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The Key to Nonprofit Financial Health Is Communication
It can be difficult and uncomfortable to navigate. Some people are not numbers oriented, for others the discomfort comes from a sense of lack. It is tempting to avoid what we do not understand or what conjures fear and insecurity. Taking a proactive approach to crucial conversations about your organization’s financial picture, rosy or not, is important to sustainability. Developing meaningful communication around finances will foster more resiliency, support, and trust. The goal is to create a healthy financial culture that accurately represents your organization’s financial position and strategy to your stakeholders.
What does a healthy financial culture look like?
- Finances are not a taboo subject or the most obvious issue that no one wants to talk about. Your employees and Board are comfortable asking for information and checking out assumptions.
- Talking about finances is productive and creative. Discussions focus more on solutions than on the problem and your employees and Board are empowered to make suggestions, offer constructive feedback, and take action.
- There is less reacting to preventable crises and more energy put toward building long-term sustainability.
- Donors and funders understand how their money is used and are confident that it is being used well.
Awareness of what a healthy financial culture looks and feels like is the first step. Cultivating such a culture takes mindful attention and continuous effort.
How to move from awareness to action:
- Prioritize financials on every Board meeting agenda. Discuss finances before anything else so that there is plenty of time for questions and that the topic doesn’t get relegated to the next meeting if you run out of time.
- Maintain regular communication (at least monthly) about finances with your Board. You do not have to wait for a meeting to share information or provide updates. Some nonprofits find value in using a financial “dashboard” to make it easier for the Board to track the nonprofit’s financial status.
- Consider that not everyone on your Board has a mind for numbers. Balance the overall financial picture with pertinent details to allow Board members to see where things are without losing their attention trying to conduct an accounting class.
- Regularly communicate your organization’s financial policies and guidelines to your employees and Board to create a culture of fiscal responsibility. Clear expectations will encourage questions as needed and limit misunderstandings.
- Make sure to show trends and provide context; a single point in time only tells part of the story. Where were you last month, last quarter, last year? A focus on trends allows for troubleshooting, sustained improvement, and goal setting.
- Remember to include external stakeholders in your financial culture. Sharing financial information via your website, newsletters, or annual reports cultivates transparency and trust. It might even lead to increased donations or productive ideas from unexpected sources.
Having a healthy financial culture can make navigating difficult times easier, but challenges can still emerge. It is during those times when it will be most important to maintain the efforts you have made.
How to maintain a healthy financial culture in the face of challenges:
- Observe where you are focusing. Are you giving too much energy to the problem and not enough to the potential solutions?
- Continue to communicate even when the news is discouraging or the decisions daunting.
- Consider your audience and tailor your messaging. Sharing financial information with your employees or your Board may require a different strategy than how you share information with your external stakeholders.
If your organization’s financial culture has been fear-based or lacking communication, remember that a change in culture can take time. Be patient as your employees, Board, and external stakeholders adapt to more frequent communication and conversations about finances. Ask for feedback, assess your progress, and stay focused on the goal.
Does your organization need help creating a healthy financial culture?
Contact The INS Group for a free consultation to learn how we can help!