HomeColumns4 Tips for Promoting Financial Literacy within Nonprofit Organizations

4 Tips for Promoting Financial Literacy within Nonprofit Organizations

When we think of nonprofit organizations, many of us first envision local or national charities. But don’t let the name fool you. Despite having “nonprofit” in the title, these organizations are just as centered around money as any for-profit business. The primary difference is what they do with their earnings. Instead of paying out profits to shareholders, they use it to continue their mission, whether it’s an animal rescue group, community arts association, environmental initiative or other worthy cause.

Since nonprofits’ bottom lines are so tied up in their goals and achievements, it’s extremely important for everyone involved (from staffers to board members) to have a firm grasp on what the numbers mean. Here are four tips for promoting financial literacy within nonprofit organizations.

Centralize Data with a Dashboard

Visibility is key to understanding. Since we’re living in an era rife with data visualization tools, why not apply them to a nonprofit by creating a financial hub for interested parties? As the National Council of Nonprofits notes, dashboards are useful for keeping all the “key players” in the nonprofit world informed:

  • Boards: Condenses down huge amounts of data into a few actionable statistics and suggestions
  • Staff:Helps nonprofit staff members define their roles and know where to focus their efforts moving forward
  • Donors: Provides the clarity donors need when deciding whether or not to donate to a given cause or organization
  • Grantmakers:Familiarizes grantmakers with nonprofits’ track records and programming

Set Benchmarks for Comparison

The only way a nonprofit organization can gauge its effectiveness is by establishing its mission and key performance indicators (KPIS) to quantify its impact. As management consulting firm McKinsey & Company writes, “Most nonprofit groups track their performance by metrics such as dollars raised, membership growth, number of visitors, people served and overhead costs.”

But organizations truly focused on fulfilling their mission must establish more specific KPIs and benchmarks, or ways to compare their performance to their peers. Only then will they gain insight into what’s working, what isn’t and where exactly to implement productive change.

Strive for Transparent Decision-Making

People tend to bring strong opinions and points of view to the table during nonprofit staff and board meetings. And this is generally good, unless it leads to deadlock, conflict or squandered productivity. Harnessing the power of modern tools like interactive PowerPoint presentations allows presenters to inform and poll their audience in one fell swoop. Instead of talking over one another, participants can use their mobile devices or web browsers as a conduit for weighing in on important issues. In this way, the decision-making process becomes more transparent because it directly involves those people it affects.

Break Information Down for Board Meetings

Providing board members with the right financial data is a crucial component of helping them understand the innermost operations of a nonprofit. After all, they do not have the benefit of being in-house full-time to see things unfold on a daily basis.  But you also must present these numbers in a way that’s digestible. Start by hosting regular (perhaps annual or quarterly) orientation sessions to get board members acquainted with crucial terminology and management models.

Something as simple as using a cash flow template to break down expenditures and revenue can help board members keep up with the latest financial markers, leading to more informed decision making. Providing the building blocks via spreadsheets or data models will also encourage everyone in attendance to ask questions about how certain numbers came to be.

Promoting financial literacy within nonprofit organizations is crucial at every level. With so many moving parts, it’s important to prioritize creating an accessible data hub, identifying key benchmarks, boosting feedback transparency and breaking down information for the board.