It is budget season at my organization. I am deep in spreadsheets, trend data, and memos for the finance committee. The work has brought me back to some great advice I received about joining a new nonprofit: before you trust the numbers, you need to understand the strength of the system that produces them.

When I interviewed CEOs about their onboarding experiences, financial surprises came up again and again. I wrote about this in Why the CFO Search Is Different From Every Other Hire. Several leaders built program-level profit-and-loss statements and found that programs everyone assumed were profitable were losing money. Those surprises rarely come from bad intent. They come from financial systems that were never built to answer the questions a CEO needs to ask.

Many nonprofits do not have robust financial systems. When you step into a new organization, a few basic questions will tell you how much you can rely on what you are being shown.

First, are there profit-and-loss statements for programs? Many organizations track finances by department or by some other structure that made sense to someone years ago. A department view tells you who spent the money. It does not tell you whether the annual meeting, the journals, or a certification program covers its costs. If you want to make decisions about programs, you need financials organized around programs.

Second, do the program statements include staff costs? In associations like mine, personnel is often the largest expense. When salaries and benefits sit in a separate bucket, or are spread across programs using a formula no one has revisited in years, a program can look like it makes money when it is actually in the red. The reverse also happens. A program carrying more than its share of staff costs can look like a drain when it is holding its own. Ask how staff time is allocated and when that allocation was last checked against how people actually spend their time.

Third, can you see trends by program over time? Board materials often show high-level trends that may be drawn from the 990 or the audit. Those documents report expenses in broad categories: program services, management and general, and fundraising. That is useful for compliance and for comparing yourself to peers. It is not detailed enough to tell you whether a specific program is growing, flat, or declining. Several years of program-level data lets you see a pattern rather than a single good or bad year.

Fourth, is the budget built by month? Some organizations set an annual number and compare year-to-date results against that total. That makes forecasting unreliable. Association revenue is uneven. Dues arrive on renewal cycles. Meeting revenue and expenses are concentrated in a few months. Without monthly attribution, you cannot tell in June whether you are behind plan or if it is simply a timing issue.

Fifth, how current are the financials? If the books close several months after the period ends, you are making decisions on old information. You are flying blind most of the year, and you learn about problems after the window to correct them has closed.

Ideally, every one of these would be in place, on time and accurate. In my conversations with colleagues across the association space, that is rarely the case. The reasons are mostly structural. Finance teams are small, systems are old, and better reporting competes with programs for the same dollars.

So how do we do better as a sector?

Start by naming the pattern. In 2009, Ann Goggins Gregory and Don Howard described the nonprofit starvation cycle. This article is more than 15 years old but still incredibly relevant. Funders and donors expect low overhead. Organizations underinvest in infrastructure to meet that expectation, and often underreport what they do spend. The expectation persists. Financial systems are infrastructure. When we starve them, we lose the information we need to steward the mission. The authors also note that allocation choices distort the picture. One organization they cite assigned most of its finance director’s time to programs.

Next, treat financial systems as a strategic investment rather than a back-office cost. Budget for the software, the staff time, and the training it takes to produce program-level statements and a timely monthly close. Then explain the reason to your board. A finance committee that understands what better information makes possible is more likely to support paying for it.

Build program statements on full costs. Once you have honest program numbers, the Matrix Map from Nonprofit Sustainability by Jeanne Bell, Jan Masaoka, and Steve Zimmerman or another program assessment tool can help a board weigh mission impact and financial results side by side. Without accurate numbers, that conversation is guesswork.

Do not try to fix everything at once. Pick the question that matters most for the decisions in front of you. For many organizations, that means getting personnel costs into program statements. Get that right, then move to the next gap.

Finally, lean on your CFO. As I wrote in Onboarding While Onboarding, my new CFAO started in September. This budget season is our first together, and these questions are part of how we are learning the organization side by side.

If you have improved the financial reporting in an organization, what did you tackle first? I would like to hear stories of success!