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“It Looks Bad If We Have a Surplus.” Oh Really?

May 14, 2013

ohreallyThis is our third installment of “Oh Really?” We hope you have been enjoying the humor.

If you take some time to review the financial section of nonprofit profiles in The Giving Partner, you will notice that projected total revenues and projected total expenses are exactly equal for many organizations.

Many nonprofits deliberately work to establish this kind of budget each year under the pretense that it is more appealing to donors and funders.

Other organization leaders have long been growing the bottom line of their nonprofits in celebration of sustainability and making more mission possible over time.

As Peter Kramer of the Nonprofit Finance Fund so eloquently states, “Nonprofit is a tax status, not a way of operating: Positive operating results (unrestricted revenue consistently exceeding expenses) are an indicator of strong financial management.”

In his blog post Top Indicators of Nonprofit Financial Health, Peter talks about a few easy concepts that can reframe the way we consider our organization’s financial picture. Financially healthy nonprofits have…

  1. A track record of unrestricted dollars coming in year after year.
  2. Consistent surpluses year after year.
  3. Revenue projections that account for the whole picture–including depreciation, debt reduction, operating reserves and future opportunities.

Here’s a special challenge: take a look at your organization’s projected revenue vs. expenses in The Giving Partner. What steps can you take to ensure a model that allows your organization to serve the community to its fullest potential while starting to build some additional reserves?

Read Tom Kramer’s blog post here.  He’s the first to point out that one business model will not work for every organization, but financial health should be every organization’s priority.

-Susie Bowie
Community Foundation of Sarasota County

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