The Festival of Chanukah is more than just a time for nonprofits to celebrate another year of service and success. It is a time to communicate with their donors, the people and institutions that make it all possible. As we light the first Chanukah candle, let’s pause to consider how the most successful nonprofit agencies prosper from year to year and it’s more than just a miracle 365 days per year. This is one in a series of brief messages we, at EHL Consulting, hope will be helpful to you during the eight days of Chanukah.
By Robert H. Isaacs, CFO & Consultant
Chanukah is a celebratory time in the lives of Jews. It is a time to meet with family, catch up with old friends, and trade stories about our lives.
Now, imagine if the stories we shared with our loved ones were all lies…fabrications invented to make us seem more successful than we really are. If our loved ones discovered these falsehoods, they would feel betrayed, and most likely not trust us again for a very long time. It’s the same way with nonprofits and their donors.
The need to share financial information today is greater today than ever before. As a nonprofit seeks to build its donor database, it is essential that basic financial information about the nonprofit be readily available to all donors online.
When this information is not openly available, donors or members may become suspicious about how the organization is run. In many cases, the very availability of your financial condition (even if it is not read) sets the foundation for successful development activities.
Here are EHL Consulting’s tips to basic financial transparency:
- Make available an annual report to your members and donors that includes, at a minimum, a summary of your year end-financials, the upcoming year’s budget, a report on your endowment (if any) and a statement of assets and liabilities.
- Be open about financial challenges that your nonprofit is currently facing, or may face in the near future.
- Have a financial report at your annual meeting and, if you are a membership-based organization, send a periodic financial report to your members during the course of the year.
Just like with family and friends, a strong relationship between a nonprofit and its donors must be built upon trust. By being honest about your finances, you demonstrate the skilled management of your organization, and begin to establish the need for additional funding.
By openly sharing your financial information now, you are building a relationship with potential donors that will make them more receptive when you speak to them about making an investment in your nonprofit for the future.