1. Why your non-profit
does NOT need
to act more like
a business
Includes
19
action points to
implement right
away
2. Introduction
Why your not for profit does not
need to ‘act more like a business’
The last thing you want to hear is
that your not for profit should
run like a business. You’re not a
business: you’re here to create
social value.
But to create that social value, you
are aware that you need to USE
good business practices to produce
intended outcomes – actual,
measurable and sustainable
benefits for those you serve.
At Checkbox, we’re sensitive to
this, and when working with your
non-profit, can help tie these goals
into your performance
management systems.
4. Performance
Management
Systems
Your performance
management system is
crucial to the impact that
your organization can
have.
Your numbers can direct
you and the decisions you
make – and, as we’ll
discuss further in this
guide, they’re critical to the
connection you make with
potential donors and
members.
On the right are some of
the numbers your non-
profit needs to be aware of.
Donations
Members
Contacts
Expenses
Overhead
Outcomes
6. Do financial
statements make
your eyes glaze
over?
When was the last time you
remember your organization’s
board having a really engaging
discussion over your monthly
financials?
If financial statements make your
eyes glaze over, you’re not alone.
It’s not that you can’t understand
them, it’s that you’ve got a
higher goal.
Financial statements can seem
very dull for most non-profits. If
we can use the phrase, many are
simply checking the box!
It’s important not to look at your
financials in isolation – consider
these as merely the starting point
to help you get where you need
to be.
7. Do financial
statements make
your eyes glaze
over?
Here are some of the reasons why you may not
be getting as much out of your financials as you
should be:
q The terminology is confusing. It’s not your
language, and you’d rather be talking about what’s
important to you.
q The terminology often relates to for-profit
businesses, and so feels irrelevant.
q The format is dry and over-detailed. You want to
get to the important elements that speak to how
well you are using your resources, raising the funds
you need, and serving your constituents.
q The figures aren’t explained properly – and you
may not want to ask (either out of boredom or
embarrassment).
q They are provided last minute, so you have to
approve them in a hurry.
8. Do financial
statements make
your eyes glaze
over?
Tips for finding your financial statements
actually interesting:
q Identify the top 5 numbers that are of most
importance to your organization. Review and discuss
those first.
q Choose several words or phrases that are either
confusing, or seem like for-profit terminology, and
discuss them with your accountant. (If they can’t
explain it in a way you understand, quickly, you may
want to look at another accountant.)
q Consider cloud accounting software that will allow
you and your board access to the financial reports
and data they need – whenever, and wherever.
q Get training on this software. Give your staff the
time and training to learn its full functionality.
q Set goals and milestones with your accountant at
the start of the year.
q Meet monthly or quarterly with your accountant to
discuss the top 5 numbers, your mid-year results,
and any financial decisions that are being made at the
time.
9. Understanding overhead
Whether you like it or not, overhead is how your public
judges you and your effectiveness.
A recent survey by Guidestar* points out a baffling
conundrum:
q 92% of people want to see clear evidence of your
effectiveness
• Are you accomplishing your mission?
• What are your social outcomes?
• How are you fulfilling your pledge to produce?
However...
q 84% of these people primarily base their decision to
support you on how your organization controls its
overhead expense.
*Article source: http://trust.guidestar.org/2015/10/13/the-state-of-public-trust-in-charities/
10. Understanding overhead
This is called the “Overhead Myth”
Although overhead – and your management of it – is
critical, there can be great misunderstanding when it
comes to how this is managed.
What gets reported as overhead expense on the
organization’s Form 990 filed with the IRS is what charity
raters, grantors, donors and the interested public use in
evaluating an organization.
The truth is that this overhead expense reporting is
largely in the control of the organization’s
management and, to a great extent, determined by the
cost allocation that the organization follows.
This is why your numbers, and your financial
management, are so important. If you understand them
and can display them to the public in a way that is clear
and that has integrity, you can increase the support you
receive – both financial and personal.
However, if there is confusion about how your non-profit is
addressing its overhead – whether that confusion exists on
your Board or in the minds of the public – this could result
in massive financial difficulty.
11. Understanding overhead
Addressing the “Overhead Myth”
The way we at Checkbox look at overhead is that it is an
investment in the effectiveness of your organization. Donors,
grantors and other funders want to see the link between the
reported overhead and the social and environmental impacts
of the organization. To quote nonprofit thought leader Mario
Morino, they “want proof that their capital is delivering on all
fronts”.
Having good, reliable and accurate accounting records,
reviewing your numbers regularly in line with your
budget goals, and having a cost allocation plan can help
turn this “mythical” overhead beast into a more
manageable domestic pet.
12. key areas in
your non-profit
organization
4
and 33 items to help you address these
[*Source: The Principles Workbook by BoardSource]
13. 4 key areas in your
non-profit organization
In the rest of this guide, we’ll review the four key areas
of every non-profit organization’s operations that need
to be part of your regular performance management
review and evaluation.
Legal
Board Oversight
Financial
Fundraising
14. Legal
If you’re not legal, you can’t succeed in your mission.
Ensure you’re staying legal by:
q Considering conflicts of interest, and how you
prevent these
q Making sure you’re keeping documents and
business records for the right length of time
• If you’re not sure, ask us.
q Asking, “How can we stay transparent?”
• Sharing the right information with your public is
critical to your success. But you don’t have to
share everything. Talk to us if you’re not sure.
q Making sure you’re compliant with tax and
regulatory authorities.
• Staying compliant on all your reporting, filing, and
disclosure requirements is critical. The
consequences of not being compliant range from
inconvenient to catastrophic. We’ll keep you on the
right side of the law.
15. Board Oversight
The oversight of your Board affects your financial
management in a big way. The board holds the
responsibility, and how you manage that Board impacts
how you manage your non-profit organization.
Some key elements to consider for your Board are:
q How does your Board:
• Review and approve the organization’s annual budget?
• Approve key financial transactions?
• Approve fiscal policies?
• Establish compensation?
q Do you hold Board meetings as often as required?
• Consider whether your meetings are what you need.
Don’t simply think about basic obligations: do you have
enough time for strategic thinking and discussion? Are
the right people in place to have those discussions?
• Consider meeting length, style, and frequency
q Do you have the appropriate number of members on
your Board, and is it diverse and independent?
• We work with nonprofits who are often surprised to
discover the benefits that maintaining a diverse and
independent board can have. Recruiting people with
different skills, experience and perspectives onto the board
helps your organization to better reflect the demographic
reality of the community you serve (or should be serving)
and to develop programs and services that are valuable
and relevant.
16. Financial
As we’ve discussed, the financial side is one that you
know you must address, but often it feels like you’re
spending time on admin when you could be impacting
people’s lives and changing your world.
But what we’ve found is that if your financial oversight is
strong, then your organization will be strong!
Here are some first principles that we always like to start
with:
ü Keep accurate financial records
ü Keep your financial records current
ü Produce an annual budget that makes sense
and is achievable
ü Make sure you’re receiving regular financial
statements so you can compare budget to
actual
ü Treat each program activity as its own
separate cost center with a view to
determining the true cost of your programs,
including direct, indirect and shared costs.
ü Have clear policies for reimbursement of
expenses
17. Fundraising
This is one of the most difficult areas for non-profits,
and it can also be the most powerful and rewarding.
Addressing this properly will relieve you of strain, and it
will bring in the funding you need so finances are not
stressful.
Consider:
q Are your fundraising materials truthful and
accurate?
q Do you acknowledge tax deductible
contributions?
q How do you know whether to accept a gift or
not?
q Do you have proper oversight with your
professional fundraisers (i.e. telemarketers,
consultants, marketing agencies)?
q Are you using social media to its full
effectiveness?
q Is your organization’s website modern, fresh,
and updated regularly (at least monthly)?
19. Conclusion
In summary, to create social value, you don’t need to act
like a business.
You do need to USE good business practices to
produce other outcomes – social benefits and public
benefits.
Your action items:
q Identify the top 5 numbers that are of most importance to
your organization.
q Use cloud accounting software for greater transparency,
accessibility and the ability to perform real time accounting
and reporting.
q Get training on this software.
q Meet at least quarterly with your accountant to discuss
your top 5 numbers, your mid-year results, and any
financial decisions that are being made at the time.
q Understand your overhead, and how it is communicated to
the public
q Keep documents and business records for the right length
of time
q Produce an annual budget that makes sense and is
achievable
q Regularly compare budget to actual numbers
q Review what percentage of your budget is spent on
programs, overhead, and fundraising
q Explore the use of social media
q Review your website and keep it fresh
When you address all these areas together with a proper
financial management system, your non-profit
organization will be more efficient, less stressful, and
best of all more enabled to help those you are here to
serve.
20. Checkbox is here
to serve you.
1420 Rocky Ridge Drive, Suite #130
Roseville, CA 95661
(916) 782-8500
info@CPAcorporation.com
www.checkboxaccounting.com
www.checkboxaccounting.com/
not-for-profit
Get in touch today to arrange a meeting
with us – or we’re happy to come meet
with your Board.
