Financial Fluency for Non-Profit Boards is Not Just About the Numbers

The Stakes are Too High for Directors to Ignore

Photo by Masarath Alkhaili on Unsplash

If your eyes glaze over and mind wanders when the agenda turns to finance, you are not alone. I see this often—not because of a lack of care about an organization’s finances, but because of a lack of financial fluency and a belief that financial discussions are best left to the ‘numbers people’ on the audit committee.

But what if this approach is holding your organization back, or even causing harm? What if your discomfort with financial matters is preventing you from being the best possible steward of your organization’s mission? Engaging with “the numbers” is part of your responsibility as a director, and there is no need for you to get an accounting degree in order to fulfill your role.

Keep reading to understand financial fluency and why it matters, and for action steps for the board and individual directors.

Financial Fluency

Financial fluency enables directors to connect financial realities with strategic and operational priorities. It is an ability to both understand what underpins your organization’s financials, and to have a dialogue with the ‘financial people’ about these issues. Understanding spreadsheets matters, but finance is very much about people, and their decisions, which are reflected in financial data.

Financial fluency includes seeing the bigger picture and recognizing that financial information is a reflection of your organization’s values, priorities, and strategies, and how they are implemented. To be part of the whole conversation, directors must to speak the language of finance.

It’s easy to look at financial statements as a bunch of numbers. However, those numbers tell a story—one of priorities, decisions, and behaviors. Every financial report reflects the culture of the organization as an outcome of its choices, including the risks it has been willing to take. As a director, your role isn’t just to know the numbers but to understand, and probe, the story behind them.

This is not about a lack of trust in your audit committee, treasurer, or executive director. It is about every director’s obligation for fiduciary oversight. It is also about encouraging deeper and broader discussions that draw in all aspects of your non-profit’s efforts to fulfill its mission.

A Broader Perspective on Governance

Every board decision—whether it’s about adding staff and contractors, launching or cutting back on a program, or whether to buy or lease office equipment—has a financial impact beyond the cost. Financial reports are not just a collection of data; they tell you about the impact of board decisions and how those decisions are implemented, all of which occur in the milieu of your culture and broader operating environment.

Discussions about strategy, risk, programs and services need a financial component to get a full picture, and discussions about financials need to relate to the story of how board decisions are implemented.

Even if financial documents have no inherent errors nor raise serious red-flags, they can contribute to an understanding of whether the organization is creeping away from approved goals. Directors who lack the skill of connecting numbers and story can miss small discrepancies, leaving the organization vulnerable to strategic drift or financial instability.

Financial oversight requires comfort with financial knowledge and lingo so directors can ask the right questions. Without this understanding, the board risks rubber-stamping decisions without truly grasping their consequences.

The Risks of Avoiding Financial Fluency

Some directors self-select out of financial discussions if they lack confidence in asking informed questions. But this comes with significant risks—to both the organization and the directors.

When directors shy away from financial matters, they sideline themselves from critical conversations. A reluctance to ask questions or engage with financial reports can create a culture of reliance on a few individuals, leaving the board less effective as a whole.

If you tune out when financial discussions begin, ask yourself, “why?” Are you assuming someone else will handle it? Are you reluctant to ask something that might be a “stupid question?” This habit can erode your effectiveness as a director and diminish your contribution to the board.

Ignorance is not a defense when it comes to governance responsibilities. Every director (not just the audit committee) has a fiduciary duty to exercise due diligence, which includes oversight of financial matters. It is a great asset if your board has directors with strong financial literacy, but at a minimum every director should have, or be working toward, financial fluency.