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What are successful nonprofit CFOs doing that works?

from  November 2, 2022 | 3 min read

Being a nonprofit CFO is never easy; they are always under pressure to achieve so much: automate processes, improve productivity, create greater levels of transparency and visibility, enhance the governance of the organization, and strengthen the team’s decision-making and strategic focus.

Nonprofits often find themselves in survival mode. One of the reasons why is that when you’re not in business to make money, it’s harder to make money. With all the challenges nonprofits face, CFOs are under this constant pressure, so how can you reduce that pressure, maximize your organization’s impact and direct more resources to your mission?

Click to read Helping nonprofits deliver on their mission with FP&A and HCM - Blog - FG 

Here we discuss some of the key challenges, special requirements, and unusual constraints of financial management and share tips and best practices for nonprofit CFOs.

What are successful nonprofit CFOs doing that works?

Craft a compelling message

Charity finance officers and nonprofit leaders need to craft a compelling message because donors will perceive the organization based on that message. To use a homeless charity example, if the message to donors is “$10 provides a bed for the night”, the donor may think the organization is small and may only give $50 or $100. In contrast, a message such as “End homelessness in your neighborhood.” creates a vision of impact and transformation. The same donor may be moved to give $1,000 or $10,000. One way to encourage this transformational way of thinking is to ask your organization what it would do if it received ten times the usual annual revenue. This typically elicits aspirations and identifies long-term compelling impact.

Focus on core financials

Even the seemingly simple tasks associated with core accounting are more complex for nonprofits. In many organizations, revenue recognition must be decoupled from cash receipts and disbursements. And all nonprofits need flexible ways of looking at their accounting transactions, such as by geography, project, timeframe, and funding source. Most “simple” accounting applications simply weren’t designed for this complexity, leaving charity CFOs and their teams to manage critical tasks offline.

Vigilant internal controls and cash management

Centralized internal controls with decentralized planning and responsibility may be the secret formula to help nonprofits remain vigilant, transparent, and agile. Entry-level accounting applications lack the security and transparency crucial to nonprofits, and they cannot accommodate the nonprofit’s need to manage their monies by grants, donors, programs, geographies, and other dimensions.

Zeroing in on funds and grants

Funds and grants are the lifeblood of nonprofits. Developing practical, workable ways to achieve inspiring missions has always been a key ingredient in successful nonprofit leadership. And the challenge of mapping limited resources against seemingly unlimited needs is especially critical today, given declining government funding and the slowed growth of private contributions to nonprofits.

Each funder has their own demands, and when your organization has dozens or even hundreds of funding sources, you could be preparing dozens of monthly closes and hundreds of monthly, quarterly, and annual reports. Without an automated way to do that, CFOs and their teams face a massive amount of low-value work that doesn’t advance the organization’s mission.

Raising insight and visibility

Nonprofit’s books are under constant scrutiny by many sets of eyes. As CFO, you must be able to “know and show” what’s happening in every aspect of the organization with both speed and clarity. Uncovering insight and demonstrating transparency are capabilities that need to be built into the way you operate across every entity, funding source, location, and program. Transparency is a non-negotiable best practice for leading nonprofits today.

Major donors often question increases in operating expenses or even why a nonprofit requires cash reserves to support operations. CFOs need to educate donors that all nonprofits are businesses with a mission to enrich the lives of clients. One way to justify cash on hand is to ask the board to designate it for a specific purpose. First, there is the operating reserve that will need to be maintained, then there may also need to be cash to fund a 10-year capital replacement plan, for example, vehicles, building maintenance and repair, or expensive equipment.

It may be that the nonprofit needs to earmark funds for other special purposes appropriate to the nature of the organization. After careful messaging and education, donors and other stakeholders will understand that funds for a particular purpose may need to be built up over several years. Then, when the board designates funds toward that purpose, people understand there is a plan.

Tools and best practices to help you survive and thrive

The responsibilities of nonprofit and charity CFOs are complex and far-reaching. You must work to automate processes, improve productivity, create greater levels of transparency and visibility, enhance the governance of the organization, adhere to changer reporting regulations and strengthen the team’s decision-making and strategic focus. All those efforts are made easier with the right tools in place. Cloud financials are absolutely key to running a nonprofit today. You can significantly reduce manual work, be more productive, and eliminate all of those capital investments.

Nonprofit organizations need an affordable, scalable, easily deployable Enterprise Resource Planning (ERP) platform that can adjust to the changing needs of their business. These solutions can help nonprofits streamline and improve their financial management, workforce management, process management, and other capabilities.

Finally, here are our top tactics for a robust budget strategy:

  • Craft a compelling, transformational message.
  • Analyze donors, segment them, and then develop a strategy for each segment.
  • Develop a revenue target independent of strategic goals.
  • Ensure key initiatives are measured to determine progress.
  • Ensure infrastructure, such as HR, IT, and Finance, is properly resourced, as these areas are typically undervalued.
  • Invest in an affordable, scalable, easily deployable Enterprise Resource Planning (ERP) platform that can adjust to the changing needs of the organization.

How can Unit4 help your nonprofit organization?

Unit4’s next-generation smart ERP software solutions are built for people in the business of helping people. With us, you can ‘Experience Real Purpose’ with an adaptable solution that’s right for you, now and in the future.

Check out the Unit4 People Experience Suite or download our Nonprofit eBook here for more information. You can also learn about more great Nonprofit customer stories here.

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