(The following post by Aaron Hurst, president of the Taproot Foundation, was adapted from Powered by Pro Bono: The Nonprofits Step-by-Step Guide to Scoping, Securing, Managing, and Scaling Pro Bono Resources. In his previous post, Hurst weighed in on the value of "pre-mortems.")
Nonprofit economics differ pretty significantly from the for-profit kind. For one thing, tools like a balance sheet or a profit-and-loss statement don't carry nearly as much weight in a not-for-profit setting as they do in the business world. Nonprofit organizations also have to follow specific rules and regulations related to their tax-exempt status. Despite these differences, nonprofits are learning how to boost their capacity and effectiveness by engaging accounting and finance professionals in their work. The fact that there are some 1.8 million accounting and finance professionals in the U.S., and that many of them are looking for ways to make an impact in their communities, is a huge plus for the sector.
With that in mind, here are five things finance and accounting professionals often are willing to do for nonprofits on a pro-bono basis:
1. Program-cost analysis. A program-cost-analysis project identifies the cost initiatives a nonprofit must define in order to answer a pressing strategic question. The first phase of any such project involves an in-depth examination of an organization's current finances to tease out cost factors relevant to those initiatives. After that, a comprehensive report which clearly lays out the full costs of taking on a particular initiative is prepared.
2. Internal financial controls assessment. Rigorous assessment of an organization's financial controls ensures that it is consistently recording financial transactions in an accurate fashion. These controls also help to minimize risk, including employee theft. The first step in developing an effective internal controls system is to identify areas where abuses or errors are likely to occur. Many accountants can provide you with a checklist of these areas, as well as questions to consider when you are planning your system.
3. Budgeting. A well-designed budget process can help an organization and its management zero in on key financial issues and potential problems before they have major consequences, enabling the organization to move from reactive to proactive resource management. The end result of such a process should be a budget that allows key stakeholders to track the status of the organization's finances in real-time; enables managers to track actual performance against plan; and allows for quick adjustments to meet changing economic conditions.
4. Pricing strategy. Pricing strategy projects look at the value of a specific product or service. Since price directly affects revenues (price x quantity sold = revenue) and, therefore, profitability (total revenue - total costs = profit), a good place to start when developing a pricing strategy is to determine unit costs. While nonprofits rarely are driven by the bottom line, net income is crucial to organizational sustainability. Therefore, any pricing strategy project should incorporate a method to calculate the real costs associated with the product or service delivered so as to ensure a sufficient level of net income.
5. Supply chain audit. The planning, purchasing, manufacturing, marketing, and distribution functions embedded in a supply chain often operate independently of one another and have their own objectives. With an eye to identifying opportunities for increasing efficiencies and better integrating these different functions, a supply chain audit looks at every step in the chain, from the procurement of the materials needed to create a product, to the process by which those materials are turned into a finished product, to the distribution of the product to customers/beneficiaries. The result, quite often, is better performance and lower costs for the nonprofit.
The nonprofit executive often has to act as CEO, CFO, COO, talent manager, and marketing director at the same time. Juggling these roles is tricky at best, but when the organization reaches a certain scale or ambition, taking a closer look at its financial health becomes critical. Identifying key financial needs is the first step to scoping projects and developing specific "asks." Accounting and finance professionals do these things everyday, and many are looking for ways to make an impact. The most effective leaders will do what they can to take advantage of this pro bono resource.
-- Aaron Hurst