Exercising executive financial leadership

February 10, 2014       The NonProfit Times      

Nonprofit executives face so many challenges that a typical day can be yet another decision of which chainsaws to juggle and which to leave aside. It can be tempting to overlook that chainsaw of financial management.

Like it or not, that one must be picked up.

During the AICPA Not-For-Profit Financial Executive Forum, Kate Barr, executive director of the Nonprofit Assistance Fund, and Jeanne Bell, CEO of CompassPoint Nonprofit Services, reviewed an article from “Nonprofit Quarterly” that outlined key business principles for nonprofit executives.

  • Activate the organization’s annual budget. Achieve a net financial result. Anticipate the future. Commit to financial projection.
  • Remember income diversification. Determine the level of diversification that will be needed. Determine risk.
  • Make cash flow your priority. Develop a cash flow projection. Anticipate — and resolve – cash flow issues. Manage shortfalls.
  • Don’t wish for reserves — plan them. Achieve a surplus. Determine the reserve goal. Manage the cushion.
  • Rethink restricted funding. Develop effective grant proposals.
  • Staff the finance function. Determine the optimal staffing approach. Invest in contract consultants.
  • Help the board to help the executive. Design financial reports thoughtfully. * Understand how boards use financial information. Remember compliance, evaluation, planning, taking action.
  • Manage the right risks. Assess the organization’s risks holistically. Consider enterprise risk management (ERM).
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