The Chief Financial Officer (CFO) of an organization serves one of the most crucial roles in the C-suite. It is their job to provide as complete an understanding of the financial resources available as possible to the rest of the organization, enabling each team and department to plan and budget accordingly. This is especially critical in the nonprofit sector, which is typically less well-resourced and faces more unpredictable funding sources than the private or public sectors. At mission-driven nonprofits, having the tools to measure and assess which projects are possible and which are out of reach is essential.
The last few years of turmoil, starting with the COVID-19 pandemic, have pushed nonprofits to do much more with much less. Widespread inflation, economic uncertainty, changes in work and office culture, and a growing call for transparency have impacted CFOs in all sectors, and these issues are magnified by the unique challenges of nonprofit work. Let’s take a closer look at some of the biggest challenges nonprofit CFOs are facing today.
The inflation rate has ballooned in recent years, driving the cost of many products higher and creating downward pressure on spending. For nonprofits, this means that income, particularly from donations, has gone down, forcing them to adjust or take cost-cutting measures. However, some nonprofits have been able to adjust their fundraising efforts and thrive despite these circumstances. A 2022 analysis of the nonprofit sector showed that, despite a significant increase in small donations, nonprofits had actually received more money than the year before, indicating that smaller amounts of larger donations had become a more common source of income. As a CFO, being able to analyze these trends and help your organization adjust is crucial for continuing your mission.
The often-debated subject of remote work is of particular interest to financial officers. Developing a clear analysis of the costs and benefits of remote or hybrid work is something that a CFO is very well-positioned to do. Because many nonprofits engage in community work that requires their staff and volunteers to be in-office, any analysis must also incorporate impacts on the organization’s mission. When considering the impact of remote work, nonprofit CFOs must strike a balance not just between costs and benefits but also between the quality of life of their staff, which affects retention and the organization’s ability to meet its goals.
Although the Great Resignation is showing signs of abating, the radical workplace changes in recent years and the subsequent burnout remain key factors in employee recruitment and retention. Because the nature of work has changed so much, financial officers are being continually pressed to come up with new ways to help their organizations attract talent without overextending resources.
The uncertain financial landscape has also made nonprofit recruitment tricky. Although nonprofit employees do their work partially out of dedication to the mission, the troubling economic headwinds can discourage talented employees from taking a less lucrative role. CFOs can help their organization come up with solutions to these issues, rethinking organizational structure, investments in recruiting, and offering more scheduling flexibility to employees or potential hires.
Because the work of a CFO is complex and often involves difficult and unpopular decisions, many financial officers keep their role and decision-making process opaque. However, there is a growing emphasis on organizational transparency, particularly among younger workers, which has emerged not just as an internal priority but also as a recruitment tool. Because so many workers value transparency and understanding their organization’s choices and priorities, incorporating and addressing feedback is something nonprofit CFOs need to consider. Even if you aren’t well-versed in transparency practices, just showing effort and a willingness to learn can help foster trust with your team.
Transparency does not necessarily mean throwing open the books to the whole organization — after all, an overload of information isn’t effective transparency either. Instead, you could consider incorporating financial reporting features, giving presentations about the state of the organization or providing team members opportunities to ask questions about how the finances look. If implemented well, a transparency program can also help you get better insights into where resources are being used and empower employees to offer creative solutions to persistent financial issues.
Another hotly debated topic is the role of automation and the burgeoning AI market and the impacts they could have on work. At a very basic level, the appeal of automation and AI should be obvious. For a CFO accustomed to working with limited resources, the opportunity to do more with less using automated tools is a welcome one. However, being able to incorporate these tools successfully into your organization isn’t as simple as plugging them in and setting them to work. As with any new technology, it is better to be methodical and thoughtful rather than to overinvest in something that could potentially cause more issues than it is worth.
As a mission-driven organization, it is critical that you ensure that you are automating work that limits your team and prevents them from driving the mission forward. Automating as much as possible could not only create huge implementation headaches but it could also alienate staff and create unwelcome turnover, hurting your long-term goals. The right balance is going to vary from organization to organization and mission to mission, but a nuanced approach to automation is essential.
A Helping Hand
These challenges are daunting, but they are far from the only thing keeping nonprofit CFOs up at night. Being able to keep your organization resourced and capable without overextending could be the difference between successful nonprofit work and failure. As longtime nonprofit professionals, our team at 501(c) Services understands the needles nonprofit CFOs have to thread to keep everything in their organizations running. We can help you identify new ways to save and rededicate invaluable funds towards your mission. If you’d like to learn more about how we can assist you, reach out to us here.
501(c) Services has more than 40 years of experience helping nonprofits with unemployment outsourcing, reimbursing, and HR services. Two of our most popular programs are the 501(c) Agencies Trust and 501(c) HR Services. We understand the importance of compliance and accuracy, and we are committed to providing our clients with customized plans that fit their needs.
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The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.