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Nonprofit finance: The answer is in your own backyard

By John Brady

For the Deseret News

Published: Wednesday, Oct. 24 2012 1:30 p.m. MDT

  • Learn and own your financial reality. "How to Read a Financial Report" by John Tracy is a classic. While written for the corporate world, it is a digestible read for those of us who are neither experienced in nor interested in financial accounting. It does arm you with enough knowledge to ask the right questions at a strategic level.
  • Do not allow yourself to be house poor. If your space is not flexible or multi-purpose, it can drain dollars. Often, emotional ties to a physical space make them political non-starters. Even previous donations and gifts can be tied to a physical structure (stained glass windows, kennels, bookcases, etc. that were given in memory of someone special). If space is an issue, find a way to respectfully transition and do justice to the memories of those connected with it, but do not allow it to block your path forward. Find out what the real market value of the space is and/or how much you can borrow against it. Not all debt is bad debt, especially if renovations or retrofitting will make it work for you.
  • Avoid excessive focus on the small stuff. Nickels and dimes can add up to dollars, and such efforts have their place. But unless you have a donor list in the tens of thousands, these efforts take a lot of time with minimal return. A bake sale or a car wash can net some cash, but it won’t build an endowment for the future. Too often, we are afraid to ask for money. If you are matching the right potential donors to the right cause, you are better served getting them to give $50/month on an automatic draft ($600/year), than a $100 one-time gift now.
  • Do not retrench. Just like we invest in our homes, our educations, our businesses, we need to invest in our nonprofits. While there is no excuse for wasteful spending, and some belt-tightening is just good discipline, avoid the temptation to take shortcuts in the wrong places. Too often, nonprofit leaders will say, “Once things start looking up, we’ll do X.” The problem is, not doing “X” is often perpetuating the downward spiral.
  • Climb a rung or two up the risk ladder. Investing is about the risk/reward ratio. If your budget at current course and speed leads to bankruptcy in three to five years, inaction is a default choice to organizational hospice. Investing and borrowing wisely might reduce that runaway to two to three years in the worst case, or it could be the fresh start you need.
  • Think about partnerships. Just as the family can provide for additional security, savings and in some cases income, complementary arrangements can be in everyone’s best interest. Interfaith outreach groups often do this very well. If you advocate for a cause that is politically unpopular, such as education or job training for inmates, technology can enable you to partner with national or geographically distant entities with similar goals. At a minimum, consider forming cooperatives for purchasing items in bulk or negotiating contracts like snow and trash removal.
Face the finances and face the fear. As Gandhi said, “Capital as such is not evil; it is its wrong use that is evil. Capital in some form or other will always be needed.”

John J. Brady is the chief operating officer of HigherNext, Inc. With 20 years in the education sector, he writes on matters of higher education, transitions into college and career, nonprofit management and standardized testing. JB@highernext.com

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