Ah, the non profit balance sheet— something to scan in order to reassure board members that there is some money in case of shut down and rainy days. But is your balance sheet building wealth and helping your organization achieve mission? For impact organizations that are stable, balance sheets are an opportunity to build financial security and wealth, generate income and provide impact and value.
In the early 2000’s, I was working in poverty alleviation. At that time, there was a shift in away from focusing primarily on income generation to understanding the role of assets in building personal and family financial security and wealth. Wealth holders become wealthy through the acquisition of assets that provide collateral and generate income. (thank you Rich Dad, Poor Dad, for this visual)
The same principle holds for organizations. Many non profits rely primarily on income and ignore building their balance sheet and assets. No matter how much income is generated (and it is never enough when trying to address wicked problems), without assets, an organization remains financially vulnerable.
Take a look at your balance sheet. Look at the assets listed there, and ask yourself: did we thoughtfully think about what assets we have currently? Which of these assets are underutilized and not working for our mission and building financial security? Which of these assets are a drain and may be time to divest from? How much money do we really need sitting in low-return vehicles—how can we put our money to work in a way that advances our mission? Do our investments align with our values and mission? If you could re-imagine your balance sheet, what mix would you want?
You need income and surplus in order to acquire assets, so that short term strategy is still essential. However, if your surplus income is not building assets and financial security for your organization, then your organization could stay trapped on the treadmill of income seeking, grant dependency and poverty. When we are facing complex and wicked problems, we need all aspects of our organizations to work for us, including the balance sheet.