Real life is often messy. Trends we are watching include the stresses and strains on leaders and organizations – financially, as well as emotionally. “Compassion fatigue” is real in our sector, just as financial challenges are. But as we acknowledge these strains, let’s also continue looking for solutions – whether through successful collaborations, or by boosting our board’s financial literacy, or simply by pressing pause and accepting that to lead effectively, a little self-care may be in order. This month's issue of Nonprofit Knowledge Matters encourages us to throw off a scarcity mentality and focus on moving forward together. One important role every nonprofit can play right now is to encourage citizens to exercise their rights to vote. Let’s celebrate the rights and responsibilities of our democracy, and hold our heads high that nonprofits are where citizens come together to solve problems and make our local communities – and our entire country – better places. 

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The Collaboration Conundrum

Collaboration is often assumed to be essential for high performing organizations. But what if collaboration doesn’t come naturally, or past collaborative experiences have been so uneven that your nonprofit isn’t willing to take a chance on another collaboration-gone-wrong? What are the ‘best practices’ for collaborations? Our blog post shares tips that can lead to more success together than alone. 

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Nonprofit Trends: Mentors and Coaches

Have you noticed? It’s now a “thing” for nonprofit leaders/emerging leaders to have a coach. Some boards of directors understand that a coach is particularly useful to help newly appointed executive directors juggle all the challenges of their new position. In other cases, veteran nonprofit leaders recognize that a coach can help them build their own leadership capacity and develop talent in their own organizations. If you are intrigued by how a leadership coach can support and transform a nonprofit’s health, not to mention your own, here’s a wonderful post from the Maine Association of Nonprofits: Why you need a Yoda and where to find one.  

Stay connected with your state association of nonprofits to learn about peer-to-peer learning, mentoring, and coaching opportunities near you.  

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Accounting rules change for nonprofits – Is your board seeing the story in the numbers?

You may have heard that the Financial Accounting Standards Board (FASB) issued new rules that affect nonprofits, and you may be wondering what they are and whether they apply to your organization. We have a blog post for that – but meanwhile, we also share our observation that the updated nonprofit accounting rules nicely illustrate two trends we are seeing across the country. Trend one: the emphasis on storytelling. Fundraising gurus tell us we need to tell stories in appeal letters. Advocacy gurus remind us that stories are powerful to persuade elected officials how their policy decisions impact the community. Well, guess what? Storytelling is useful for explaining a nonprofit’s financial position too. One hallmark of a financially literate board is that board members can look at a nonprofit’s financial report and understand the story the numbers show. For instance, reading financial reports should help board members answer: Is there enough cash on hand to get the nonprofit through a dry spell? Is available cash restricted in any way? The new FASB rules should make it easier for those reading nonprofit financial reports to answer those two questions.

Which brings us to the second trend the new rules highlight: Many nonprofits are in an extremely fragile state, but their precarious financial situation may not be obvious, even to their own boards, unless board members are adept at reading financial statements – and asking questions. One simple but important question is, “How much does the nonprofit have ’in reserve’ for emergencies?”’ The data in the new Northwest Nonprofit Capacity Report (2016) reveal that nonprofits of all sizes and missions across the Northwest have on average less than three months of cash in reserve. This is consistent with the findings for nonprofits across the country, as reported for several successive years by the Nonprofit Finance Fund in the State of the Sector survey. For instance, in 2015, 53% of nonprofits surveyed reported 3 months or less of cash in reserve. Having a robust reserve won’t solve all financial challenges, but knowing how deep the reserve is – or isn’t – is an important factor for any nonprofit board’s consideration. Nonprofits with boards that can see the story in the numbers will be better prepared to thrive.

We hope the resources below will help your nonprofit’s board (and staff) understand what stories the numbers tell. Our guest post by Ed Mulerin, founder & CEO of eCratchit Nonprofit, explains how the FASB’s new rules will require financial statements to be more transparent about a nonprofit’s cash flow challenges, among other things. 

Financial literacy resources for staff and board members

• Make finance fun for boards! Demystify the numbers with Finance Unlocked for Nonprofits games and videos (Washington Nonprofits) (introductory video)
• Use a Cashflow and Budget Toolkit designed especially for small nonprofits by the financial team at the New York Council of Nonprofits. You can watch this video that explains the tool, before purchasing.
• The Nonprofits Assistance Fund consistently offers great resources on financial topics in easy-to-understand language such as, “Why board members miss the red flags,” and several videos, including, “Balance Sheet Basics: What we have, what we owe, what we’re worth.”
• How to read a nonprofit’s statement of financial position – and questions to ask (Greater Washington Area Society of CPAs)
• Building a better budget (even if you are allergic to numbers) (National Council of Nonprofits)
• This video explains why FASB believed the new rules were needed and what it is trying to accomplish with the new standards (FASB)
• Results and explanations about the topics covered in the BoardSource financial literacy quiz (BoardSource)

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