Finance · Strategy

Episode 2: Building Financial Strength

Today we’re talking about the frequently unpopular topic of finance. Nancy, Sarah, and JoAnn explore how we can position our organizations today to be financially stronger tomorrow.

Questions to reflect on before you listen:

Think about how your board talks about the financial situation of your organization. Is it a comfortable topic? Does everyone engage in the conversation? Do you have the right information to have a productive conversation? 

Discussion questions:

  1. What resonated with you about this conversation? What would you like to take back to your board?
  2. How could you strengthen your board’s financial literacy to make sure every individual on the board can contribute to these conversations?

Word of the Week:  Progress
What does “progress” mean to you and your organization right now?

Key Listening Points:

0:00 – Introduction

3:17 – Three Big Ideas about Finances

5:01 – Finance Exercise to do with You Board

6:23 – Overhead

9:09 – Word of the Week: Progress

12:57 – Reevaluating Your Course


Episode 2 Transcript

Nancy Bacon  00:01 Hello, and welcome to the nonprofit radio show, a podcast with tips and tools for small nonprofits. If you feel in the dark about how to run a nonprofit, sunshine is on its way. I’m Nancy Bacon, and I’m joined by Sarah Brooks and Joanne Crabtree, and this week, we’re talking about probably the least popular topic ever among nonprofit people. Finances. How do we talk about finances in these uncertain times? I’ve been thinking a lot about how do we kind of keep an eye on the sunshine over the border while we’re walking in the rain right now? How do we address today’s challenges and address some of the underlying issues that make today so hard? We’re talking a little bit about money today, but we’re really talking about that larger issue of leadership, culture, and learning. Those are the thing that I’ve been thinking a lot about lately.

Sarah Brooks  00:57 I’m so glad we’re talking about this, Nancy. Just yesterday, I was with a Zoom call with some other nonprofit organizations. And I said, Hey, how are you all talking with your board about your finances right now? And literally, you could watch every facial expression sort of fall in change, and then we quickly pivoted away to a different topic. So, I think this is one of those things that we shy away from talking about and the fact that we shy away from talking about it is part of the reason we need to get really good at talking about it.

Nancy Bacon  01:29 I totally agree. I, you know, I’ve done a lot of training on Nonprofit Finance across the state, and I would say this is the broccoli topic. This is the topic of like it’s on your plate. You’re a board member, you know, you need to eat that broccoli, but you really don’t want to, so you go to a training because you’re told that you need to figure out how to read a balance. Sheet. And the thing is, you know, I used to feel the same way. And over the years, I have really learned to love my broccoli. I love talking about Nonprofit Finance. And the reason why I love talking about Nonprofit Finance is it is the currency that allows us to do our mission, and that without money without talking about money and our plans for money, our culture around money, how we how we plan knowing about money, we really can’t achieve our mission. So that’s that’s what I get excited about.

Sarah Brooks  02:21 Well, I agree, and I, you know, I think the key to liking the broccoli is figuring out how to how to cook it well, right? Like I hate raw broccoli, but roasted broccoli works for me. And I think it’s a really interesting analogy to think about how can you present the information to your organization in a way that is appetizing. Maybe you need a little cheese sauce every once in a while, and that’s okay. And so you get to this doesn’t have to be corporate finance. This doesn’t have to be the accounting 304 class that everyone shied away from in their junior year. It can instead be color coded or a graph or words on a sheet of paper and with bullet points that just say, “hey, we’re doing okay,” or, “no, we’re not.” But if you aren’t those conversations about where you are financially, you absolutely cannot be having realistic conversations about how you’re going to make your mission happen.

Nancy Bacon  03:17 I totally agree. And I have three kind of big ideas that I think about when I think about finances, and you know, this, this, this podcast is all about bringing things into the light, putting sunshine on things, and so often I see that finance happens in the dark. It’s something that it comes up on a meeting agenda. We all kind of hide, and then it’s over quickly. We talk about putting finances onto the consent agenda, so we don’t even have to talk about them at all. And I think the first thing that I want to really highlight is the need to bring finances into the light to celebrate it to, to talk about it too, to think about how you can bring your board around great conversations, and that might mean increasing your financial literacy. It might mean that some people on your board need to better understand how to read a balance sheet or read an income statement. So building in that kind of education is really important. I think another thing that I want to talk about is the culture around numbers that, for some reason, in the US, we have this thing of, like, I don’t do math, I don’t do numbers. Money has a negative stigma that we don’t talk about politics. We don’t talk about money, and that’s been so ingrained in who we are as people that we bring it into our board meetings we get nervous when money because it becomes existential, almost we do have money, we don’t have money, it determines whether we have value or not. And so I think just really understanding the culture piece and then the third element of that, of course, is leadership and modeling ways to think about your culture and bring your culture to a place where you can shed light where you can have conversations. So those are the three things I think about Sarah, what do you think about with money?

Sarah Brooks  05:01 Well, I absolutely agree with you that, at its heart, it’s about culture, and it’s about acknowledging that money carries baggage for most of us in very different forms. One really interesting exercise to do with a group of people like a board is to ask people, what’s the first word that comes to mind when they think of money? And I guarantee you that in a group of 12 people, you will have a wide range of answers. Some people will say abundance, others will say greed. We have very different feelings about money based on largely where we grew up and the circumstances of our finances as we were children or as adults, but we all assume everyone has the same answer to that question. And so if I’m coming from a place where I see money as scarce, and I’m talking to someone who sees money as opportunity for generosity, we have very different languages. It can be a really useful exercise to acknowledge that in a room of people and then have a conversation about what do we need our organizational culture to be about money? What do we want the word for this nonprofit to be when we hear the word money and then we’re going to commit to using that lens in the group conversation around money, setting aside our own personal baggage about it. It’s actually really powerful to have a conversation like that. And that counts as talking about finances, not just reading the balance sheet.

Nancy Bacon  06:23 You saw, and I love how you’re talking about language because there’s a few things in our language that we use a lot in nonprofits that I would love to just address right away, and that is we talk a lot about overhead. We talk a lot about we’re so proud. Like I’ve talked to a few groups who say, for example, that, you know, 100% of our proceeds go directly to programs. We don’t take a single dime of money to support the work that we’re doing. And isn’t that awesome? And that’s something that I think fails to acknowledge the cost of doing this work and so moving, you know, another example of folks who are delivering food to a needy, needy population far away, and so they packed the truck full of food, and they drove it, and the only money they accounted for was the actual cost of the food. They didn’t account for the driving the staff time, all the other costs that came around with that. So So, understanding this notion that we need to invest in ourselves, we need those core functions that we do, I think not only do we need to talk about them, we need to invest in them, and we need to change our language around how we talk with funders and outside supporters about why we’re investing in those things.

Sarah Brooks  07:37 You know, Nancy, if there was one thing I would take my magic wand and change about the nonprofit sector. It’s the shame we feel over having to spend money to do our work. I cannot emphasize enough how important it is for a nonprofit organization and its board to acknowledge that we are trying to solve some of the world’s most complex, most difficult problems and challenges if they were easy to fix. The for-profit world would have done it. If it was super easy to fix. Somebody else would be doing it, but in your community right now, you’re addressing an issue that is hard. And when you address a hard issue, you need to have resources to feel shame, which is which is the main feeling I get from a lot of organizations when they talk about their budget or they talk about their finances is like Oh, I’m sorry, but we didn’t have to pay someone to do this. No, it should be ownership. This shouldn’t be like this is great. We are we are attracting the brightest people we can to solve the hardest problems. We are going to be fiscally responsible and no good and lean as we do it. But it does take money to solve these problems. And we should be a strong voice in those conversations with foundations, with donors, with government officials as we advocate for our mission that helps people understand that it does take money to solve these problems. And we know how to use it responsibly.

Nancy Bacon  09:09 Absolutely. You know, our word for this week is progress. And I thought about that word because I really want to look at a different kind of progress. We very proudly work for progress on our tissue, whatever our issue is, if we’re a food bank, we want people said if we’re a homeless shelter, we want people housed if we’re an environmental group, we want the earth to be protected and celebrated. And that progress is really important at the same time. I hope that we make progress on our own ability to sustain our work. I think these COVID Times have really tested nonprofits. It’s definitely tested our resilience, but it’s also tested our sustainability. And my hope is that we can just take a step back again, keeping an eye on the future while we have an eye on today, and I’m not I on the future. I was really directed at making our work sustainable and making progress on ourselves.

Joanne  10:05 The prophets have been working with such a small margin and just to kind of teetering on the edge of doing great work. And then any dealing with that knowing that things are really are not a ball in this crisis that we’re in right now, really brings that to the forefront that we’re already having difficulty maintaining going on not burning out people not running out of cash, not having to shut down because of the notion that like you mentioned running things should be free which everything should go into the the actual programs. Nothing should be spent on salaries and technology and everything else that it costs to run a nonprofit.

Sarah Brooks  10:44 Yeah, and I love that our word today is progress because, for me, progress kinda takes small steps forward. I don’t think the progress is like we went from zero to 60 miles an hour. You know, that’s revving up progress. Is this like the tortoise who’s sort of chipping away and every day moving forward? And I think in the nonprofit world, when it comes to finances, the way to do this is to take a small step forward. So a great suggestion I have that I learned from other brilliant nonprofits is to find one champion in your organization, whether it’s a board member who does understand the financials or a staff person, and work with that one person so a team of two is all it takes and figure out what are the three or four big indicators for us. Is it cash? How much cash we have on hand? Is it how much we have in our endowment? Isn’t how much we have coming in from an event or ticket sales, or is it how much we have coming from major donors. There are three or four indicators that really do sum up the health of your organization. Figure out what those are, and then share them and find a way to tell them in story form to your board. So again, sometimes that’s color coding. Sometimes it’s a graph, sometimes it’s just clever words like we’re we’ve got thumbs up, it can even be emojis, you can do whatever you want to convey them to your whole board. Hey, all systems are go we look great, or oh, we have a slight problem. We should probably spend a little more time at this meeting talking about it. Or, oh my goodness, we have to stop everything we’re doing. We have a financial cliff coming up. And if we don’t deal with it, we’ve got a problem. So just find one person, work with them, pick three or four indicators, and then start finding a clever way to convey that information so that those who say they don’t do math realize they can.

Nancy Bacon  12:38 Absolutely I love that idea of the tortoise because I think the trick on this is making small commitments, making small commitments that everybody on your board has just a basic understanding of how to read the financial statements and have a small commitment to make sure you all value your core expenses that you have common language around that.

Joanne  12:57 As we’re moving forward and progress. What we need to remember is to kind of take an approach as the airlines did way before computers airlines still made it from point A to point B they would fly off in the direction they needed to go, but because of trade winds and other factors, they would reevaluate they would see oh, hey, we’re off a little bit off course. So then they would adjusted in the other direction, and they would overshoot, and they kept doing that. So basically, we’re flying like a very small zigzag to get where you’re going, but you still got from point A to point B. The trick is to take a small step, observe and adjust. Take a small step, observe, and adjust, repeat without judgment.

Nancy Bacon  13:34 I love that idea. I think you have the courage to change. You’ve had the courage to address big issues in your community. And I believe that together you have the courage to make small changes small shifts. In how you how you do your work in order to make sure you’re sustainable into the future. Your inspiration lies in your mission, that whenever you start to your courage flags, and you start to feel tired, remember your mission is important. It really really is important, and that is the source of all of the inspiration on why we do what we do. You’re in great company. As you make these steps. You’ve got your board, your staff, your volunteers, your donors, so many people are cheering you on. And I think it’s really important to make sure that even when you can’t come together socially that you are together. You’re gonna be okay.

Joanne  14:32 thank you for joining us today. We hope you’ll share this episode of the Nonprofit Radio Show with your colleagues, friends, and family. Nonprofit Radio, sunshine for small nonprofits. Tune in for our next episode on your favorite podcasting site or at nonprofit radio nonprofit radio show is hosted by Nancy Bacon, Sarah Brooks, and Joanne Roundtree music composed by Ralph

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