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Friday, September 30, 2016

The Nonprofit CFO’s Role in Relationship Building


Nonprofit CFOs have so many duties. In fact, some say the real question is, "What do they not do?" Yet, one of the most important roles a CFO can play is that of relationship builder.

The best CFOs build and maintain cross-departmental relationships. In order to proactively address the financial challenges of the organization, they ensure that the finance team is talking with development—and that they are all looking to executive leadership for strategic direction.

Can development and finance really get along?
The simple truth is that your development and finance teams cannot live alone in their silos. They have to talk. Here’s an example of how even the best-intentioned effort can head south if the two departments are not communicating:

Bob in Development has a brainstorm for a new initiative. Donors will be invited to “purchase a seat” in the nonprofit theater’s main stage, and the funds will go for a new performance space for the children’s theater program. There’s also an option to fund a scholarship for the children’s summer theater camp. But if Bob doesn’t let the folks in finance know about his idea, they’ll be caught by surprise when the first gifts roll in. Without some collaboration—or at least some communication—finance won’t be prepared to track the giving by designation.

At the same time, finance needs to be talking with development. For example, if program staff finds a way to run the children’s program with less than what was projected, the finance team can alert development that they can now solicit gifts for other purposes.

The CFO as a bridge builder
The reality is that finance and development have different goals, different responsibilities—and even different software systems.

Development is focused on getting the dollars in the door. When they secure a gift, they record it in their CRM program. Their focus is on the relationship: Who is giving? How much have they given in the past? What is their potential for future gifts?

By contrast, finance is focused on accurately recording the gifts once they come in—and in as timely a manner as possible. Their software is more concerned with things like gift designation.

A wise CFO makes sure the left hand knows what the right hand is doing—and that they are both working together for the good of the organization.

Some real-world perspective
Take a CFO for a large food bank. Strengthening her relationship with the food bank’s development staff has paid off with improved cross-department communication. The CFO nurtured the relationship by educating development on new business processes and revamped budgeting policies that accommodated a shift from single-year to multi-year gifts.

The food bank charged its development department with an ambitious goal: Increase revenue by 30% over the next three years. To meet these steep revenue goals, the focus turned to attracting large, multi-year gifts. Problem was, the finance department’s budgeting and reporting processes were not set up to handle gifts that extended over several years.

Behind the eight ball
The CFO points to a recent gift received by the food bank that is payable at $500,000 a year. Previously, they would have posted the full gift amount to 2016, and the development department would have certainly exceeded their goal for the year. But that next year, the organization would have spent the $500,000 without the matching revenue, and the development department would have started the year in the hole. So, they get kudos one year and are behind the eight ball next year, which doesn’t incentivize them to go out and look for multi-year gifts.

The CFO spent six months working with development to redesign the financial reporting process to provide better information about the multi-year, temporarily restricted gifts. The communication was then tailored to the specific needs of the board of directors, the audit committee and the finance committee.

Now, the communication between the finance and development departments starts early. Before the organization is to go after purpose-restricted funds, finance, development and program services teams meet to evaluate how restrictive the grant will be and if they are able to track and report on what they want to report. Based on those discussions, they may decide to not move forward.

Bye, bye silo
Corporate America has long known that when companies readily share information across departments, they enjoy much greater efficiencies and higher staff morale. Nonprofits are no different. The CFO has a strategic role in leading cross-department relationships—whether it’s educating the development team on finance issues or working with the executive director to ensure alignment with overall strategy.

At Armanino, we understand the challenges CFOs face and can help you enhance cross-departmental communication so that your nonprofit is fiscally sound for the years to come. For more insights into nonprofit sustainability, access the full audio recording of “The CFO’s Strategic Role in Rethinking Sustainability,” from our 2016 Nonprofit Symposium: http://www.nonprofit-symposium.com/sf/2016/#recap

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