Financial Equilibrium

The question is simply this:  do we manage our financial assets in a way that makes it possible for the mission to happen?     It all comes down to mission and money and the interplay between the two.   There is no mission – it does not happen – if we do not manage the economics, and manage those economics effectively. 

Negligence on the financial front means that the mission suffers.   But that does not mean that money or finances or the annual budget are front and center.  They matter; without a workable budget, the mission does not happen. But the crucial piece to remember is this:  in the end it is not about a balanced budget or a surplus budget – which may sound like good news; it is about the mission.   Did we manage our finances in our way that mean that the mission happened?

Thus the key to a good budget is that the expenditures are aligned with institutional purpose; money leverages mission.

Beyond this, it is imperative that the following is in place:

  • A chief financial officer who works closely with the CEO and manages the budget process effectively;
  • There is clarity about the financial position of the institution;
  • There is an intentionality about fund development with a consistent and dependable donor base, with effective leadership from the CEO and others on this front;
  • There is an understanding about the economic engine of the organization along with diversity – that is, multiple streams of revenue.

Essential Reading:
Gordon T. Smith, Institutional Intelligence.  IVPress, 2017.  Chapter 8.
William G. Droms.   Finance and Accounting for Nonfinancial Managers:  All the Basics You need to Know.    Reading, Massechusets:   Addison-Wesley:  1990.