Transcript Episode 111

Transcript Episode 111 – The Role of the Nonprofit CFO on The Prosperous Nonprofit

[00:00:00] Stephanie Skryzowski: Hey there. If you’re looking for the 100 degrees of entrepreneurship podcast, you’re in the right place after a hundred amazing episodes, we’re changing things up to serve you the most inspiring content in a fresh new way. Thanks for being here and keep listening.

Welcome to the prosperous nonprofit, the podcast for leaders who are building financially sustainable and impactful nonprofits and changing the world. I’m Stephanie Kowski, a Chief financial Officer and founder and c e O of 100 Degrees Consulting. My personal mission is to empower leaders to better understand their.

To grow their impact and their income. On this show, we talk to people who are leading the nonprofit sector in new, innovative, disruptive, and entrepreneurial ways, creating organizations that fuel their lives, their hearts, and their communities. Let’s dive in.[00:01:00] 

Hey everybody. Welcome back to the show, the Prosperous nonprofit. Today you have me and we are talking about the role of a nonprofit C F O. Now that’s Chief Financial Officer, so this is my job. This is what I have done for a very long time now, and I have a team. Of fractional CFOs that work in nonprofits and really sit in this role.

However, I do feel like this is one of those roles that it’s like, wait, what are they supposed to do again? Are they just a glorified bookkeeper? Did they file our nine 90? Are they our auditor? What is the C F O? What is the role of the cfo? Let’s kick it back a while now. A ways back when I first interviewed to be the CFO F of the organization that I was working for, it was a promotion, and I was asked to interview with the treasurer of the board, and this [00:02:00] person happened to be the retired CFO F of a Fortune 500 company, like maybe a Fortune like 50 company, maybe a Fortune 10 company.

Really high up on the list. This person was the retired C F O Chief Financial Officer of this massive global corporation. So I was like, what, 27 years old or something? 28, 29 years old. Like super intimidated. But I will never forget what he told me in that interview. And he told me that the role of the CFO F is to see around the corner.

The role of the C F O is to see around the corner, and that has stuck with. For a very long time, ever since that day, oh, I can’t even tell you how nervous I was. I went to this person’s home and it was amazing and beautiful and I was so incredibly nervous, but I got the job and that really set my career on the trajectory [00:03:00] to get me to where I am right now.

So I’m glad I did it. Glad I went. But I’ve taken this advice with me or this, this idea that the role of the CFO is the sea around the corner, and. Let’s talk about like what a CFO F can do in your organization. So your cfo, F a, CFO F, can really help with scenario planning, right? They should have the ability to think through different scenarios that may impact your organization and.

Be able to financially plan for them. Right? So like basically crunching the numbers to see what the impact would be if X happened or if y happened, right? That’s forecasting, that’s projections. That’s something that we do every single month for our clients, right? And so it can often be really helpful in decision making when you’re like, ah, should we, should we close this pro?

Actually I’ve done this before. Like should we close this program? Like is this program. Costing us a significant amount of [00:04:00] money, like we’re not able to fundraise for this program, and the C F O can look at the numbers, can run the analyses, can see, okay, if we shut down this program, what would be the impact?

What amount of fundraising are we losing? How would that impact the rest of the organization? Right? We can develop scenario planning to help make decisions like. So that’s one big piece of what A C F O does. I think another big piece of how A C F O contributes to the organization is engaging with stakeholders now that’s like the most broad word ever, but really engaging with, you know, the development team, leadership, the board.

Your programs team, right? Finance is kind of like the hub of the organization. Um, the hub of the wheel and all of the spokes are all of the different people that all need to work with finance, right? So the C F O can be that leader that brings everybody together in conversations to talk about the numbers.

So your C F O is also using data and KPIs and analytics [00:05:00] to identify patterns and trends that will help us determine any future risks or any future opportunities. Again, it’s this like seeing around the corner that the C F O can do using numbers. So that’s like a huge, that’s really a huge piece of it. I mean, I think in a lot of organizations, of course the CFO F is also overseeing accounting and finance and things like that, but I think that this idea of A C F O being able to see around the corner, It really gives you a good picture of like what this person should be doing.

So if you’re thinking about hiring a cfo, F like what are some questions you wanna ask? Because what I don’t want to happen is you to hire somebody whose resume looks fantastic when it comes to numbers and maybe numbers aren’t your strong suit. And so you’re like, er, Don’t really know what to ask, but like, this seems good enough.

It seems like they know how to do numbers, but [00:06:00] in reality you’ve just like accidentally hired a bookkeeper, right? We absolutely don’t want that, and so that’s why I’m giving you some. Ideas of questions to ask before you hire A C F O. So the first thing we that we definitely wanna ask is, what’s your experience in financial management?

Now, this is different from bookkeeping, right? We wanna hear what’s their experience in managing a budget and creating financial reports. In forecasting. Forecasting is seeing around the corner and accounting. One thing I will say is like, I have. Hired and or almost hired people that had a really good sense of financial reporting, but they had no idea how the numbers got to be where they are in the financial reports, meaning they were not accountants, they did not understand debits and credits and how things played out.

They could take an uh, p and l, an income statement. And tell you what it meant, but they didn’t really understand the entries that got there. I know [00:07:00] that sounds kind of crazy as I’m saying it, but it’s definitely happened before. And so depending on how large your organization is, if you only have like a one or two person finance team, that CFO really needs to make sure that they can be a quality control, check on the numbers and make sure the financial reports that they’re looking at are correct.

Right? So they need to have some, some skills in accounting as well. I think asking specific examples of how they’ve managed financial systems and previous roles is a great place to start as well.

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I think the short answer is no. Right? Because we can learn, but. I think it’s strongly preferred. Frankly, in my business, we will not hire a cfo, f or a bookkeeper who does not have previous nonprofit experience for us. We are coming into organizations and expected to just jump right in and pick up from wherever the previous person.

May or may not have left off, and so we do not have the capacity to be able to train somebody on nonprofit accounting or on the nine 90. They need to be able to come [00:09:00] in and know that. So just think about that with your organization. I think it’s an important question to ask and then ask yourself, okay, can we train them on the ins and outs of the nine 90?

Can we train them? You know, the way that we need to track and record restricted funds. I mean, for me, I’d be looking for somebody with experience in the nonprofit sector, but I wouldn’t say that it always is an absolute deal breaker. So, The next question that I would ask is, how do you approach financial planning and budgeting?

What’s your budgeting process? So I am always looking for somebody that has a collaborative approach to budgeting where we are working with all of the departments, remember? You’re, you’re the hub of that wheel with all of the spokes coming into you in finance, right? We want this person to be able to have a collaborative process and to bring others into the mix.[00:10:00] 

So that I think is really important to understand what is their budgeting strategy, what’s their approach to risk management is another question I would ask. You know, as nonprofits that receive funding from sources that oftentimes we can’t control, for example, it’d be really interesting to hear what is their approach to.

That type of fundraising strategy, right? How do they anticipate and mitigate potential issues? And I would love to hear some examples of like how they use the numbers and the financial analysis to maybe identify a risk before it became a big deal and, and actually go and mitigate that risk, right? So that’s a good question to ask.

Okay. This is one of my favorite questions. This next question. What’s your communication style? How do you communicate financial information? This is so important because the C F O is often that person that is responsible [00:11:00] for communicating the financials, good or bad, to the board, to other leadership members, to the rest of the staff, maybe even to donors or other funders through grant reporting or through an annual report.

And if you’ve got somebody that. It gets lost in technical jargon. That’s talking in assets and liabilities and debits and credits. You’re going to lose your audience, right? Whoever they’re talking to is gonna be gone. Because if we start throwing around accounting terms and we start throwing around, you know, big words that are really technical jargon, you’re gonna lose your audience.

And that, you know, our message that we wanna communicate is not gonna get through and. I wanna hear that A C F O really understands how to tailor their message to their audience, how to read a room, how to understand where their audience is in terms of understanding complex, you know, [00:12:00] financial analysis and concepts, right?

Because you can throw out terms like burn rate all day long. Or operating margin or, I mean, those are kind of simple ones, but I mean, simple to me, maybe if, if you’re listening, you’re like, I don’t know what a burn rate is, right? So I should not be talking about burn rates unless I explain exactly what that is in terms that, you know, in sort of layman’s terms like you’re gonna understand.

So that’s not to, you know, say like, okay, we need to talk down to people tell, talk to me like I’m five. But they need to be able to communicate financial information appropriately to the right audiences. So I think that is a super important question to ask. So there’s probably a lot more that you wanna ask as C F O, um, when you are thinking about hiring one in your organization.

Those are just like five questions to get you started that I think are super important. And frankly, those are questions that we ask in interviews when we are hiring our CFOs that then work with our clients. So I hope this was helpful. I often see people getting [00:13:00] tripped up, getting stuck when it comes to the different finance people that may work in their organization.

And so that’s why I wanted to just dig a little bit deeper into C F O. Um, I forgot when this was. It was a while. It was a while back. And somebody asked what I did and I said, oh, I’m a C F O. And they’re like, uh, what? Like, I don’t even know what those letters mean, right? So, okay, if anybody’s thinking that chief financial officer, that’s what we’re talking about.

But you know, really being able to understand this role, especially compared to an accountant or a cpa or a bookkeeper or a financial advisor, right? Really understanding the difference between those roles is going to help set you up for success and to get the right people on the team, which we all know is one of the most important pieces of running a Prosper.

Nonprofit. All right, my friends. Let me know if you found this episode useful. I would love to hear if you ask these questions to a potential CFO that you’re hiring. All right. I will catch you next time. Before you [00:14:00] go, I just wanna thank you for being here. To access our show notes and bonus content, visit 100 degrees

That’s 100 degrees, and I’ll see you next time.