The following article was originally published as “Three Ways to Make an NFP Accounting Team Love its CFO” in June 2024 in The CPA Journal and is republished here with permission.
Factors such as outdated and highly manual processes, antiquated platforms, lean staffing, and low prioritization of resources spent on what is perceived as a “less than mission-critical” functions can make nonprofit finance teams feel marginalized and pressured. Nevertheless, senior finance leadership (from the director of accounting to the CFO) can make a significant impact on the way their teams utilize resources, prioritize work, and ultimately operate in a more successful way, by focusing on three key areas: leadership and guidance; preparation, timing, and trust; and process management and documentation.
Leadership and Guidance
Finance leaders can offer essential guidance and support to leadership in shaping the organization’s overall financial strategy. This involves the following:
- Providing oversight and monitoring of financial activities
- Assisting in the development of multiyear scenario planning, cash forecasting, and annual budgeting
- Reviewing and analyzing financial reports
- Leading by example and celebrating finance team wins by saying, “thank you”
- Reporting to the finance committee and presenting the annual budget to the board of directors for approval.
Senior finance leadership plays a crucial role in shaping strategies to support the goals of the nonprofit’s mission and upholding its organizational vision, while ensuring a responsible and accurate financial environment.
Preparation, Timing, and Trust
To effectively manage accounting functions, finance leaders must meticulously prepare and establish timelines for routine responsibilities. This ensures that tasks are consistently, accurately, and promptly completed, including the following:
- Monthly, quarterly, and annual close and reconciliations for accurate and reliable financial accounting data
- Creation and development of annual organizational budgets and projections, as well as departmental, programmatic, and grant-specific budgets
- Oversight of the audit process and compliance with GAAP and other requirements
- Fostering collaboration interdepartmentally to set expectations on each department’s duties and responsibilities, to establish required timing for information gathering and receipt, and to create a collegial environment that encourages communication and transparency
- Generating and presenting financial reports to the board and organizational leadership.
In addition, finance leaders must continually monitor and recommend efficient and effective financial policies and procedures. This not only supports the organization in meeting operational objectives and delivering timely, accurate reporting, but also fosters trust and integrity throughout the organization, bolstering the accounting department’s credibility.
Process Management and Documentation
Finance management and more-senior staff bear the responsibility of supervising day-to-day finance and accounting processes. This encompasses the oversight of various tasks, including the following:
- Processing payroll, accounts payable, and accounts receivable
- Handling invoice payments, deposit creation, and submission of funder invoices
- Supervising the accounting system, encompassing entry and review of budgets, payroll, and all other journal entries.
Regular evaluation of process and procedural documentation of the above tasks is crucial for nonprofit organizations to identify and streamline key steps, and ensure that current practice aligns with the documentation itself. Given the constant pressure of monthly responsibilities, nonprofit management and junior staff may not feel empowered to spend time updating key processes and even innovating new ideas without directives from senior finance leadership. It is the CFO’s role to encourage staff to challenge past practices.
Several factors have fundamentally changed the way organizations manage manual processes in recent years. Necessity forced organizations to rapidly shift to a dependence on virtual and computer-based processes. This is just one example of a paradigm shift in how duties are carried out that may not yet be reflected in policy and procedure manuals.
Support and buy-in from senior finance leadership to promote the evaluation of policies and procedures, even in the face of other competing priorities, will show a commitment that will be reflected throughout the department. This will provide transparency in how the department is automating processes efficiently, which in turn allows for cross-training of other individuals within the department. That can then be leveraged against the jeopardy of staff turnover at the expense of business continuity, while effectively executing core accounting functions.
Strong senior leadership presence in the execution of these three areas contributes significantly to relieving the burdens on a nonprofit organization’s accounting department. Accountability for budget mandates, extra time and resources that are generated by well-articulated procedures and established timelines, and engagement and trust in senior leadership support of finance department goals, translate to more dependable and timely reporting, and ultimately an efficient and effectively managed accounting team.
This, in turn, empowers decision makers to advance the nonprofit’s mission effectively with timely and accurate reporting produced by said efficient and effectively managed accounting team.