The CFO'S Perspective

Do you truly understand how your organization is funded? And do know why it matters that you do?

Unfortunately, too often nonprofit leaders and board members only have a vague sense of how their organizations are funded and what that means for furthering their missions. This is a problem because funding is an integral part of an organization’s success, and the right funding mix is essential for the growth and maintenance of any nonprofit.

An organization’s funding mix can influence its overall financial health as well as determine its reach, capacity, operational flexibility, and long-term sustainability. To strike a balance between flexibility and sustainability, nonprofit leadership must have a firm handle on how the organization’s funding sources are diversified and what kind of implications that has for the organization.

What do you need to think about when transitioning a portion of your business from a B2B model to a B2C model?

This type of major strategy shift requires a full-scale examination of every facet of the organization – sales, marketing, operations, manufacturing, supply chain, logistics, and R&D. It is wide-reaching and comprehensive, rippling through everything that comprises what you sell, how you make/acquire it, and how you sell it.

When you need to hire a Controller, what should you look for? What do you really need and what is just nice to have?

Obviously, as the person who will have ownership over your entire accounting operation, you need someone that is disciplined, focused, and organized, but what else? Your Controller should be a strong accountant with a tactical focus and solid track record of reliable performance, but their resume should not end there. When you are looking to bring in a Controller, find someone who will also:

Over the last decade it has gotten harder to understand and evaluate the indirect cost rates being applied to grants. Nonprofit leadership has struggled to keep up as the requirements and recommendations around indirect cost rate calculations have shifted and changed. And yet, this work remains critically important to the effective financial management of nonprofit organizations because without accounting for indirect costs correctly nonprofits cannot cover their overhead.

Unless the expense of overhead costs such as rent, utilities, technology, and payroll are recouped through funding, an organization cannot be fully compensated for what it costs to run the programs that they offer, jeopardizing their ability to offer not only those programs but maintain other vital initiatives in the community as well. Therefore, properly calculating indirect cost rates is a cornerstone of effective grant management for nonprofits.

Are you thinking about selling your business? Some business owners hear this question and respond, “No… well, not any time soon anyway.” But, if the answer is yes, even if you don’t plan on selling it soon, the time to start planning is now. If you think that selling your business might be in your 3-year, 5-year, or even 10-year plan, start getting the pieces in place now. Preparing ahead of time makes the process go more smoothly and quite often helps owners to get more value out of the sale of their business.

It’s never too early to plan for selling a business because there are a lot of steps that need to happen before coming to the table to sign the paperwork. Getting your financial house in order involves cleaning up your books, assessing the overall financial health of your business, putting together the information that buyers will need to enter into an agreement, working through the details of the deal, and then closing out the sale. From the early planning stage to final sale completion, the whole process can take several years to complete.

While some nonprofits have been dealing with cash deficits over the last few years, others have experienced the opposite – too much cash! Granted, this “problem” is a much better one to have! However, it still poses a question that needs to be answered strategically to ensure a healthy future for the organization: “What do we do with the cash we’re sitting on?”

Of course, nonprofit leaders can choose to do nothing and just hold onto that cash until their hand is forced and they need to use it. Unfortunately, this approach poses two threats:

1. Not utilizing available cash to make strategic moves can cause an organization to miss out on key opportunities for growth, reducing its long-term effectiveness.
2. Sitting on cash gives the impression that the organization does not really need the money, which can diminish future giving from donors. Afterall, if an organization already has more than they need, why would donors keep writing the big checks?

According to news reports, Tesla’s CFO, Zachary Kirkhorn, has unexpectedly stepped down after 13 years with the company. This came as a shock to many because he was widely viewed as a possible successor to Elon Musk for the CEO role. He announced that he will remain on until the end of the year to help with the transition, but that the company’s Head of Accounting would replace him within the week in an interim capacity.

What happened? And could this happen to you as well? Let’s dig in to understand more.

Last year had been dubbed The Year of the Controller by financial recruiters because demand for the position dramatically increased amid uncertain economic times and increased accounting needs at many organizations. This year has seen continued interest in the role and there is no indication that the buzz around the Controller role is slowing down, which means that going into 2024 many companies are still inquiring about how a Controller differs from a CFO (Chief Financial Officer) and how a Controller can benefit their organization.