Nonprofits: Follow the Money

OK, so you’re in your first 30 days. You did your empathy tour, you’re observing and asking questions, and you’re triaging like a MASH doctor. Before you generate your work plan, there are a few deep dives we need to talk about, and the first one is about money.

If there’s one universal truth in nonprofit leadership, it’s this: no money, no mission. Just an inspiring vision… and a very sad checking account.

Finances are the lifeblood of nonprofits. But somewhere along the way, people got confused. Maybe it’s the name 'nonprofit' that tricks folks into thinking money’s irrelevant — like we're powered by good vibes and bake sales.

Spoiler: We’re not. Nonprofit is a tax status, not a way of doing business. We’re powered by cash flow, and if that dries up, so does the good we’re trying to do.

Every time I walk into a new interim CEO gig, people think I’m practicing the dark arts if I talk about profit margins, P&Ls, and revenue strategy. I often hear some version of “We’re not in it for the money.”

Okay, but are you in it for solvency? Because no matter how noble your purpose, you want to get paid, right?

An organization has to be financially minded, and that's where many nonprofits get in trouble. You need to think like a CFO, and when I start, I become a forensic accountant / truth detective. 

I'll talk about creating a good business mindset for nonprofits in a future article, but for right now, we’re still in our first 30 days, and we need to do a deep dive into the finances to uncover where the bodies are buried.

🕵️ Financial Forensics 101 - Nonprofits: Follow the Money

I read everything I can get my hands on — 990s, audits, board minutes, payroll registers, the Google Drive, and especially the locked desk cabinet that says ‘Confidential’.  If it's got a dollar sign, I want to see it.

You know what delivers the gold nuggets?

👉 Balance statements I’m specifically looking for debt, something that’s going to saddle us with additional weight and prevent us from pushing off the bottom of the pool. Because along with debt comes interest payments, and that could suck us dry.

👉 Income statements I want to see every month for the last six months. This is where I see the gap between optimism and reality. Why are consulting contracts so high? Did we net anything after our last fundraising gala? Did that six-figure grant show up or ghost us? 

👉 Budget vs Actuals I especially like to see what our budget vs actuals are, both by month and YTD (year to date).  Where are we over or under-spending? Where is revenue falling short of projections? Keep asking 'why'!

👉 Budget Assumptions I not only want to see the budget, but what were the assumptions built into the budget? Are they proving to be spot on? Are they overly optimistic? Were they right six months ago, but not now? From this, I’ll know if this is a real working document, or just an aspirational statement. If the latter, then I can’t rely on budget vs actuals anymore. 

👉 Cash Flow and Cash Flow Projections First, do we even have a cash flow statement? Many times we don’t, and that’s telling in-and-of itself. If we do, what’s it telling us? Often, I’ve found the lean months to be in the spring right after we’ve spent our grants that originated at the fiscal year in July and after we’re crashed from the sugar high of the holiday giving season. How does May and June look? That’s your canary in a coal mine.

👉 Audit footnotes. That’s where the drama lives. Footnotes are like the foreboding dark alleys of financial reports. Most people skip them. I read them first. Read between the lines and pull out the nuance. 

👉 Payroll. It’s often 50–80% of expenses. If you want to find where the money’s leaking, start here. Overtime? Ballooning healthcare costs? Skyrocketing workers comp? Yeah, I’m looking at all of it.

But I’m Not Just Looking at Reports

I also look at financial processes too because you can still be flying blind if your systems are partying like it's 1999. So I ask:

• Why is our A/R aging like a fine wine?

• Have we automated A/P?

• How long does it take to run payroll?

• When do I get last month’s financials?

If the answer to the last one is “in six to eight weeks,” that’s not financial reporting — that’s a historical reenactment.

You want to make me twitch? Tell me we close the books six to eight weeks after the month ends. That’s dead data! I need data I can act on, not what the iceberg looked like two months ago. That’s like trying to steer with a fogged-up windshield in a snowstorm. If it’s taking more than 3–4 weeks to get last month’s financials, we’re going hunting for bottlenecks.

Even better, start using the full dashboards of Sage Intacct or Quickbooks so you’re getting real-time information! (We’ll talk about that in a future article as well.)

💡 What I’ve Learned From Financial Crises

Here’s the thing: financial crises almost never start with bad intentions. They start with:

• Leadership drift

• Wishful thinking

• Bad (or no) data

• Failure to confront hard truths early

By the time the dollars go red, the denial has been compounding for months.

Here’s what experience has taught me:

1. Numbers don’t lie — but people do, even to themselves. I’ve learned to go straight to the source: cash flow, liabilities, aging receivables, hidden contracts. I never accept a budget at face value. I follow the money until I understand where the real problems are hiding. 

2. Action beats paralysis. In times of crisis, you need to make decisions fast — but not recklessly. I’ve learned to triage using the urgent/important matrix, stabilize operations, and rack up a few early wins. Financial triage doesn’t mean solving everything at once. It means stopping the bleeding while rebuilding systems of accountability. 

3. Transparency builds trust. I’ve walked into rooms where staff and board were on the verge of collapse. But when I share the raw numbers and a clear plan — without spin — people exhale. They’d rather know the truth than live in uncertainty. Trust starts when people feel seen, informed, and included in the solution.

4. Crises create permission. You can finally kill that sacred cow project. Cut ties with overpriced consultants. Build a leaner org chart. A financial crisis makes it easier to do what you’ve secretly known all along.

🧠 Bottom Line

I don’t fear financial crises anymore. I’ve seen what’s on the other side. Handled right, they can be a turning point — the moment an organization finally stops faking it and starts fixing it.

So follow the money. Ask the uncomfortable questions. And don’t be afraid of the numbers — even when they bite. Because once we know what’s real, we can rebuild. Stronger. Smarter. And yes, with a better dashboard.

Please forward, share, and like this article if you got any value from it! Let me know in the comments what resonates with you.