APRIL IS FINANCIAL LITERACY MONTH!
Manager, Arts & Business Council of Greater Houston
Will you spend the next 30 days improving your financial literacy?
In 2014, the Nonprofit Finance Fund reported that almost 50% of arts and cultural organizations indicated their greatest challenge as a business is achieving long-term financial stability. Organizations struggle to ensure that adequate funds are available to support the mission of the organization, yet finances and financial operations are some of the most overlooked business practices and skills for nonprofits boards and staff.
In The Nonprofit Sector in Brief 2014, the Urban Institute reports that almost two-thirds of reporting 501(c)(3) charitable organizations have less than $500,000 in gross receipts and over 90% of reporting organizations have less than $5 million in gross receipts. Operating a mission-driven organization on limited resources is a challenge and many small and medium-sized organizations rely heavily on the knowledge of their board, as well as pro-bono services to manage their finances.
Financial literacy is understanding financial fundamentals and how to apply them to your business. It’s not a topic that’s relevant only to struggling or failing organizations. It is relevant to every organization and every business.
The Wallace Foundation reported that financial literacy increases as organizational revenues increase. A significant increase in literacy levels appear when an organization’s total operating reaches $5 million.
So what does this mean for the 90% of charitable organizations that operate on much less?
Small and medium-sized organizations can rarely afford to hire highly specialized staff or consultants to manage their finances. Staff, paid or volunteer, is expected to be a jack-of-all-trades. Looking through job postings for nonprofit arts Executive Directors in the area, the three most common required skills were marketing and communications, technical and passion for the mission. Why not financial management skills?
Nonprofit leaders must develop basic financial skills. Critical areas such as bookkeeping, cash management and financial reporting are at the heart of financial literacy and good leaders shouldn’t solely rely on someone else to manage their organization’s finances; leaders must understand the information in order to make sound decisions for their organization. Increasing financial literacy is imperative to making good business decisions and being a good steward of contributions.
For the next 30 days, individuals and businesses are encouraged to establish and maintain healthy financial habits through the congressionally dedicated National Financial Literacy Month. The Arts & Business Council of Greater Houston will be posting online resources, studies, tips and workshops available to help arts administrators and board leaders increase their financial acumen.
I invite you to join us for the month of April to improve your financial literacy!