Should Non-Profits Outsource CFO Versus Hire In-house
“Your life should be about finding the intersection of your greatest passion and the world’s greatest needs.” Gary White, founder of Water.org
The intersection of passion and need has led to the creation of the country’s largest nonprofits – the Red Cross, the Salvation Army, Feeding America – and its smallest – the grassroots organizations that exist on shoestring budgets and the kindness of neighbors. It has also led to a sector that employs 10 percent of the US workforce, accounts for 5.5% of the GDP,* and has over $1.51 trillion in revenues and nearly twice that in assets.**
Nonprofits may be fueled by passion and need, but they are funded in dollars, just like any company or corporation. They need high-level financial guidance to ensure they can continue serving their communities and offering vital programs. How can an outsourced CFO help them navigate their own growth?
High-Level Advisory to Guide Financial Decisions
The more complex the organization, the greater the need for a CFO. This person will oversee bookkeeping, payroll, accounts payable, accounts receivable, grants, and, of course, the production of timely and accurate financial statements. In addition, the CFO handles advanced tasks, including:
The economy and government cuts in funding have caused a lot of sleepless nights for nonprofits. When you have to adjust to new funding levels, an outside CFO can help you look at programs from an objective financial perspective:
Is this program viable? Do you need to secure other sources of funding? Do you need to restructure the people in these programs? Since many of these programs are your “babies,” it can be hard to see which are just not viable. Outside expertise brings a new set of eyes to the situation.
One agency we worked with experienced drastic funding cuts, and they were burning through long-term money on short-term program gaps. Their reserves were dwindling, and they were facing difficult decisions about whether or not to continue to offer programs that were no longer funded. When BottomLine first met them, this organization was not sustainable.
We helped them set up budgets by program and worked with the executive director to take a hard look at the various offerings. By making some tough choices and implementing sound financial processes, they were able to create a sustainable organization and build a reserve fund for a rainy day. Today, they’re not just sustainable; they’re vibrant and thriving.
Is your staff going to be able to meet your needs going forward? Do you need a controller, part-time CFO, a mentor for your bookkeeper? Just as in for-profit companies, there is no one-size fits all solution, and the right fit will depend on your nonprofit’s size, complexity, and budget.
An outsourced CFO can help you make those decisions and bridge gaps in the meantime. We worked with a nonprofit, for instance, to help them figure out what they needed from their next CFO or controller. Through that process, we also developed planning for different programs and examined gaps in funding. That way, when the new financial professional came in, he or she could hit the ground running.
A part-time CFO can also educate and mentor your existing financial team. If, for instance, you have a bookkeeper who has been with the organization since the beginning, a CFO can work with her to sharpen her skills to ensure she can meet your growing needs.
A nonprofit’s board of directors has a fiduciary responsibility to the organization. They require a package of financial information, including projections, internal financials, budgets, tax documents, and more, so they can achieve accurate insight into your financial state. This often extends beyond the scope of a bookkeeper’s duties. A CFO will prepare a package for the board and help tell the story behind the numbers.
Use a CFO as a strategic partner – and as a teacher. A high-level financial expert can help you understand the information in front of you so you can use it to make better decisions. He will teach you what to look for, which documents you really need, and how to use the data effectively.
This lends you credibility with your board, with government funding agencies, with corporate sponsors, private donors, and even your staff. They know that you have looked at the nonprofit through a financial lens, instead of focusing solely on mission. This assures them that the organization has the best shot at sustainability – which ensures they can achieve their mission.
BottomLine’s goal isn’t to solve a crisis (though it sometimes begins that way!); it’s to help you build a strong foundation for your nonprofit. When passion and need intersect with solid financial guidance and leadership, your nonprofit will be able to move mountains.
*For Nonprofits, A Bigger Share Of The Economy; New York Times
**Charitable Giving Statistics; National Philanthropic
Tags: Feeding America, Outsource CFO, Red Cross, Salvation Army, water.org