“We are a nonprofit. Why should I care about cost accounting?”
This sentiment from nonprofit CEOs and EDs is wholly understandable. In manufacturers, cost accountants work closely with engineers to capture all dimensions of a widget’s costs: labor, materials and overhead. But many nonprofits provide services, not widgets. Therefore, is cost accounting applicable to nonprofits??
The concept of how cost accounting applies to nonprofits may sound obscure, but is highly relevant. Earned and contributed revenue opportunities are available to nonprofits, sometimes in competitive circumstances, and often with strings attached. An accountant with cost accounting experience can partner with the CEO or ED to help determine the costliness of these strings. Accepting an award may require narrow skill sets from new personnel or consultants, raising matching funds, new technology, and/or advanced reporting requirements – adding expenses that could exceed the amount of the award! Rejecting and returning awards may actually be signs of a mature, self-aware and insightful nonprofit, despite the Hunger Games environment.
Nonprofits also often get spread too thin, with heartstrings pulled by constituent needs and funders that promise new capital. Yet “adjunct” awards often pull nonprofits further from mission, fueled by the same Hunger Games environment of depravity.
Need another perspective from a thought partner – consider RADAR!