We’ve talked before in our blog about outsourcing bookkeeping and other accounting services, but many nonprofit organizations don’t know that they can also outsource their CFO services. You may be thinking, “well our company isn’t large enough to have a dedicated CFO,” and that’s exactly why you should keep reading. Outsourcing CFO services can benefit any size and type of organization, let’s look at how.
What Does A CFO Do?
A Chief Financial Officer (CFO) is an executive individual within the accounting and finance department that is ultimately responsible for the financial position of the entire organization. A large portion of a CFO’s job duties includes being an effective manager.
The CFO is the highest-ranking financial position, so they dictate the expectations and performance of all accounting staff. A lot of the CFO’s focus is the accounting functions, but they remain up-to-date and work in rhythm with every other department in the organization.
On top of leading the team to greatness, a CFO reviews and analyzes financial reports. They monitor the expenses each month and act when there is an opportunity to reduce costs or increase efficiency. They are held accountable for the accuracy and transparency presented in each financial report.
A CFO manages the cash flow of the organization, being responsible to adjust activity when cash flow is short and review net income regulations when cash flow builds up. To control cash flow and consider the future financial health of the nonprofit, a CFO manages the financial planning for the organization as well, which may include investment activity, organizational restructure, and special funding needs.
Benefits Of Outsourced CFO Services
We’ve established that every organization needs the services of a CFO, but why outsource the functions?
Outsourcing accounting services is more cost-effective than hiring a CFO for many nonprofit organizations. In fact, the average salary requirement for a nonprofit CFO is over $115,000. That is a significant payroll expense for an organization whose purpose requires being able to consistently re-invest in the mission.
However, most companies can tell you that while it’s a large salary expense, the expert skills and knowledge a qualified CFO brings to the organization are worth it. That’s where outsourced CFO services begin to make sense. Using an experienced accounting service to perform the functions of an in-house executive is a more cost-effective solution for most small businesses and nonprofit organizations.
Organizations that do not have a dedicated CFO on the payroll, typically see more billable hours being submitted from their accounting departments. The reason is that, whether the organization has a financial executive team or not, the transparency of the financial records must still remain a priority.
Accountants, bookkeepers, and volunteers may not be trained to evaluate the impact of daily transactions on the bottom line, so they spend much longer compiling and reviewing ledgers and reports at month-end or year-end. Managing finances falls to the business owner or leadership team, which requires them to spend less time focusing on the overall purpose of the organization.
Nonprofits must comply with the rules and regulations set forth by federal, state, and local agencies. Nonprofit status is regulated by the state in which your organization operates. The specific requirements of each state vary, but an experienced accounting team can make sure all reporting and operating requirements are met.
Keeping nonprofit status, awarded by the state government, is also important to keep the organization’s tax-exempt status. Remaining tax-exempt is monitored by the IRS, which allows the nonprofit to avoid most federal income tax liability. Outsourcing CFO functions can ensure that organization is filing accurate Form 990s and maintaining all other compliance requirements set by governing agencies.
Nonprofit organizations are created to serve their members and the community, and most nonprofit founders want their organization to serve as many groups or individuals as possible. The growth goals and ideal timelines in every organization are unique, but CFO services can give the organization the power to achieve its goals. CFOs have the knowledge and financial planning tools to implement processes that will fuel the growth and longevity of the nonprofit.
The duties and functions of a CFO protect the organization because they have been educated and experienced in nonprofit business in all types of industries, regions, and markets. The experience allows these experts to identify potential risks to the organization, like fraud, non-compliance, cash flow shortages, and UBIT liabilities.
Since CFOs are trained to recognize these threats, they are able to quickly react and adapt operations to minimize risk.
Having an experienced CFO benefits a nonprofit in several ways, but hiring a full-time executive is not in every organization’s budget. A more cost-effective option is to work with an accounting team, like JFW Accounting Services, to outsource CFO services.
JFW Accounting Services serves as a financial manager dedicated to the success of your nonprofit organization. Give us a call today to learn how our outsourced services can help your nonprofit establish strong financial controls, plan for the future, improve financial reporting procedures, and more.
Jo-Anne Williams Barnes, is a Certified Public Accountant (CPA) and Chartered Global Management Accountant (CGMA) holding a Master’s of Science in Accounting (MSA) and a Master’s in Business Administration (MBA). Additionally, she holds a Bachelor of Science (BS) in Accounting from the University of Baltimore and is a seasoned accounting professional with several years of experience in the field of managing financial records for non-profits, small, medium, and large businesses. Jo-Anne is a certified Sage Intacct Accounting and Implementation Specialist, a certified QuickBooks ProAdvisor, an AICPA Not-for-Profit Certificate II holder, and Standard for Excellence Licensed Consultant. Additionally, Jo-Anne is a member of American Institute of Certified Public Accountant (AICPA), Maryland Association of Certified Public Accountants (MACPA), and Greater Washington Society of Certified Public Accountants (GWSCPA) where she continues to keep abreast on the latest industry trends and changes.