Nonprofit boards play a critical role in their organization’s success. The finance committee is part of the board and essential to ensuring that the organization remains financially viable and healthy. For finance professionals looking to give back, sitting on a finance committee can be a meaningful opportunity to put your expertise to use while supporting a cause or program that matters to you.
However, to truly make the most of the opportunity, it’s imperative to understand how finance committees work. It’s also important to know where you can add value and what you should — and shouldn’t — expect from the experience.
Here are five key tips for making the most of your experience as a board finance committee member.
1. Understand the finance committee’s role.
Each nonprofit has different financial needs and resources, with the latter often depending on the organization’s size. In some cases, an organization may have a seasoned CFO and finance team. In other scenarios, the nonprofit may have just one employee charged with managing the finances, in addition to his or her other responsibilities. Whether or not there is a full finance team, the finance committee is responsible for balancing the nonprofit’s near-term needs and long-term obligations. The committee must work closely with whoever is in charge of day-to-day financial operations.
The duties of the finance committee include monitoring and reporting on the organization’s funding needs as well as its resource management. Its members will work to assess the nonprofit’s financial health and the potential risks the nonprofit faces.
Finance committees also play a vital role in reviewing and approving the organization’s budget. Committee members aren’t always expected to get into the operating details, but they will provide high-level oversight and determine whether the budget aligns with the nonprofit’s mission and goals.
Lastly, members of the finance committee — and the board of directors in general — help direct some fundraising efforts. This work may include reviewing fundraising trends and providing revenue targets in support of the nonprofit’s operational needs.
2. Familiarize yourself with the nonprofit’s financial life cycle.
Just like a for-profit business, nonprofits have a financial life cycle. The organization you’re supporting likely does budgeting at the same time each year. That process may last months, beginning with an assessment of the organization’s current finances and culminating with the board approving a budget for the next fiscal period.
Many nonprofits also have a dedicated window for planning the next year’s strategic goals, some of which may relate to the budget or development needs. Other seasonal financial tasks may include annual fundraising campaigns or an annual or biannual audit.
Understanding this life cycle ensures that you’re offering the right type of guidance at the right time. For example, it may not be appropriate or helpful to suggest new strategic goals during the budgeting process. The cadence and seasonality of the work will help inform your own contribution.
3. Don’t be afraid to ask questions about your responsibilities and commitment.
In a similar vein, you’ll want to know the term limits of board members as well as what’s expected of you in the near and long term. By doing so, you can align your efforts with the short- and long-term goals of the organization. A very common obligation is two consecutive three-year terms, according to Board.org.
If your term is a few years, you’ll have the opportunity to spend the first year getting to know the financial life cycle as well as the challenges and future opportunities. In the ensuing years, you can provide even better insights and solutions at the most relevant points.
Additionally, it’s worth connecting with previous board members to get a sense of the total time commitment required. Most board seats and committee appointments require more than attending a monthly meeting. You may need to review documents at home, participate in finance-specific meetings or provide insights and advice to the organization’s leadership and staff.
4. Recognize that financial knowledge on the committee may vary.
It’s easy to think that everyone on the finance committee has the same knowledge and level of expertise. But in most cases, the range of education and skills regarding finance will vary — you may find yourself as the person with the most professional expertise.
Keep this in mind as your committee does the work of reading reports and reviewing financial documents. If you spot something concerning, speak up. You don’t want to necessarily assume that others noticed and deemed the issue not a problem.
In addition, volunteer your skills for tasks that require a good handle of financial issues. For example, you may volunteer to review the terms of a loan document or other types of financing. Your expertise is incredibly valuable in these cases.
That said, be mindful that nonprofits operate with different motives and goals than for-profit companies. Draw on your experience and knowledge, but understand that your strategies and approaches may not necessarily apply in this new context.
5. Listen and learn but also make your voice heard.
Being asked to serve on a finance committee is an honor that recognizes your own experience and commitment to the nonprofit. You are there to provide value, so if you have opinions or information regarding decisions, don’t hold back. Of course, listening is just as important, and you’ll learn as you go. You’ll be working collaboratively with other committees and board members as well as the nonprofit’s leaders.
In all cases, it’s good to remember that the organization asked for your assistance and expects that you’ll add value to its board and help with its decision-making. In fact, it’s important to note that the board and its members have a fiduciary responsibility to act in the best interest of the nonprofit and ensure that it is fulfilling its mission.
Finance committees provide a great opportunity to put your financial expertise to use and give back to a cause or organization you believe in. Familiarize yourself with the committee’s role and your responsibilities, and you’ll make the most of your board service.