Understanding Financial Leadership — what does your future hold?  

Joan M. Renner, CPA, CGMA, Director 501(c)(fit!)

When I sat down to write about financial leadership, you know what popped into my head?  Financial leadership is like Marley. 

Not Bob Marley…Jacob Marley from Dickens’ classic, A Christmas Carol.  Stay with me on this.  Marley returns as a ghost to convince his miserly old business partner, Scrooge, to get his life on the right path before it’s too late.  Three ghosts show Scrooge scenes from Scrooge’s miserly past, his decrepit present and his fateful future.  Let’s say Scrooge learns his future is not too bright.  Fearful of his demise, Scrooge asks the third ghost whether the scenes he has been shown are things that will be, or things that might be if he doesn’t change.  Discovering he can create a different future for himself, Scrooge mends his ways and goes forward with a light heart.

What does that have to do with financial leadership?  Well, like Scrooge’s ghostly guides, a financial leader uses knowledge of the organization’s past and present to improve its future.  Accounting is only one facet of financial leadership.  It shows how resources came in, how you used them in the past and where you stand at the present.  Financial leadership also includes understanding what can be done with that knowledge to assess your future and explore alternatives to achieve the goals of your organization’s leaders.  Just like Scrooge, if you don’t like what your future holds, you can change course to go forward in a more positive direction.

As CEO, you don’t have to be a numbers wizard, you just have to know how to oversee a healthy finance function and what can be done with the information you have.   If you understand the power of your finance function, you will oversee it from a more informed point of view, ask the right questions, give it the right priority and use it fully to benefit your organization.

Financial leadership includes overseeing the finance function and infusing it into all organizational areas like impact, resource mobilization, governance, stewardship, accountability and sustainability, to assess past operations and current conditions, explore alternatives and emphasize priorities to achieve the goals of the organization’s leaders. 

Unfortunately, little in a nonprofit leader’s background prepares him or her to step up and oversee the finance function.  Many execs keep the finance function at arms-length and some at the length of a ten-foot pole.  Many starve the finance function until it limps along in the background, out of sight and out of mind.  After all, why would anyone spend money on something they didn’t use?  Shifting the financial oversight away from top leadership takes away the opportunity to use your financial information to lead.

What can we learn?

Seek to understand your organization’s finance function including your flow of transactions and financial reporting.  What is your system for keeping top leaders informed about where your organization stands financially? 

Insist on timely, accurate and clear reporting.  Do you receive financial reports that are clear and accessible? Are your financial reports timely?  Does your audit tell you they’re accurate?  Are they the reports that best support oversight and governance? 

Assess your efficiency.  Are you taking advantage of streamlined electronic transaction processes? 

Protect what you have.  Do you have fraud prevention controls?

Knowledge is power.  Are you able to request financial analysis when considering questions and evaluating alternatives?

Budget to your goals.  Does your budget reflect the goals of your leadership?  Have you allocated resources to achieve the goals set by the organizations leaders?  What choices do leaders need to make?

Turn that budget into a projection.  Is your operating model sustainable into the future?

Quantify your risks.  Have you considered the financial effect of your most severe potential risk events and how you might address them?  How many days of operating expenses do you have on hand? 

Plan for success.  How would you need to allocate resources to build a greater reserve?

Learn more about our Financial Leadership Training for Emerging Nonprofit Professionals coming up this Fall in Alexandria, Richmond and Virginia Beach.

Our 501(c)(fit!) live 2-day financial leadership training seminar prepares new nonprofit leaders to exercise their oversight responsibilities over the finance side of the organization with sessions such as:

Nonprofit Governance — who’s in charge, who’s responsible and who’s watching? 

Financial Statement Concepts for the NON Financial Emerging Nonprofit Leader

Remodeling Your Financials — how new financial reporting GAAP will affect YOU! 

The Power of Financial Reporting — making your finance function work for you

Financial Presentation makeover — from DRAB to FAB!  

Accounting Solutions for Today’s Transactions — a streamlined approach, 

Controllership and the Layer Cake of Finance

Building Your Budget — and putting it to work, 

Your Tax Exempt Status — care and feeding, 

Red Flags in Your 990? — a roadmap for effective review. ()

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