Streetsmart Financial Basics for Nonprofit Managers

Chapter 2Mission: Managing Your Two Bottom Lines

It has become popular to refer to the bottom line in contexts far beyond the merely financial. The phrase has a certain ring to it, a suggestion of a no-nonsense philosophy that many find attractive. But the fact of the matter is that the bottom line isn't really, well, the bottom line. At least it isn't a bottom line in the sense of a definitive, live-or-die standard; any organization can lose money during any given year and still escape with relatively little damage. It can even do it several years in a row. For any kind of business entity, the real bottom line is the inability to get capital into the organization. For nonprofit corporations, that happens when no bank will loan any more money and no philanthropist will donate any more funds. For for-profits, it means no more credit and no one willing to buy the stock anymore. Large nonprofit groups rarely go out of business because it is usually possible to persuade one more source of capital to contribute.

Profit is the organizing principle in the for-profit world. It is the only commonly shared arbiter of conflicts and the enduring benchmark of all activity. It forces the recognition that a particular course of action should be chosen because it is in everyone's best financial interests. At the same time, profit alone is a weak organizing principle because the economics affecting it can change so easily. Athletic teams win the championship one year and explode the next, their ...