The financial stability and moral character of a not-for-profit are key factors in its capacity to carry out its mission. If your nonprofit is expanding and your executives are finding it difficult to balance financial obligations, it might be time to learn more about how you can make use of CFO services.
In this article, we will dig deeper into some of the signals that might appear when the need comes to employ external CFO services. Read on and let’s find out more about how you can keep your nonprofit organization financially healthy!
As we have already mentioned, the chief financial officer is an executive in a position of financial leadership. They oversee the finance department and provide the financial information to the CEO and the board of directors using their expertise in the market, accounting, cash flow, investment banking, and financial planning.
But what is a nonprofit CFO doing on a daily basis? The main responsibilities of a CFO are to:
- Oversee the financial decision-making of the nonprofit organization
- Take care of the charity accounting of the organization
- Recommend financial strategies to the founder, president, and executive team.
- Determine and resolve any possible risks to the organization’s finances.
- Control all financial activities, including budgeting and auditing
- Put plans and procedures in place to enhance financial performance
- Help the financial department create both short-term and long-term financial objectives
- Examine financial information to identify cost-cutting opportunities
- Handle organization’s financial data and records
- Execute the needed financial reports
- Operate as the primary point of contact for the auditors
The nonprofit CFO position is a complex one. CFOs are accountable for boldly assessing an organization’s future while basing their recommendations on financial analysis. They forecast, manage risk, spot potential possibilities, and create effective strategies in the financial reports they generate.
When do you know it might be the time to start looking for a nonprofit CFO that can take care of your financial responsibilities?
We have put together a list of signs you should consider for preventing any financial turmoil:
Leading a nonprofit that is expanding quickly is like climbing a rocky mountain. It may be both challenging and satisfying at the same time.
This is particularly true if you’ve been meeting your growth goals repeatedly. But for those in charge of prosperous organizations, one of the toughest problems is figuring out how to continue expanding and thriving in the future. Why? Because an organization will ultimately reach a limit as it grows. This is referred to as a “crisis point.” And one of the biggest crisis points a nonprofit could face is a poorly managed budget.
This is one of the main reasons your organization needs nonprofit CFO services. Growth comes with great responsibility, therefore it is for the benefit of the organization to outsource the fundraising for nonprofit and other financial activities to a trained nonprofit CFO.
Since the goal of nonprofit organizations is to continuously fund the causes they promote, they develop new methods of revenue-raising every year.
Some of the most common revenue streams for nonprofits are:
- Individual donors
- Large-scale donors
- Governmental funds
- Corporate philanthropy
- Grant-making public charities
- Recurring/seasonal funding
If your nonprofit is generating revenues through multiple streams, it might be a good time to consider employing CFO services. The tax-exempt status for your organization is only applicable for specific revenue streams. That can be achieved only by pursuing a set of three tests: lawful, political, and asset.
To avoid any potential complications, a nonprofit organization should take into consideration CFO services. This way, it is ensured that all the revenues are declared and registered appropriately.
Most nonprofit organizations are following the structure of for-profit ones: start-up, growth, expansion, and maturity.
While in the growth stage, fundraising for nonprofit organizations can become one of your biggest worries. Even though your organization has a clear strategy, sometimes the financial practice is the one shooting time.
With the help of a CFO, you will be able to better manage the financial development of the company. Simultaneously, hiring a CFO will open up new avenues for revenue generation if raising money for your organization is a challenging task.
In a major organization, the CFO provides internal and external stakeholders with financial information in order to support decision-making. And most CFOs use data to provide the board of directors with insights.
For a for-profit organization, the finance division provides insight into the future of the business, and the finance leadership uses reporting to produce better results.
A charity CFO must show donors and sponsors that their funds are being used wisely through open reporting and ethical business practices. Financial management must be a complete process that is carried out in conjunction with meticulous planning.
Managing multiple programs makes it even more complicated as it implies applying the same behavior to various activities.
When you want to outsource your financial health obligations, you should at least look for a CFO who is well-versed in the financial, accounting, and tax regulations that apply specifically to the nonprofit sector. The CFOs who have solely worked for companies generating profit may find it challenging to accommodate the switch to the nonprofit sector.
Simultaneously, non-profit CFOs must be knowledgeable about funding sources, grant administration, and single audit requirements if their organization receives $750,000 or more in governmental funds. A certified public accountant designation and, ideally, an MBA are prerequisites for the ideal applicant.
Strong communication abilities, strategic thinking, financial reporting experience, and the ability to use ingenuity to work within resource constraints are all required for the position. Last but not least, you probably want the CFO to truly care about your purpose because nothing inspires workers like a conviction in the rightness of the cause.
Expansion requires a lot of planning and organization. CFOs can help your nonprofit in that way. They make decisions based on data, cultivate relationships that guarantee a continuous income, plan their spending wisely, share their knowledge of cash flow, and develop several streams of income.
Book a free consultation with Zivo if you need a Canadian professional to look over your finances before you decide whether to proceed with a CFO or on your own!
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