My remaining blog posts in 2011 are going to touch on 4 confusions that infect nonprofit leaders when it comes to nonprofit financial management. We find them everywhere we turn in our consulting practice--especially among gifted executive directors, faithful board members and departmental managers. Yes, even CFO's who are good at what they do can share in the confusion.
Here are the 4 errors:
- Confusing income for size of budget.
- Confusing fiscal year with length of effect of a transaction.
- Confusing a monthly report with a real-time management tool.
- Confusing reduced expense with an improved cash flow.
In my next four posts I'm going to explain each one and provide a suggestion or two to avoid confusion.
For now, ask yourself the following questions:
- When I am asked about my organization's income, what figure do I give? Why?
- Does my organization do cash or accrual accounting? If we are doing cash, are we violating our responsibilities to do proper accounting?
- Do we look at monthly reports at board or department meetings? What numbers do we look at the most? Why?
- Do we focus on cost reduction, income expansion or the difference between them as the bottom line of organizational performance?