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How Virtual CFO Services are Like a Superhero + Crystal Ball Combined

by with No Comment Featured BlogFinancial ManagementPeopleProductivity

“A shift is happening. The early CFO, version 1.0, was The Historian. Next came version 2.0, the Real-Time Analyst who caught issues based on real-time dashboards. It now appears that we are beginning to see a new version: CFO 3.0 – The Futurist.” (Source)

I talk about Excel being my crystal ball all the time. With the right numbers, used in the right way, we can literally see the future. Through financial modeling and forecasting, we can predict what will happen with our revenue, expenses, cash flow, and more. It’s not totally failsafe but it is the most educated guess around.

I love The Futurist CFO 3.0 as described by Intacct, but I think the most successful CFO is a solid combination of all three: Historian, Real-Time Analyst, and Futurist. We can’t know where we’re going until we know where we’ve been. It’s incredibly difficult to make future predictions without any data on past performance.

Intacct says, “the low cost of storage and computing power, coupled with the internet of things revolution, makes available large portions of data for smarter solutions. In short, we can get to answers more quickly by comparing the previously incomparable to discover new trends and relationships that are otherwise beyond our line of sight.”

Yup! And that’s exactly what I do – discover new trends and relationships to help you make better decisions.

When we decide to work together, I have a tried and true process I use to analyze your numbers and make predictions for the future. Here it is:

  1. Do a cursory review of chart of accounts. What is missing or redundant?
  2. Run P&L and balance sheet by month and by year for the past 3-5 years. Review P&L vs budget and variances. Where are the biggest variances? Which revenue streams have grown or decreased the most over time? What are the biggest expense line items?
  3. Calculate a litany of ratios and financial measures to determine areas for opportunity.
  4. Review budget and cash flow. Many small businesses don’t have a budget and most organizations don’t have a cash flow, so we create one. This is the crystal ball that gives the most insight to see around corners. Because we’re projecting out 12 months (or more in detailed financial models), we can make educated and accurate predictions based on the historical review in step 2 above so we can change course NOW instead of later to maximize revenue and minimize risk. It sounds easy because it kind of is!

“Such becomes the case for CFO 3.0 – Master Jedi – seeing around corners and flying through walls as they guide their business to scale and profitability.”

Master Jedi, Crystal Ball Reader, Excel Guru, Business Superhero. Or maybe just Chief Financial Officer. 🙂

PS – Do you want to get this deep insight for your organization? I can apply my process above to your numbers to give you info about your business that you haven’t seen before. Grab a spot on my calendar today to start the conversation!

 

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A nonprofit trend that will influence 2018

by with No Comment Featured BlogFinancial ManagementNonprofit

Classy just posted an article about the 9 nonprofit trends that will influence 2018, but they left out one critical component of nonprofit management. Finance.

[Side rant: Why does everyone forget finance?! If I accomplish only one thing in my life, it will be to elevate the finance department of nonprofits everywhere! Our work is the foundation to programmatic, fundraising, and marketing success, but we are too often overlooked.]

Since Classy covered marketing, data, graphic design, and others, but left out finance, I thought I would round out their list of nonprofit trends that will influence 2018 and add one trend in for finance.

The question is: What did you notice in 2017 and how do you see it influencing the future?

My answer, when thinking about nonprofit finance, is TRANSPARENCY.

I’ve compiled a Transparency Tip Sheet to help you share your financials the RIGHT way. Download it here! >>

Historically, the numbers have been left to the experts. The accountant enters the transactions, the CFO reviews them and presents to the CEO and Board, and that’s where it stops. The Program Manager who runs the programs on the ground has no clue what the income statement looks like or why they should care.

Transparency in the nonprofit world isn’t a new concept. A decade ago, the IRS released the revised 990 which included significant governance questions, and Guidestar, the charity watchdog that we all know and love, has already implemented greater standards for nonprofit reporting, including programmatic accomplishments so that we’re not judged on numbers alone.

But has this industry transparency trickled all the way down to the organizational level?

In my experience, it hasn’t. Non-finance staff still have no idea about their organization’s budgets or financial performance.

Why is this important? If they’re not on the finance team, why should they care how much cash is in the bank or how much we raised last month?

Because transparency leads to accountability which leads to ownership. The more transparent we are about our numbers to the entire team, the more accountable they will feel towards their own small budget. When making decisions on buying supplies for their program or talking about the organization at a donor visit, they’ll think about the big picture. They will feel greater ownership for the organization’s financial health if they know the basics of financial performance.

Transparency is one area we focus on and instill in each of my clients. We host training that breaks down the income statement and balance sheet into the most critical and relevant details so that everyone knows what the numbers mean to them. We boil the financial statements down into usable dashboards so even the most numbers-averse can understand their organization’s financial performance at a glance.

So as I look into 2018, I think more organizations will begin to instill transparency in their organizations and will reap the benefits of a more accountable and dedicated team, and as a result, a more sustainable, strong organization.

Industry-wide transparency from the very top all the way down to individual staff members can only reap good for the nonprofit world as a whole.

I’ve compiled a Transparency Tip Sheet to help you share your financials the RIGHT way. Download it here! >>

 

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Why 100 Degrees is so much more than accounting

by with No Comment Featured BlogFinancial ManagementMindset

Empowerment.

I’ve seen it criticized as a buzz word or jargon in the nonprofit world, but I disagree. Yes, everyone seems to be empowering someone or something but I happen to like the word.

When I think of empowerment, I see someone standing a little taller, speaking up a little more, and taking action with confidence. It’s that feeling that we can do something and make a difference in our own life and in the lives of others.

Empowerment to me is confidence in your skills and abilities to make the best decisions for you.

We often think about it in terms of empowering youth or empowering women but 100 Degrees Consulting does empowering work too.

We give CEOs and Executive Directors confidence in their numbers and their ability to lead their organization. We discuss the financial statements in a way that even the most non-numbers people can understand, and we help provide a clear vision into the future by developing customized forecasting tools.

For us, clarity leads to confidence which leads to empowerment.

We are helping CEOs more strongly lead their organizations through empowerment.

I am so ready to conquer this week and empower our nonprofit and small business leaders out there!

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How to Mitigate Risk for Non-Finance People

by with No Comment Featured BlogFinancial ManagementNonprofit

Mitigating risk.

Big words. Sounds scary. Not applicable to my business or my little nonprofit.

We all know that starting any type of venture – your own business or a nonprofit or social enterprise – comes with inherent risk. We invest our time and often money into something that we don’t know will be profitable or make an impact on those we set out to help. And when it does work out, a lot of times better than we expected, there are opportunities to grow and expand that again come with risk. Even working for someone else or a Fortune 500 company can be risky. We don’t have control over decision-making or our salaries or whether or not we might be laid off one day.

I’ve been approached by a number of clients lately – entrepreneurs, small businesses, and nonprofits alike – all wanting to know how financially healthy they actually are and if they can afford that big investment they want to make next year. They want a clearer picture of the risk that lies ahead, how they can address it, and they want it in the form of numbers.

As a CFO, this brings me no greater joy because knowing your numbers and being able to see in black and white where the money is coming from and going is one of the most important ways to mitigate risk. The more insight you have, the less unknown lies ahead and the more confident you can be in your decisions.

Props to you, you savvy people!

So mitigating risk is really not so scary a concept. Even if you’re not a numbers person, I want you to do these three things right now to mitigate risk in your own business.

  1. Where am I now? Look at a monthly Profit & Loss statement for 2016. You don’t need to be a financial guru to do this – look for what jumps out at you. Circle the numbers, highlight them, and really visualize what’s happening with your business.
    • Where are you spending money?
    • What months were low on revenue?
    • What is your overall net profit (revenue – expenses)?
  2. Where do I want to be? Write down your goals for next year.
    • How do you want to grow?
    • What investments in your organization are going to take you there? More people? More professional development?
    • Maybe you want to finally invest more in yourself? Increasing your salary or contributing to a retirement account?
  3. How do I get there? We all know that the best way to get anywhere you’ve never been is with GPS. Back in my day, it was called a map. In this case, your budget is your map. I know it can be scary, but I want you to put together some numbers.
    • How are you going to build your revenue goals to be able to make those new investments or otherwise mitigate your risk?

Still don’t think you’ve got the know-how to make the right decisions, even after you do this? I’m happy to help mitigate risk together, but no matter how you approach your numbers, don’t go into 2017 blindly.

When you acknowledge and address your risk, you will reap an even greater reward. As those brilliant Italians say: Sapere e Potere.

Knowledge is power.

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Hey entrepreneurs: Don’t make these 3 finance mistakes

by with No Comment Business DevelopmentFeatured BlogFinancial ManagementProductivity

Entrepreneurs are the BEST. We take an idea from scratch, put all of our brain power and hard work into it, and build that idea into a business for which people pay real money for our services and products. When you think about what goes into building a business, it’s pretty awesome that we can make this happen.

However – you knew there was going to be a however, right? – there are some pitfalls that entrepreneurs often encounter that will truly make or break their success, and they’re related to the numbers.

I get it. We’re not all math people. But neglecting the numbers can land you in a scary place, so today we’re talking about a few mistakes you can avoid.

1. You fail to plan.

When you start your venture, it’s easy to just dive in headfirst and spend a little here and there, get your first sale, and go full steam ahead without thinking about what expenses lie ahead and what your revenue pipeline looks like. This could be a quick way to get into trouble if you don’t know what’s around the corner. Your plan doesn’t need to be super complicated.

Start with the expenses. Think about what you need to be successful, what investments you need to make in your business (computer, training?), what supplies you’ll need to create your products, any professional services (legal, accounting, etc) – then lay those out into a monthly spreadsheet so you know the timing of each expense.

Then tackle the revenue. What is the bottom line you need to cover expenses? Now think bigger: How much do you want to make? Plot out your revenue goal by month so you have clear targets to work towards.

I know it sounds like a lot, but this planning exercise will help you focus and give you clear insight into the financial health of your company or organization.

2. You get behind on tracking your numbers.

We, as entrepreneurs, are busy people. We’re constantly thinking about our businesses, serving our clients, putting out products, doing activities to help the businesses grow, so it can be very easy to let a few months go by without entering expenses into our accounting system, organizing receipts, or looking at a P&L. This is the danger zone! We have absolutely no knowledge of how our businesses are doing without staying up to date on our numbers.

So make sure that you set aside just one morning a month to make sure all revenue and expenses are entered into the books, your bank account is reconciled, and you take a look at your P&L. Maybe even forecast out the coming months so you can see where your business is headed. The most important thing is to stay on top of it – otherwise, you’ll likely be spending more money and calling in the experts come tax time or end of year. This strategic insight is going to help you make better decisions for your business and give you the insider info you need to grow!

3. You refuse to ask for help.

I know firsthand how hard it is to ask for help. I mean, you’re an entrepreneur for goodness sake! You built this business from nothing, so why shouldn’t you be able to do it all?! I ran into this in my own business. I am very stubborn and was determined to build my own website and create my own graphics from scratch. Hours and days later, I was frustrated with the end result, tired of Googling how to do every little thing, and annoyed I had wasted so much time with nothing to show for it. I was humbled into making that call to the graphic designer I had in my back pocket.

Same thing goes for the finances. If you’re not a finance expert, you probably won’t give the numbers they priority they need because it’s not a fun task for you, and you’ll likely spin your wheels for much longer than it would take an expert to get your financial house in order and analyze the numbers for you. Focus on your strengths and leave the numbers to the crazy math lovers.

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Think bigger than your “overhead rate”

by with No Comment Featured BlogFinancial ManagementFinancial StatementsNonprofit

Once upon a time, I was a victim. A victim to the nonprofit overhead myth that as much money as possible should go to programs and anything spent on “overhead” or infrastructure was taking education away from the children of Africa.

I walked around with a 75 pound, 3 year old laptop, and every time I would lift it up, the battery would drop out of the bottom. This was especially problematic en route to meetings when I had my materials up on the screen just before presenting. I’d have to pop the battery back in, shift uncomfortably in my seat while the system booted up again and I opened my presentation back up. I eventually duct-taped the battery in which served me well until the entire system died.

Really? A duct taped computer? I wasted hours on that thing instead of just spending the $600 to get a new laptop!

I was a victim of the nonprofit overhead myth.

Which is why I’m thrilled to see this conversation making the rounds again and again.

I recently spoke at The Shift, a nonprofit incubator workshop, where I walked newbie nonprofits through creating a budget and pipeline for revenue and expenses. You can be sure I planted those seeds early that minimal infrastructure does not equal maximum programmatic impact.

I love Nonprofit Quarterly‘s shift in thinking about overhead as Core Mission Support, and I think it all goes back to the scarcity mindset. We feel like an investment in key infrastructure is taking away from programs and that there are limited resources out there for us.

Of course, we must be reasonable and responsible with our precious resources (none of Oprah’s “you get a car, and you get a car!” business) and focus on our impact, but let’s all commit to making a shift in mindset. Budget for what you need to be efficient – enough staff and equipment to run like a well-oiled machine. On the income side, don’t limit your fundraising goals either – instead of thinking “Oh, maybe we could raise $100k this year”, think instead of what you want to accomplish and develop a plan to get there.

The sky’s the limit, my friends! Go forth and invest!

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Seeing around the corner

by with No Comment Featured BlogFinancial ManagementFinancial StatementsGoal Setting

When I was interviewing for my first CFO role, I had the honor of interviewing with the retired CFO of a Fortune 10 company. I was incredibly nervous and felt so very out of my element – how could I ever stack up to his expectations of a CFO? I ended up getting the job and worked closely with him for several years, almost completely forgetting the anxiety of that first meeting.

One thing I did not forget, however, was his answer to my question: What makes a good CFO? This guy was responsible for the financial health of a major (very successful!) global corporation so if anyone could answer this question, he could. He said:

A good CFO helps the organization see around the corner. This has stuck with me for years. Every time I’m involved in any type of strategic conversation, I imagine myself peering around that metaphorical corner, striving to plan for what’s ahead. Now, I’m no psychic. I don’t have supernatural powers to help me see the future (although, sometimes I think that would be nice – that’s why they say hindsight is 20/20, I suppose). But there are a few practices that can help CFOs lead their organization by seeing around the corner:

Stay Connected. At nonprofits, we wear a lot of hats which can mean CFOs are also doing bookkeeping, HR and IT, plus trying to stay on top of the financials. It can feel nearly impossible to think strategically while you’re completely immersed in the daily operations of the finance department. But to see around the corner, you must stay connected to all parts of the agency. Have lunch with the program staff, meet the development director for a quick update on the annual campaign, go visit a program site and connect with your clients. Staying connected to everyone your organization touches will help you see the big picture of where you are and where you’re going.

Use Your Numbers. We prepare the income statement and balance sheet each month, we explain variances and make adjustments but we’re often only comparing budget to actual, or last year to this year. Two points of comparison don’t often tell a rich enough story. Use your numbers to dig deeper, create 5-year historical analyses and forecast beyond next month. Set aside time on your calendar after each month-end close to dig deep into those Excel spreadsheets and play with your data and I promise you will see farther around that corner than you ever have before.

Be Open to Change. Especially for agencies that have been around for a decade or two, we tend to fall into the same practices, procedures and programs that we’ve always done. When we ask a staffer why we’re doing it that way, they will probably shrug and say, that’s how we’ve always done it. To see around the corner, we have to open our minds to new possibilities. Maybe we need to close an unsuccessful program – take a step back – in order to free up resources to expand another program threefold – take two steps forward. A traditional CFO may try and reallocate resources to make the unsuccessful program better but a seeing-around-the-corner CFO is open to change and can see the bigger picture.

What do you think? How do you see around the corner?Organizations still need help seeing around the corner?

Contact us!

 

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Transparency: How to Share Financial Info the RIGHT Way

by with No Comment Featured BlogFinancial Management

Even if you’re not the one in your household who pays the electric bill, checks your bank statements or transfers the money into savings, you are still invested in the financial health of the family. How money is spent affects you and you’re therefore conscious of the financial impact your actions make. These new suede boots for fall fit into the budget, right?

The same mentality needs to apply in the nonprofit world. Oftentimes, program staff feel so far removed from the budget, the balance sheet, the income statement, that they may have no clue how the organization is doing. They’re likely devoting every bit of energy to their clients that there’s no time left to dig deeper and do the research on their agency’s financial health.

That’s where we come in. As the financial leadership of the organization, it’s our duty to be transparent and share the balance sheet and income statement with everyone from entry-level program staff to the Board Chair. Many organizations face the who/what/when/how challenges with openly sharing their financials which I will address.

Who to share financial info with?

Everyone! Staff, board, donors, volunteers. Financial information about your agency is relevant for all stakeholders. We’ll talk more about what information and how you present it below.

What to share?

For the sake of understandability, I would recommend sharing different types of information and presentations to different groups of people (using the same set of financials as your base, of course).

Board: High-level dashboard – a birds’ eye view – of the quarterly financials and forecasts plus a full balance sheet and income statement for those who want more details

Staff: High-level dashboard with highlights that are relevant for them (i.e. share about a new grant or program, or the fundraising results from last month’s gala). The more graphical the presentation, the better!

Volunteers/donors/public: High-level and/or public information such as the 990, annual report and audited financials

When to share it?

  • Annually: Annual report, 990, audited financials on website
  • Quarterly: Board meetings and staff meetings
  • Monthly: Board Treasurer and leadership team

How do we make the information interesting and readable?

PowerPoint. Graphs and charts. Bulleted talking points. Simplicity can be powerful!

Put yourself in your audience’s shoes. Do they know what accrued expenses or current liabilities mean? Probably not. Take five seconds to explain it and you’ll see a lot more head nods than heads buried in smartphones. Again, Excel graphs and charts are your friend. They’re super simple to create and for those of us who don’t get their kicks from black and white spreadsheets full of numbers, they help tell a much richer story of your organization’s financial health.

I encourage you to be transparent about your financials because transparency breeds ownership and ownership breeds engagement and engagement by all stakeholders will take your agency to the next level.

How does your organization share financial information?

Are you ready to put it all out there? Grab our Transparency Tip Sheet to help you determine the Who, What, Where, When, and How of sharing your numbers!