As a not-for-profit leader, you are used to overseeing all aspects of your organization. Truthfully, the finance department is not always the first thing not-for-profit leaders think to scale as the organization grows. You might think, at times, that having a financial expert run that side of the operation could be a plus. More often than not, organization leaders come to this realization once they have seen a big increase in revenue and realize that more strategic financial planning is in order. While this might be true, hiring a chief financial officer (CFO) is a weighty decision that can largely impact your organization.
Experts suggest weighing the following factors when determining whether to bring a CFO on board:
- Size of the organization;
- Complexity and types of revenue sources;
- Number of programs that require funding; and
- Strategic growth plans.
Not-for-profit organizations are more likely to need CFOs because they have evolving programs and long-term plans that may rely on investment growth, financing and major capital expenditures.
Examining CFO duties
Generally, a not-for-profit organization’s CFO (or “director of finance”) is a senior-level position charged with oversight of the organization’s accounting and finances. This individual works closely with the executive director, finance committee and treasurer, and serves as a business partner to your program heads. The CFO reports to the executive director and board of directors on the organization’s finances, analyzes the financial performance, investments and capital, develops budgets and devises financial strategies.
Factoring in your size
A CFO’s role and responsibilities can vary significantly based on the organization’s size and the complexity of its revenue sources. In smaller not-for-profit organizations, with budgets of $1 million to $10 million, CFOs have wide responsibilities — accounting, human resources, facilities, legal affairs, administration and IT. Midsize organizations, with budgets running up to $40 million and non-complex funding and programming, may also require their CFOs to cover such diverse areas.
In larger not-for-profit organizations, CFOs usually have a narrower focus. They focus their attention on accounting and finance issues, including risk management, investments and financial reporting. CFOs of midsize organizations with diverse programs (for instance, several programs that generate revenue) or governmental funding may have a similar focus.
Controller versus CFO
Not-for-profit organizations with smaller budgets and straightforward operations probably assign these responsibilities to the executive director or may choose a more affordable option. As your organization grows and its financial matters become more complex, hiring a controller may be best before bringing on a CFO.
A quick way to rule out hiring a CFO is this: If you do not already have a controller, you do not need a CFO. Do you have time to handle CFO responsibilities, including managing any financial software or ERP you need? Are you competent enough to understand and improve your organization’s health? If the answer is yes, then consider hiring a controller. If the answer is no, then hiring a CFO may be the answer.
Related Read: CFO vs. Controller: Which One Should You Hire?
With a CFO playing such an essential role, your organization should devote considerable effort and time to hire someone with the right qualifications. At a minimum, you want a person with in-depth knowledge of the finance and accounting rules for not-for-profit organizations. A CFO who has only worked in the for-profit sector may find the differences difficult to navigate. Not-for-profits’ CFOs will also need a familiarity with funding sources, grant management, and if your organization expends $750,000 or more of federal assistance, single audit requirements.
What about educational and professional credentials? The ideal candidate should have a certified public accountant (CPA) designation and, optimally, an MBA.
In addition, the position requires strong communication and strategic thinking skills, financial reporting expertise and the creativity to deal with resource constraints. It is useful when CFOs have experience in organizations with a wide range of functions — for example, human resources and IT — so that they can identify when outside expertise is vital to the success of their organization.
Finally, you will want your CFO (and every employee, for that matter) to have a genuine passion for your mission. Nothing motivates employees like dedication to the cause. In the case of a CFO, this makes it easier to understand that success for a not-for-profit is not only about the bottom line.
The outsourcing alternative
Does your organization lack the size or complexity to warrant having a full-time controller or CFO on staff, but desires the financial peace of mind the position can provide? Consider outsourcing controller and CFO responsibilities to a CPA firm. Outsourcing can produce several benefits at a far less cost.
With outsourcing, you obtain cost-efficient access to top-notch expertise. Not-for-profit organizations tend to look to their existing staff when filling the controller and CFO positions, but the in-house accountant may not possess the requisite financial expertise. Outsourcing will likely cost less while fulfilling the needs of both roles.
ORBA’s Cloud CFO Services may be right for you. Our managers cover all controller-level needs with the support of our associates for your day-to-day bookkeeping operations.
Because our team works with a number of business models, we offer industry expertise that you will not normally find in a controller. Plus, you will have access to our CFO check-ups a few times a year. We also have a CFO service add-on for organizations that warrant more consistent CFO expertise.
We save our clients both time and money. A virtual CFO can replace at least one full-time employee with additional savings in the finance department of up to 30%. See our pricing tiers to learn more about our base packages.
AICPA and other industry rule-making bodies require CPA firms to maintain independence from their audit clients. In short, this means that if you are a current audit client of ORBA, then you are not eligible for our accounting, controller or CFO services. However, we work with a number of other CPA firms and outsourced service providers that have not-for-profit industry expertise that we would be happy to refer to you.
If you are eligible and ready to add a strategic partner to guide your sustainable growth, click here to book your free consultation today.
For more information, contact Segdrick Byrd at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.