Would You Have Dated Your Organization If You Had Known Its Financial Condition Beforehand?

Posted on by David Gray, President of Finance Arts, LLC

The above may seem like a pretty silly question,  but the process of courting potential donors, Board members and other supporters too often neglects the very real moment when the organization’s financial reality intrudes upon the glowing and attractive mission work we bragged about when we first invited them over.

The New York Times recently reported on a trend in dating where the topic of debt and credit scores is a red flag that can kill romance before it even begins.  You can read this cheery story here. Basically, single people are including the issues of debt and credit ratings in their assessment of potential partners. Yeah, you might be tall, dark and handsome, but can you qualify for a mortgage?

In my recent presentations for the Board Leadership series, Financial Management: Telling Your Story Through Numbers, we talked about how the financial statements we create are an integral part of the story we tell about our organizations.  Yet for many of us, preparing financial documents to send with a grant proposal or that we bring to Board meetings are at best, a rushed affair. We seldom ask ourselves “what story do these numbers tell about us?”

To be clear, I do not recommend that anyone obfuscate their financials. I suggest that you make every effort to make those financial statements provide clarity and demonstrate professionalism.  If your numbers are sloppy, both in the numbers themselves and in their presentation, I am left to wonder if you understand their importance. Do your financials leave me asking more questions or do they provide greater certainty?

Do you provide comparative data such as actual results from previous periods so folks can assess how your organization is changing financially, and if your projections are in line with, or are a significant departure from your previous financial realities? Do you include footnotes to clarify items that are new or significantly different?

The IRS Form 990 is easily accessible on Guidestar. Do you know what your 990 says about your organization?  Did you take the time to write a detailed (and flattering) description of your program service accomplishments or did you let your accountant type in the mission statement?

What do the notes in your audit say about you?  When someone sees the details of your loans, your leases, your investments and your conflicts of interest do you wish you could provide a clarifying statement?  Then why don’t you?

I often feel when I serve on grant panels or when I consult on nonprofit financial issues, that folks don’t take the time to consider how their financial information is read by others.  The New York Times article quotes people expressing surprise and shock on this emphasis on their financial histories.  We in the nonprofit world should not be shocked by this at all.  We’ve been sending financial information to our Boards and funders forever.

Having a weak financial condition is not the end of the world. If your financial story looks bleak then it is up to your leadership to develop and articulate a plan for improving that situation. It is amazing how often honest and forthright leadership will prove more important than a weak financial report.

Twenty three years ago I was a junior member of a nonprofit organization making hardly any money, with something like $10,000 of student loan debt looming over my head, which I was unable to pay without help. Yet 23 years ago today (as I write this), I managed to ask one of the world’s greatest Ballerinas out on a date. Despite learning about my financial condition (not on the first date I assure you) we were married five months later and are together still.

So having weak financials doesn’t mean you can’t attract a mate or significant support.  You just have to have lots of nerve and a plan.

Image credit: morguefile

David Gray is President of the consulting firm Finance Arts, LLC, and author of the Finance Arts Guide to Nonprofit Cash Flow, published in 2010. He teaches nonprofit Finance at Brookdale Community College and is a frequent speaker on nonprofit finance and management. In addition to being a Certified Financial Planner, he has twice served as Executive Director of nonprofit organizations. David is host of NonprofitNJ, a television program that explores issues that impact nonprofit organizations. A graduate of Johns Hopkins University, David and his family live in Princeton.

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