Teaching Nonprofit Financial Management: More Important than Ever

In my work as a nonprofit management consultant and educator, finance and accounting seem to intimidate many leaders in our sector. This intimidation (or “fear factor” of numbers) is unfortunate and unnecessary, as it often hinders many organizations from surviving and thriving. I make it a point to emphasize to nonprofit leaders — as well as the students in my classes — that the concepts of finance and accounting are more about language and communication than numbers or math. In that regard I see myself as more of a linguist and storyteller than a financial technician.

I have encountered many executives in nonprofits who feel that the “numbers folks” are off doing this mystical, secretive activity which is only understood by those with a specific set of skills and knowledge. This is not only not true, but it is an irresponsible stance to take as a nonprofit leader; it can often lead to poor planning or worse — bad decision-making — within an organization. We need to demystify this field of study and practice.

Let me start with some basic conceptual definitions to illustrate what we mean when we say “financial management.” Financial management consists of the joining together of two separate disciplines: accounting and finance. Accounting is a very specific practice that involves following a prescribed set of consistent rules in order to literally “account” for the transactions (activity) of an organization. Finance, on the other hand, is a discipline involving the application of accounting rules in order to analyze and interpret the financial activity of an organization. I like to use the analogy of language for clarity. Think of accounting as the vocabulary and finance as the sentence or paragraph structure. These two practices or disciplines combine to “tell a story” or narration about the financial health of an organization.

If we think about financial management as a “language” as opposed to “math or numbers,” we can alleviate some of the anxiety that many nonprofit leaders — including those charged with governance (i.e., board members) — have about understanding the importance of financial literacy. The language aspect of financial management is the ability to be comfortable enough with the vocabulary in order to ask questions and have a conversation about the financial health of an organization. In addition to asking questions, understanding how to communicate critical financial information is important for decision-making

So what does all this talk about language and communication in the world of nonprofit financial management really mean to me?

One of the not-so-hidden joys for me as an educator is when a former student reaches out to me and tells me how much my teaching nonprofit financial management helped “change their life.” I had the honor of attending an amazing dance performance by Exit12 Dance Company. The co-founder and Artistic DIrector, Roman Baca, was a student of mine a few years ago in my nonprofit financial management class at Columbia University. After the performance, he enthusiastically shared with me his growing confidence in putting together budgets and narrating his dance company’s financial story to potential funders. This new confidence had led to a series of successful funding opportunities and growth, in addition to an appreciation of resources and how to plan.

Another recent interaction was with a colleague at Columbia, Chris Gu, who had been my Associate Instructor for three years. Chris was recently promoted to Adjunct Instructor leading the exact same nonprofit financial management class in which he had been my associate for the previous three years.  His announcement on social media was heartfelt and touching about my influence on him towards how to teach the subject matter. I was incredibly moved and honored. Equally as important was my strengthening belief that even “intimidating subject matter” can be conveyed to someone if you are creative, accessible, and thoughtful in presenting information! 

That is the power of language and teaching: it is as vital as the power of numbers. We need this approach and power more than ever in our sector as organizations grapple with the changing landscape of nonprofit management. We need to achieve our goal of confident financial management practices by nonprofit leaders. We have an obligation as educators, scholarly practitioners and nonprofit professionals to make that happen.

It is the power of communication.