Financial Stewards, Risk Mitigators, Digital Pioneers: What Don’t Nonprofit CFOs Do?
Safeguarding an organization’s fiscal health remains a core responsibility of nonprofit CFOs, but their roles have grown far beyond the four corners of a financial statement. At last week’s BDO Greater Washington, D.C. 2018 Annual Nonprofit Summit, a panel of CFOs tackled the myriad responsibilities and evolving challenges today’s nonprofit CFO encounters.
- Didi Salmon, CFO of the National Academy of Sciences
- Irena Barisic, CFO of The Brookings Institution
- Alex Galeano, CFO of ASIS International
Below are a few actionable takeaways from their discussion:
1.Connect the dots between the statement of financial position and the strategy.
When discussing financials with the board, don’t let the numbers speak for themselves. Go beyond a nuts-and-bolts monetary conversation and communicate how spending can help move a specific long-term goal forward.
With many organizations committed to updating and enhancing their technology, communicating how expenses fit into that initiative is a perfect case study for this approach. For a more compelling story, isolate specific costs like the initial cost for the new software, investments made for employee education and training, and dollars needed for system security. To elevate the conversation even further, consider using data visualization in your reports to the board to illustrate change more effectively.
What’s the overall message for the board? It’s more than an increasing line item: It’s one step closer to meeting a strategic priority.
2.If a budgeting process is broken, don’t be afraid to overhaul it.
Has your nonprofit ever changed its fiscal year? The prospect of such a dramatic change might seem like a daunting task, but as the financial steward of your organization, difficult short-term decisions are sometimes necessary for success.
Panelist Alex Galeano shared why making the change was the right choice for ASIS International. As an association, 60 percent of their revenue comes from an annual trade show held in September. Adjusting the fiscal year away from the traditional calendar year provided them with a longer runway to fully assess their financial situation before making decisions that would impact the next fiscal year’s budget.
If your organization relies heavily on an event to drive the majority of fundraising activity, evaluating when that event falls in relation to your fiscal year could be a valuable endeavor. This article
includes more insights into considerations for changing your fiscal year.
3.In a constrained funding environment, communicate early and often.
Purse strings are tight for nonprofits across the country, and limited federal funding has put pressure on nonprofit discretionary budgets. Didi Salmon of the National Academy of Sciences explained that limited funding for science has put pressure on nonprofit discretionary budgets. To mitigate surprises down the line, she suggests starting the budgeting process early and making projections to give a realistic picture of how the organization’s financial situation could shake out.
During budget planning, the panelists cautioned nonprofits not to overlook some of those big budget items like investing in new technology and the cost to move accounting functions to the cloud. If your organization is facing some large operating expenses, don’t stomach it all in one fiscal year. Instead, consider phasing those expenses over various years.
4.Stay in the conversation on risk mitigation.
The finance team is an integral part of conversations on risk, as it relates to quality control, physical security, and cybersecurity. As many organizations move their accounting functions to the cloud, CFOs should have a seat at the table to discuss the most effective way to secure those financial assets.
Risk mitigation incorporates cybersecurity, but also less flashy topics like compliance. Since risk mitigation is such a broad umbrella, it’s important to cultivate a culture where people feel comfortable asking questions or for help.
Every organization will have a different level of risk tolerance, but CFOs would be wise to keep a close eye on how their risk profile evolves.
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