Finance & Strategy

Real world nonprofit finance matters, and real world thinking about strategies for financial, programmatic, and leadership sustainability. This column is written by Steve Zimmerman, principal of Spectrum Nonprofit Services.

photo of Steve Zimmerman

Alternatives to Strategic Planning

In Part 1 of this two-article series, we discussed some of the ways in which strategic planning processes have served nonprofits poorly. One key reason is that strategic planning is the primary organizational change process that nonprofits know about, that boards are comfortable with, and that funders will fund. In this article we give some alternatives, in part because it's helpful just to have choices when facing organizational decisions.

Strategic planning -- when done appropriately for your organization -- can be exactly the right tool for the job. But too often strategic planning is undertaken for reasons that would be better served by other methods: "engaging" the board, "getting everyone on the same page," getting buy-in from stakeholders, and so forth. And sometimes when boards are unhappy with their executive director, the one thing they and their executive can agree to is to undertake strategic planning.

Different processes are better for different types of decisions and challenges. Here are some tips to strengthen any process well as some specific alternative planning processes.

Focus on the questions that need answers

Begin a planning process by asking this: What are the four or five questions to which we must have unambiguous answers by . . .

Stick With Old Media: Not Cool But It Works

In the age of social electronic media, media expert Holly Minch dares to defy the Twitter evangelists and makes the case for the power of traditional print and radio:

There's tremendous strategic value in traditional media . . . yes, still! Three reasons why writing press releases and pitching reporters are still worth it:

1. Third-party validation. As pithy as your latest tweet is, as fun-filled as your latest Facebook update is, there's one thing that social media simply can't give you: third-party validation. Don't forget that more than 58 percent of people get their news from television and 34 percent read the newspaper. Face it: an article about you in the Chicago Times will impress your funders and donors; a post on your Facebook page won't.

2. A reach . . .

Nonprofit Bookkeeping Test

If you're not an accountant yourself, it can be hard to hire a qualified bookkeeper. How can you tell if an applicant really knows bookkeeping? CPA Dennis Walsh created this terrific assessment test you can give candidates for bookkeeping and accounting jobs. We especially like the chart at the end that shows what training is called for based on which questions were answered correctly or incorrectly:

This 21-question quiz samples from general bookkeeping knowledge as well as nonprofit bookkeeping and compliance matters. Use this assessment test as part of your hiring toolkit as well as for identifying staff training needs. Take it yourself and see how you do!

The Nonprofit Bookkeeping Assessment Test

We recommend that you give an applicant 20 minutes to complete the assessment test. The ability to make accurate choices under time pressure is an important indicator of suitability for this type of work.

1. Which of the following regarding the Statement of Financial Position is true?
a) It is also known as a balance sheet . . .

Meaningful Budget Work by the Board

For many nonprofits, the annual "approval of the budget" is the cornerstone of board financial oversight. However, this annual approval is frequently an empty ritual: one where board members peruse a budget that they are unsure is realistic or appropriate to the planned activities.

Consider the following scene:

The budget discussion is at the end of the agenda, and things are running late. Given a complex budget that "needs to be approved," board members react first by looking for things that they can understand . . . usually a relatively small expense item: "Why is this travel budget so high?" "Can this phone budget be reduced?"

As each question or suggestion is raised, staff respond by explaining why each suggestion for a change is unrealistic. "The travel budget has been funded for Program X so we have to do it." "Actually the phone budget is not that big." After a few instances of staff "explaining" line items, board members realize that asking such questions isn't really going anywhere.

In the backs of their minds is the thought, "It's probably okay. It was okay last year and I didn't understand it then either." So they vote to approve the budget.

In short, . . .

The Easiest Way to Raise Money: Register with CFC

Combined Federal Campaign (CFC) guru Bill Huddleston tells how nonprofits can raise money from federal employees in just eight great points:

1. Why should I bother to read this article about the Combined Federal Campaign?

  • Because it's easy to register the first time, and after that it's really easy to renew your registration
  • Because if it were a foundation it would be the 10th largest foundation in the United States
  • Because your small local nonprofit can raise reliable unrestricted money . . . CFC doesn't work only for large or well-known organizations
  • Because in terms of time to dollars it's one of the most leveraged fundraising vehicles.

2. Okay, you've got my attention. What is the Combined Federal Campaign?

CFC is the workplace giving (payroll deduction) program for employees of the U.S. federal government. If you are enrolled with CFC, any of the four million federal employees and military personnel can easily pledge to your organization. CFC is the only vehicle open to these employees.

3. How much can our nonprofit expect to generate from federal employees?

A Board-Staff Agreement for Financial Accountability

Not all board members need to be familiar with financial terms and concepts, but each organization needs to develop a clear and explicit agreement for how financial accountability will be ensured. The following is a starting point for an agreement that the board and staff can make to ensure a partnership for accountability.

Starting with this template, a discussion on the finance committee with the executive director and the finance staff will go a long way towards clarifying roles.

Sample Board-Staff Agreement for Financial Accountability

Read more for sections on accounting, budget, personnel, more . . .

How to Hire a Great Accountant for Your Nonprofit

For many executive directors, hiring an accountant is fraught with anxiety. How will we find the right person? How can I tell if someone really knows accounting? Will an accountant fit in with the rest of us? As difficult as it is to hire a good accountant, hiring an incompetent or incompatible person is even worse. Here are some FAQs on hiring accountants for nonprofits, and what to do if you're having an impossible time of it:

Where do we recruit applicants?

You may spend more time recruiting good applicants for your finance team than you may spend for program staff; after all, accounting skills are often more marketable across sectors than program skills. Competition for strong candidates can be challenging.

  • Ask your auditor: Your auditor not only is connected with the accounting world but also understands your needs. Auditors may know of good candidates who may be looking for work; for instance one of their other nonprofit clients may have just downsized. Be sure to ask where else to recruit in your community.
  • Advertise differently: For the accountant position, look beyond . . .

Raise Money in 30 Days

Sometimes you need to raise funds in a hurry. It's easy to think, "We should have established a fundraising plan earlier!" That may be true, but it doesn't help now. Here are some ways to raise modest funds in a pinch. Because institutions like foundations, government, and service clubs typically take more than a month to make funding decisions, your best bet to raise money in 30 days usually involves asking individuals for donations.

Each of these techniques can raise a lot or a little depending on who is doing the organizing. For example, a house party in one organization can raise $500 in one evening, while in another it can raise $100,000. In either case, the amount raised is . . .

Nonprofit Business Model Statements

Although every nonprofit has a mission statement that defines the organization's core purpose and work, many are unaware of its useful companion, the business model statement: a brief summary that spells out the organization's economic drivers. Like a mission statement, a business model statement acts as a touchstone: a reminder and a guide for the organization's focus and strategies.

Nonprofit executives and board members usually have a good sense of the various types of funding that support the organization, but they may have a harder time explaining the organization's business model. Let's imagine a childcare center with the following mission statement: "We provide high quality child care in a cross-cultural setting." A first draft of their business model statement . . .

Treasurers of All-Volunteer Organizations: Eight Key Responsibilities

More than half of the nonprofits in the United States are estimated to be all-volunteer organizations. Here is a wonderful, succinct guide for the 600,000 + treasurers of such organizations:

My time as treasurer of a faith-based nonprofit was a labor of love. Starting out as an all-volunteer organization with a $20,000 budget, we developed financial systems, workable budgets, and demonstrated accountability. We served families affected by incarceration and there's no greater personal reward than seeing people realize they have real hope for a better life. In just three years the budget grew to over $330,000.

However, there was stress as well. As a CPA I found myself the recipient of unnerving deference at times. I frequently fell short in communicating financial information to board and staff. But the outcomes made it all worthwhile.

This experience helps me appreciate one of the many unsung heroes of our time: the treasurer of the all-volunteer organization (AVO). AVOs are among the most important and most invisible building blocks of our communities. Members of all-volunteer organizations read to children, care for the dying, get clean water legislation passed, serve as . . .

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