various categories of performance. This evaluation helps you pinpoint steps you should take to move your organization to optimal financial performance.

The book's case example shows how the executive director of a violence intervention program ranked herself around 10 key indicators, including funder accountability, teamwork, and information sharing. (I have to admit that I did some serious thinking about my financial acumen after using the evaluation. Fortunately, the authors do an excellent job of helping you expose your foibles in a constructive manner!) (View case example of the "Red-Yellow-Green" evaluation on overall financial leadership.)

The Dual Bottom-line Matrix

Peters and Schaffer go into quite a bit of detail on overarching financial leadership principles, as well as specific approaches to the use of ratios, staffing patterns for nonprofit accounting departments, accounting practices, annual budgeting, and more. There's too much to describe here, but I will focus on one of the easily understood tools: The Dual Bottom-Line Matrix, shown below.

Adapted from Boston Consulting Group's well-known Growth-Share Matrix, this is a tool that you can apply today to an analysis of your nonprofit's programs. The matrix places mission impact on the x-axis and financial sustainability on the y-axis. The four quadrants are then labeled as follows:

  1. Star — High Mission Impact and High Sustainability: Keep and strengthen these activities.
  2. Heart— High Mission Impact and Low Sustainability: Keep and build the sustainability of these activities.
  3. Money Sign — High Sustainability and Low Mission Impact: Keep and increase the mission impact of these activities.
  4. Stop Sign — Low Sustainability and Low Mission Impact; Close or transfer these activities.

So, a program in the lower left corner has low mission impact and low financial sustainability — and is something you'll want to close down soon. Meanwhile, a program in the upper right corner has both high mission impact and high sustainability. That's a sure keeper. Simple though it is, the matrix can help bring clarity to some confusing situations.

Latest and Greatest

Web Seminars

The Financial Edge (for Accounting For Nonprofits clients)
This demonstration is designed for current users of Blackbaud's accounting software and will highlight the benefits of converting from Accounting For Nonprofits.


March 25, 2:00 p.m. ET


The Financial Edge (for non-Blackbaud clients)
Join us to discover the
tools The Financial Edge provides for advanced reporting and budgeting, managing projects and grants, and enhancing internal controls.

March 12, 2:00 p.m. ET

In the news
Charities Face Postal Increases in May
The U.S. Postal Service has proposed new postage rates for nonprofit organizations and other mailers to take effect on May 12. Under the proposal, postage for nonprofit standard mail, mostly letter-size pieces, will increase by an average of 0.7 percent.

Read the entire story here.


Corporate Giving Continues to Rise
Charitable contributions by major corporations and their foundations increased to $10.2 billion in 2006, with pharmaceutical companies the top givers and health services the top beneficiary, a new study says.

Read the entire article here.
Resources

Blackbaud Forums
Blackbaud's new and improved forums are now live! Stop by to discuss a wide range of topics with your nonprofit peers, industry experts, and Blackbaud employees.

View the forums here
.


Eight Secrets of Effective Online Networking
As more and more organizations jump on the social networking bandwagon, people are seeking ways to make the time spent on these tools as efficient and fruitful as possible.

Read the entire article here.

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