Do Your Stakeholders Trust Your Financial Management
According to a 2022 survey by Morning Consult, 3/5 of people surveyed generally have trust in nonprofits, but 43% have experienced loss of trust with at least one organization. This survey also revealed that use of funds is the most critical financial trust area.
There are several steps you can take to help your stakeholders (donors, staff, board members) maintain trust in your organization.
1. Perception is just as important as reality – you may have great financial controls and be spending your funds very wisely, but if this isn’t communicated well, your stakeholders may lose faith in your ability to steward your financial resources. Your staff should understand not only what procedures they should follow, but they should also be able to understand why those controls and procedures are in place.
2. Does your board understand the financial reports? Your board members are ambassadors and often key fundraisers for your organization. They should feel confident about the financial reports they receive. If your board is confused, then its likely that donors or other stakeholders are as well.
3. How do you explain gains or losses? Gains and losses are a natural part of the life cycle of any organization. How you explain these ups and downs (especially the downs) can impact a potential donor’s trust in organizational management. Was the loss a planned part of organizational capacity building? Is it just a natural part of your funding cycle? Did you have to write-off a large asset? Make sure your staff or board have a good understanding of significant gains or losses when communicating with external stakeholders.
4. Communicate quickly when donors give – Sending a thank you note immediately after a gift will help show your donors that you have good tracking systems in place. If a donor receives a thank you note four months after they donate, they may wonder if your organization is overwhelmed, unable to track donations timely, or unorganized.
5. Does your financial statement format show that you understand key nonprofit accounting issues that impact your organization? Make sure that the financial statements and notes that you send to the board or donors reflect an understanding of key items like pledges, restrictions, revenue recognition and allocation of expenses.