So, Your Finance Director Hates Your Development Director…

There are few nonprofit relationships with more potential for productive partnership, or more potential for absolute chaos, than the relationship between finance and development.

On paper, these two functions should be natural allies. Development is responsible for bringing money into the organization. Finance is responsible for making sure the organization understands, manages, tracks, and reports that money appropriately. Both functions care deeply about revenue. Both are responsible for organizational sustainability. Both need accurate information about where money is coming from, when it is coming, what it can be used for, and whether the organization is actually on track to meet its financial goals.

And yet, in nonprofit after nonprofit, finance and development drive each other absolutely nuts.

The finance director thinks development is overly optimistic, perpetually changing projections, and making promises without understanding the financial implications. The development director thinks finance treats every fundraising opportunity like a compliance problem, doesn't understand how fundraising actually works, and somehow expects them to predict exactly when a donor will sign a grant agreement six months from now.

Finance wants certainty. Development deals in probability. And therein lies the problem.

Looking at the Same Money Differently

A development director looks at a $250,000 foundation opportunity and thinks: We have a strong relationship with the program officer, excellent alignment, an invitation to apply, and a good chance of getting this. Finance looks at the same $250,000 and thinks: Do we have an executed grant agreement?

Both perspectives are reasonable.

Development has to operate before revenue is certain. If we waited until every gift was guaranteed before including it in fundraising strategy, there would be very little strategizing to do. Fundraisers live in pipelines. We work with probabilities, relationships, cultivation stages, historical behavior, application timelines, donor signals, and judgment. We are constantly asking: “How likely is this money, and what do we need to do to move it closer to 100%?”

Finance has a fundamentally different responsibility. Finance needs to know what money the organization can responsibly count on. It has to manage cash flow, budgets, expenses, audits, reporting, restrictions, and financial risk. A 70 percent chance of receiving $250,000 is very different from having $250,000.

The problem begins when either side assumes the other is looking at the money incorrectly.

They're not. They're just doing different jobs.

The Pipeline Is Not the Budget

This is one of the most important things finance and development need to agree on.

Your fundraising pipeline and your organizational budget are not supposed to be identical.

If your development director has $5 million sitting in a pipeline, that does not mean they are telling finance to budget $5 million in revenue. A pipeline should contain opportunities at multiple stages of certainty because its purpose is to show what development is pursuing and whether there is enough potential revenue in play to ultimately hit the goal.

In fact, if the organization needs to raise $2 million and the development pipeline contains exactly $2 million, you probably have a problem. You are implicitly assuming a 100 percent close rate.

Fundraising does not work that way.

Some prospects will say no. Some foundations will change priorities. Some donors will give less than expected. Some corporate partners will push a decision into the next fiscal year. Some proposals that everyone felt fantastic about will disappear into the abyss.

That is why a functioning development operation needs a pipeline significantly larger than the amount it ultimately expects to close. In fact, experienced fundraisers will tell you that you need your pipeline to maintain a three-to-one ratio: that’s three prospects for every gift that will close, or $3 for every $1 you expect to raise.

Finance, meanwhile, needs a defensible revenue forecast.

Those are related tools, but they serve different purposes.

The solution isn't forcing development to make its pipeline look like the budget. The solution is developing a shared methodology for translating the pipeline into a forecast.

Development Is More Conservative Than Finance

Experienced fundraisers are usually painfully aware of how much can go wrong.

We know that a great donor meeting can still end in a no. We know that a foundation can encourage an application and still decline it. We know that a longtime donor can suddenly change priorities, a corporate partner can freeze spending, a proposal can get pushed into the next fiscal year, and a gift everyone expected in June can arrive in October.

That uncertainty tends to make good development professionals more conservative.

A development director may look at a $250,000 opportunity and say, "Yes, this is promising. No, I am not willing to tell you it is definitely coming in."

That can be maddening for finance. Finance wants to know what revenue it can count on. Development may be saying, "I think this is likely, but I cannot guarantee it." Finance hears uncertainty. Development hears accuracy.

And this is where the friction starts.

Fundraisers are constantly trying to balance two responsibilities that pull in opposite directions. We need to build ambitious pipelines because we know not every opportunity will close, but we also need to avoid overstating revenue because we know how dangerous that can be for organizational planning (and for our job security if the overstated revenue doesn’t come through).

A responsible development forecast is not a promise. It is a best estimate based on the information available at that moment.

That means development may deliberately understate what is possible. It may refuse to count a grant until the relationship is further along. It may assign a lower probability to a donor than leadership would like. It may push an expected close date because the funder has gone quiet. It may tell the CEO, "I know you want this in the budget, but I am not comfortable calling it probable yet."

That is not pessimism. It is disciplined fundraising.

But it creates a very real challenge for finance, because finance is being asked to build budgets, manage cash, and make organizational decisions around revenue that the revenue engine itself may be unwilling to describe with certainty.

Finance TREATS Uncertainty Like Incompetence

If you’re a finance director and you ask a development director in January exactly how much unrestricted revenue they will raise by December, and then you become frustrated when that number changes, you are fundamentally misunderstanding the nature of development.

Fundraising forecasts should become more accurate as the year progresses because the underlying information improves. That is not a flaw in the system. That is how forecasting works.

Imagine a major donor who has given $50,000 annually for five years. Development knows the donor well, the relationship is strong, and there is every reason to expect another gift. But the donor has not yet committed.

Development may reasonably consider that highly probable, but still not 100% certain, revenue. Finance may reasonably feel that it belongs in the budgeted revenue because it’s so consistent.

The answer isn't an argument over which department is correct. The answer is a system that allows both pieces of information to exist simultaneously.

You Need More Than One Revenue Number

One of the simplest ways to reduce finance-development warfare is to stop asking development for "the number."

There should be several numbers.

There is secured revenue: money that has actually been committed, preferably in writing. There is forecasted revenue: the amount the organization reasonably expects to close based on the current pipeline and agreed-upon probability assumptions. There is pipeline value: the total potential value of all active opportunities, including opportunities that will not all close. And there is the revenue goal: what development ultimately needs to raise (and which development hopefully had a say in defining).

Those numbers all answer completely different questions.

If your annual fundraising goal is $3 million, development might have $1.8 million secured, another $1.4 million in weighted forecasted revenue, and $6 million in total active pipeline value.

That tells leadership considerably more than simply asking, "Are we going to make budget?" It also allows finance and development to discuss risk intelligently.

Restricted Revenue Makes Everything Harder

Then there is the uniquely nonprofit problem of restrictions.

Development can raise a literal fuck ton of money, and the organization can still have a cash problem.

A $500,000 grant restricted to a particular program does not necessarily help you make payroll for staff outside that program. A multi-year grant may be recognized differently from the way cash actually arrives. A reimbursement grant can create significant cash-flow pressure. A grant may cover program activity without adequately covering the administrative infrastructure required to deliver it (looking at you, philanthropies with a maximum 10% indirect cost rate).

This is exactly why finance and development need each other before the proposal goes out.

Development should understand the financial realities of what it is raising money for. Finance should understand enough about philanthropy to recognize that every proposal cannot simply contain whatever cost allocation would make the organization's spreadsheet most convenient.

There needs to be conversation: What does this program actually cost? What portion can reasonably be requested from this funder? What expenses are eligible? How much indirect support does the organization need? When will the money arrive? Are there matching requirements? Will we have to spend money before reimbursement? What happens if we receive only part of what we request?

Those aren't finance questions or development questions, really. Or, not entirely. They're organizational leadership questions.

STOP SURPRISING EACH OTHER SO MUCH

Nothing destroys trust between these departments faster than surprises.

Finance should not discover a $400,000 grant when the check arrives. Development should not discover three days before a proposal deadline that finance cannot produce the required budget.

Finance should not learn during the audit that a funder required financial reporting nobody knew about. Development should not learn halfway through a grant period that finance has been coding expenses in a way that makes the funder report nearly impossible to complete.

And neither department should be maintaining a completely different version of reality in separate spreadsheets. There should be regular reconciliation between development and finance. Not once a year. Not only during budgeting. Not only when something has gone wrong. Regularly.

For many organizations, that means a monthly finance-development meeting. For organizations with complicated institutional funding or significant revenue volume, it may need to happen even more frequently. And the meeting doesn't need to be long; it just needs to be disciplined. Both functions just need to understand: What has closed? What moved? What fell through? What changed in timing? What cash is expected? What restrictions accompany it? What reporting obligations are coming? Where does the forecast now stand against budget? What risks does development see that finance should know about? What financial risks does finance see that development should understand?

Suddenly, the two departments aren't arguing over whose spreadsheet is right. They're managing revenue together.

Know When You Need to Speak the Same Language

Finance and development are different disciplines. They have different responsibilities, different tools, different professional standards, and different ways of understanding revenue. That is not a problem to solve.

Development should be allowed to talk about prospects, cultivation, solicitation, probability, expected gifts, relationship strength, pipeline coverage, and anticipated close dates. Those concepts are essential to understanding fundraising. A finance director does not need to start managing the organizational budget according to moves management stages in order to collaborate effectively with development.

Likewise, finance has its own language and its own rules for understanding revenue. Development does not get to redefine accounting principles because the CRM says a gift is "committed" or because a fundraiser is confident the check is coming.

Organizations get into trouble when nobody recognizes when those two languages have to converge.

There are moments when finance and development absolutely need to be telling the same story. A board meeting is one of them. An audit is another. The 990 process is another. Organizational budgeting, formal financial reporting, grant reporting, and other external reporting may require the same alignment.

Before those moments happen, finance and development need to agree on what numbers are being presented, what those numbers mean, and which rules are governing the conversation.

That does not mean development has to abandon its own numbers. Development may still have a $6 million pipeline while finance reports $3.6 million in recognized revenue. Both numbers can be correct because they answer completely different questions. The problem arises when development walks into a board meeting saying the organization raised $4.2 million and finance walks in saying it raised $3.6 million, and nobody has discussed why those numbers differ.

And, in my experience, finance needs to be particularly careful about assuming that its terminology should automatically become development's terminology everywhere. Accounting language is essential for accounting. It does not necessarily describe fundraising well. Forcing development to manage its pipeline according to accounting definitions can actually make the development data less accurate, not more.

The goal is not to make finance and development speak the same language all the time. The goal is for both departments to understand that they speak different languages, respect why those differences exist, and know when the organization needs them to translate.

When that moment comes, they should already have agreed on the shared language they’ll use. No surprises. No competing spreadsheets presented as competing truths. No CEO trying to reconcile two numbers in real time in front of the board. Of course, it almost never happens the way it should…but it should.

Different disciplines can see the same revenue differently. They just can’t afford to contradict each other when the organization needs one answer.

Neither Department Works for the Other

There is also a cultural problem underneath some of this friction.

Finance sometimes behaves as though its job is to police development. Development sometimes behaves as though finance exists to process whatever fundraising brings through the door.

Neither is true. Finance is not development's compliance department. Development is not finance's revenue-delivery service. They are two functions responsible for very different parts of the same organizational reality.

Development needs finance because raising money without understanding its financial implications can create enormous organizational risk. Finance needs development because there is no financial management strategy sophisticated enough to compensate indefinitely for insufficient revenue.

You can’t spreadsheet your way out of a fundraising problem, and you can’t fundraise your way out of poor financial management.

Your CEO Has a Role in This, Too

If finance and development are constantly at war, executive leadership cannot simply shrug and say, "Those two don't get along."

That is an organizational management problem. Leadership needs to establish shared expectations, shared definitions, clear decision-making authority, regular communication, and mutual accountability. If one function routinely withholds information from the other, undermines the other in leadership meetings, or treats collaboration as optional, the CEO needs to address it.

And leadership needs to be careful not to reward the conflict. Don't ask development for an aspirational number, hand it to finance, and then later blame development because finance treated it as guaranteed revenue. Don't ask finance for the most aggressive possible scenario and then accuse development of underperforming against it. Don't allow two departments to present contradictory numbers to the board because nobody bothered to reconcile them first.

Create one organizational revenue story. Finance and development should contribute different information to that story, but the organization should ultimately be telling the same one.

You Want These PEOPLE to Be Friends

Maybe not literally. They don't have to spend weekends together. But organizationally? You want finance and development joined at the hip.

You want the development director comfortable calling the finance director and saying, "This $500,000 grant we've been forecasting is looking shaky. I think we need to move it down." You want finance responding, "Thank you for telling me now," rather than, "Why didn't you know this six months ago?"

You want finance saying, "We're seeing a cash crunch in September. Are any of these expected gifts realistically movable?" You want development saying, "Maybe. Let me look at the relationships and timing," rather than, "That's not my problem."

You want them building budgets together, reviewing forecasts together, solving grant restrictions together, preparing board reports together, and flagging risks for each other before those risks become emergencies.

Because at the end of the day, finance and development are trying to accomplish the same thing from opposite sides of the ledger: make sure the organization has the resources it needs to do its work and keep doing it.

Your finance director doesn't need to love your development director. Your development director doesn't need to love your finance director. But they need to respect each other, understand each other, and trust each other’s expertise.

And if they can manage that, they may discover they never actually hated each other in the first place.

They just hated each other's spreadsheets.