Non-profit organizations deal with social causes and do not focus on earning profits. They exist to serve society at large. Non-profit organizations work in varied areas and strive to bring about changes in education, research, religion, science, and other social activities. Running a business for social causes is very challenging especially when they heavily depend on donations and grants.
Non-profit organizations struggle on various fronts and need someone with strong financial experience to guide them through their rough patches. A CFO is a financial expert who can structure a clear path and help non-profit organizations to sail through all their constraints.
The CFO can help the non-profit organizations in their everyday activities as well as arrange for donations and pitch services to high-end clients. A CFO has both administrative and leadership traits which are a blessing for non-profit organizations. A CFO takes care of all finance-related issues while they can focus their time and resources on the upliftment of society.
The CFO plays a strategic role in budgeting, reporting, analyzing data and financial information. CFO helps to provide clarity and thus supports the non-profit organization in making sound decisions.
The non-profit organization can benefit from the services of the CFO and face many challenging situations. Some challenges that a CFO can solve are:
1. Raising Funds:
The biggest challenge faced by nonprofit organizations is getting funds. A CFO plays a pivotal role in helping non-profit organizations to procure funds from different sources, including the corporates and the government. Non-profit organizations receive money from sponsors, members, government grants, etc. They rely completely on donations and have to ensure that they don’t miss out on any financial opportunity. A CFO helps in planning, developing, and streaming a system that enables non-profit organizations to receive funds regularly. The CFO can arrange for meetings and make presentations to high-profile corporations in order to generate funds. With the help of a CFO, non-profit organizations can develop strategies and customize fund-raising programs designed for every donor. The CFO can provide sponsors with details of the end-use of the funds. Such an informative and precise outlook always ends up in a favorable response, which means more funds for non-profit organizations.
2. Managing cash flows:
Non-profit organizations need to manage their cash flows effectively. A well-maintained cash flow ensures the employees are paid on time and every social cause is funded regularly. The CFO’s outlook in managing cash flow helps the non-profit organizations to trim down their expenses and set realistic goals. The CFO is an expert who uses cash flow statements to determine future needs. With the help of the cash flow position, the CFO understands the areas where funds are being used. The CFO carefully analyses the cash flow to predict future cash needs and meet its goals without facing an acute financial crunch.
A CFO helps non-profit organizations in preparing realistic budgets. These budgets provide a clear roadmap on how to use the funds for the designated purpose. It also helps different departments to be accountable for their spending habits. Since the budget lays down a concise spending plan, the organization can plan its activities in the most economical manner to ensure that all its needs are met. A well-designed budget ensures that the staff, volunteers, partners, and members are on the same page. Even the board of directors gets a clear picture of how the organization will carry on its activities with the available funds.
4. Recruiting and training
Non-profit organizations find it challenging to recruit and retain employees. A CFO can assist the organization in designing compensation and wages that attract and retain the staff for a considerable amount of time. A CFO can also provide insights into providing the correct technical skills and training to new and existing employees. Usually, non-profit organizations work with few employees. These employees perform multiple roles, which is the main reason for attrition in the non-profit sector. A CFO can provide assistance on developing automated systems to receive donations and funds which would free up some time for the employees so that they can concentrate on other important tasks.
5. Reducing the misuse of funds:
Non-profit organizations are highly susceptible to fraud and misuse of funds. A CFO can use his knowledge and experience of using systems and software to ensure that proper accounting and bookkeeping systems are in place. A properly managed system ensures that all funds are accounted for. It ensures that every donation, no matter how small, is routed through the system, thus leaving very little scope of being misused or being unaccounted for.
6. Analyzing and preparing financial statements
A CFO is of great help to non-profit organizations in preparing financial statements and reports. The CFO can assist financial professionals in the organization to prepare a structured balance sheet, statement of income and expenses, statement of cash flow, and statement of functional expenses. The CFO analyses these statements to understand the financial position of the organization, assess future liabilities, understand the liquidity position, plan and organize future fund-raising activities.
7. Reporting to stakeholders and fund providers:
Non-profit organizations receive funds for diverse purposes. They need to give reports to every donating party about the use of funds. This can be a tedious and challenging process. CFO helps non-profit organizations to streamline their accounting process, which helps them to track the fund flow. Reporting becomes easy when funds are properly monitored and allocated.
At your service:
The non-profit organizations are low on funds and may find it difficult to appoint a CFO to help them overcome various challenges. However, they can always choose to use part-time CFO services or VCFO services, which are cost-effective. Diligen is one such financial service provider that offers VCFO services that cater to clients across different industries and various sectors. Diligen’s has helped many nonprofit organizations by providing them with services of competent, committed, and creative VCFOs.
They understand the client’s business and provide them with valuable solutions that help them succeed and achieve their objectives. Diligen’s VCFO services can be customized as per the organization’s requirements. The VCFOs use their financial and management skills to enable non-profit organizations to increase their scale of operations face challenges and fulfill their mission with zeal and enthusiasm.