Wednesday, October 24, 2012

Not-for-Profit But Still a Business - iDatix

?Charities should be run more like businesses. They are so slow and inefficient.? You hear those words over and over from volunteers fresh from executive positions with major corporations. I used to think that too.

Yet, once I had the opportunity to work with charities, my perspective changed.


Not-for-profits don?t have to conform with stock market rules or file tax returns, so you?d think their accounting systems would be simple. Not true.

Businesses have a great deal of freedom in how they spend their money. When you buy a widget, you don?t spend a lot of time thinking about whether the company will invest the profits from the sale into research, executive bonuses or product development.

On the other hand, charities have to attach a flag to every dollar of revenue because someone will want a detailed report about how that dollar was spent. Business systems for non-profits need to show a high amount of transparency, keeping separate buckets (usually called ?funds?) for each source and intended use of the funding.


Not-for-profits have a reputation for using obsolete technology, but consider for a moment how important their online and social media profiles are for charities.

Imagine running WorldVision or the Foster Parents Plan without software to manage the thousands of images of the individual children being sponsored by the programs.

How would you manage all of the Terry Fox runs for cancer across the country without systems to back you up?

You may not see the latest and greatest technology in a not-for-profit.

They have to be frugal.

But when it?s mission critical, charities invest in systems.

Decision Making

Businesses tend to have a clear chain of command, with decisions being made from the top. If you have 50% of the shares plus 1, you control a company.

Not-for-profits put time into achieving a consensus among stakeholders. The issue is simple: not-for-profits rely on members, volunteers, donors and other funders. These stakeholders are free to leave at any point. A vote that splits 60% / 40% is fine for a business, but it could be a disaster for a charity.

Finally, businesses have to react quickly to changing conditions. When someone starts eating your lunch, you don?t have time to let them finish the meal!

Not-for-profits tend to have a longer time horizon. World hunger will not be solved this year or probably even in my lifetime. Cancer is not the death sentence it used to be, but we still need years of research into its cure. The stability of funding is more important than beating last quarter?s sales.

Working with or volunteering for charities is not only a way to give back to the community, it?s also a way to learn. Not-for-profits need good management. After all, they?re in business too!

More by Bill Kennedy:

  • Habits of Very Successful Accountants: 3 Tips for Effective Communication
  • The Evolution of Workflow
  • Habits of Very Successful Accountants: Upgrading Annually
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