Nonprofit finance: The answer is in your own backyard

Leaders of small nonprofit groups often find themselves in a complicated relationship with money. They have the desire to be responsible stewards of it, the anxiety of having too little of it, the discomfort with asking for it, and too often, maybe even for some of these reasons, they are frustrated by the way its scarcity seems to always penetrate the agenda or even threaten to rob them of the gift of continuing service.

To better understand the relationship between finances and nonprofits, think about the ultimate service organization: the family. Regardless of its composition, the family is inherently a human service enterprise. It serves to nurture and provide for at least one and often several generations. It often provides for companion animals, makes decisions about how large a footprint to make in the community, and makes difficult choices about how to balance the needs and wants of the present with those of an unknown future.

It balances time allocated to earning money with time allocated to its primary mission and purpose. It also seeks to understand, or at least benefit from, investing and finances such that money starts to work for it, rather than it for money.

Once an organization finds its existence a struggle from year-to-year, it enters what I frequently refer to as an “organizational cycle of poverty.” This cycle parallels the spiral that, if unbroken, can keep people from realizing their potential, sometimes for generations. It also drives increasing attention inward rather than outward as one crisis leads to another.

Countless publications provide creative ideas for fundraising, but without understanding how finance works, the best revenue ideas can only pour money into a leaky pipe, thus perpetuating the cycle. Six ways to break the cycle: