A new study published by Bill Meehan and Kim Jonker indicates that nonprofit financial management has a greater impact on how nonprofits are viewed by the public than previously thought. The study, The Stanford Survey on Leadership and Management in the Nonprofit Sector, penned by “friends” of the GuideStar organization, outlines seven areas which the study’s authors call “the engine of impact.” Several of these points, when taken together, point to nonprofit financial management’s role in the leadership of an organization.
The Seven Engines of Impact and Their Role in Nonprofit Financial Management
We know that nonprofit financial management can make or break an organization. Sound financial management provides a sturdy base from which a nonprofit may fulfill its mission. Without responsible financial management, nonprofits—like their for-profit counterparts—may cease to exist.
Among the seven “engines of impact” cited in the study, several can be taken together under the umbrella heading of nonprofit financial management. Let’s take a closer look at each, but especially those that impact nonprofit financial management.
- Mission
- Strategy
- Impact Evaluation
- Insight and Courage
- Organization and Talent
- Funding
- Board Governance
Among the seven, most directly or indirectly intersect with the world of nonprofit financial management. The survey’s authors found that among the 3,000 nonprofits they surveyed, most—if not all—fell short in at least one area. Successful nonprofits were strong in all seven.
Supporting Your Nonprofit: Improving the Engine of Impact
The good news is, according to the survey results, more than 80% of nonprofits fell short in one or more of the seven areas. The bad news is your nonprofit may be among that large majority.
Board governance, funding, and impact evaluation—three key areas of nonprofit financial management—were cited among 50% of respondents as areas in which they fell short.
How does your organization measure up? The survey’s authors put together a questionnaire which you can fill out online at the link cited above to assess your own nonprofit.
If you find your organization comes up short, there are quite a few things you can do to improve:
- Work with an outside consultant: A CPA firm specializing in nonprofit organizations can help you assess your financial status and suggest direct improvements to benefit its health.
- Use software: Software to help track, manage, and assess fundraising activities, donor communications, and general organizational management can be helpful to add a layer of accountability to your organization. Many nonprofit accounting software packages include good reporting capabilities, which can transform data into useful information that will help finance and non-finance personnel alike manage their work better.
- Engage the board in direct conversation: If you feel that board governance is an area in which your nonprofit falls short, build an action plan with your board, along with directors and other key stakeholders, to improve stakeholder engagement. How can you engage in conversation with your board so they feel both empowered and invested in the activities of the organization?
There’s no magic to improving nonprofits. A concerted, focused effort, based on an evaluation of major criteria such as those outlined in the seven points presented in this study, can help you improve your nonprofit and build a stronger organization that can best serve your constituents.
Beck & Company
Beck & Company is an independent certified accounting firm specializing in nonprofit organizations. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.