Good financial management is more than crunching numbers: It is effective use of those numbers to gauge financial health. While the specifics of reports, their formatting and timing are important, other factors also contribute significantly to good financial management. Relationships -- between board and staff, and with other agencies -- are equally important, as are basic business practices sometimes forgotten in the rush to get the budget done.

The director of finance and the board chair, a former treasurer himself, of an educational organization offer a few rules to mange by:

• Train the board: "There are plenty of places you can send someone for training [in financial management]. Grant-makers offer board support," the director of finance says. "We figure out a way to educate board members either in house or through training.

• Require accountability: "Ask financial staffers for information," the director of finance says, then observe. Ask why an expense is not as budgeted or how cash flow needs will be met next month or in six months or what is the procedure for monitoring credit card use. How soon did they get back to you? Did they seem forthcoming? Does it make sense? Is the explanation the same now as it was last quarter?

• Have a line of credit: Buffer the inconsistencies in nonprofit funding with a line of credit, the board chair advises, as well as putting in place credit cards for unexpected emergencies you never dreamt of. He cited a sudden hotel expense that arose when students on a field trip were snowed in out of town. "Every nonprofit should have a line of credit," the director of finance says. "Get it when you don't need it." Of course, procedures must be in place -- and used! -- to monitor line of credit and credit card use.

• Don't count your money too soon: "You need a solid commitment, a signed contract with funders," the director of finance says. The board, she says, should question income projections: How real are those commitments from funders? Have you submitted the proposal? Do you have the grant letter in hand?

• It's a team game: "Recognize that this is a partnership," the board chair says. The board makes the strategic plan but the chief financial officer and director of operations have to be on board to make it happen, as do other staff members. "You hire good people who have knowledge of the roles of board members and staff."

• Respect and make use of talent at the top: Tap into the expertise of your board, the director of finance says. "Call and ask questions if you need to ... Choose a treasurer you can call for advice when needed. But, she adds, "Board members' time is precious ... Find out how the treasurer likes to communicate. Does he need advance notice to set up an appointment? Does she like email?"

But, wait, there's more!
Comparison -- and that whiff of competition that emerges from any comparison -- improves financial oversight, well beyond the mundane number crunching, according to the board chair.

The first step in tapping this synergy is to align budgeting with strategic objectives, he says. "Religious and social enterprise organizations best meet their objectives when they align the strategic plan with financial goals," he says, citing one method of doing so, called "Balanced Scorecarding."

If the organization wants to increase math scores, for example, that may mean more time in the classroom for students and teachers or more supplemental experiences, such as music. How the budget is aligned has a direct effect on fulfilling the mission of the agency.

The second step is a congress of agencies providing similar service, using standardized report formats, and whose treasurers meet regularly to compare both data and progress. "The more we know about best practices, the better we will be," he says. "We check each other." His agency is part of a naturally occurring consortium whose members interact regularly. From these meetings, he, as board chair and former treasurer, has derived knowledge and understanding of both governance and of the agency's work.

In comparing reports -- and the explanatory comments -- of multiple agencies, treasurers can benefit from the experience of others, as well as come up with new ideas that benefit them all. A small example is the sharp decrease in an expense category, with the comment that the savings resulted from switching telephone systems. That information could provide another agency with a cost-saving idea.

The board chair's vision is to create standards for financial reports and benchmarks for excellence that are aligned with and implement the goals of the social enterprise. To do that one must "reach out and find out what's going on at other places, to build relationships," he says.

What can funders do?
While funding the financial education of board members is essential, funders need to look beyond that, according to the board chair. "Funders must accept growth, not just 'top of the heap,' " he says, that is, they must be willing to finance the development of an organization and adoption of more effective management techniques. Funders must also support new paradigms, he says, such as the interagency effort to create standards mentioned above.

In other words, it's not enough to fund an understanding of debits and credits. An understanding of how the budget relates to the mission, and efforts to define and achieve "best practices," must also be funded.