Key insights
- Building capacity in your staff and systems helps your CDFI pivot quickly when needed. It also creates a strong finance foundation that supports the rest of the organization.
- Documented, standardized processes make it easier to cross-train staff, hire people who can learn as they go, and get more from out-of-the-box software.
- Connecting lending, accounting, and fund accounting systems, then adding AI with human review, can cut manual data entry potentially freeing your team for higher-value work.
- Building capacity doesn't always mean hiring, so decide what to keep in-house, then standardize, automate, or co-source the rest for steady growth.
Add capacity to your CDFI without adding headcount.
Community Development Financial Institutions (CDFIs) that build capacity in their finance function can take on new lending products and funding sources without overloading staff and software or putting compliance at risk.
That capacity comes from documented processes, connected lending and accounting software, and the right mix of in-house staff and outside support, so the work keeps moving when priorities shift or people leave.
Learn how to protect specialized knowledge, cut manual work, and decide what to keep in-house so your CDFI is ready for its next opportunity.
How to build capacity across your CDFI
Finding ways to build capacity for staff and systems can help any CDFI pivot quickly when it needs to. It can create a strong finance structure, which flows to the rest of the organization.
Protect specialized knowledge and reduce key-person risk
When turnover occurs, staff aren’t only taking institutional knowledge about your CDFI, but about CDFIs in general. When higher-level staff leave the organization, it can cause delays in month-end close, put compliance deadlines at risk, and delay critical planning and forecasting.
Bringing in temp staff can help manage daily treasury management tasks, but they often don’t have the skill to help with higher-level accounting and finance duties. CDFIs have unique duties many other nonprofits, or even for-profit organizations, don’t manage.
Specialized knowledge is required for:
- Budgeting the balance sheet
- Managing CECL and the loan portfolio
- Tracking net assets used for lending
- Specialized reporting
Losing employees with this knowledge can create major gaps and costly errors such as losing funding sources or major audit findings.
Standardize CDFI processes before adding capacity
Many finance staff at CDFIs can get wrapped up in the day-to-day work. They don’t have time to sit down and document standardized processes or procedures. Or they may be the only one doing the work, so they may not feel the need to document a specific process, they just get the task done. While that may move work along, it doesn’t help the organization in the long run.
When a CDFI has standardized and documented processes, it can begin looking at ways to add efficiency and correctly staff teams. Instead of doing manual work because the systems lack the customization they need, they can use out-of-the-box software with less manual work.
They can also hire staff who may not have the CDFI knowledge but can follow procedures and learn as they go. This leaves more time for cross-training and reduces the risk of staff turnover leaving with vital institutional knowledge.
Connect systems and data across your CDFI
Trying to get lending software and accounting software to talk can be challenging, especially when you throw fund accounting in the mix. Then add expense management, grant management, AP, AR, payroll, and CECL software and it can easily become overwhelming.
Many organizations just give up and end up with a lot of manual data entry and spreadsheets — which often leads to errors. Short-staffed finance teams may push aside data entry until year-end, turning small tasks into one big one. If most of your team’s work is manual, this is a sign you need help connecting systems or moving to new software.
As the network and size of CDFIs grow, so do the digital options for managing all the different parts. Many software options now allow for fund accounting and can seamlessly connect with other software.
The key is finding what combination works well for your CDFI for not only your current state, but where you want to be in 5 or 10 years.
Use automation and AI intentionally
AI can help CDFIs save time and money by taking repetitive work off the finance team’s plate and making information easier to access. Many people use AI to help document processes and procedures, but the real key is building AI into the process to build efficiency.
Many teams spend hours each month pulling data, formatting reports, drafting narratives, reviewing transactions, or searching through files for prior decisions and supporting documentation. AI tools can help organize information, identify patterns, draft first versions of reports or policies, and support faster research and analysis.
When paired with strong internal controls and human review, AI can allow staff to spend less time on manual tasks and more time on higher-value work like funder relationships, portfolio strategy, cash flow planning, and mission impact.
Choose how to build capacity
Building capacity sounds great, but many organizations don’t know where to start. Analyzing a few key areas can help you get started.
Decide which CDFI functions to keep in-house
Start with the work shaping your CDFI’s relationships and direction. These roles depend on knowing your organization from the inside, so they belong with your own team.
Invest in the people who handle this work. Training, cross-training, and knowledge-sharing keep expertise in-house when staff change and make your organization more resilient over time.
| Consider keeping in-house | Consider outsourcing |
|---|---|
| Work requiring mission knowledge, strategic judgment, decision-making authority, or direct accountability | Work requiring specialized experience that’s hard to recruit, keep, or fully use with internal staff |
| Borrower relationship management | Accounting and fund accounting |
| Underwriting decisions | Compliance monitoring |
| Community engagement | Information technology |
| Fundraising strategy | Payroll |
| Compliance oversight | Grant administration |
Document and standardize routine work
Identify opportunities for standardization. Capacity is often constrained when processes rely on individual knowledge rather than documented procedures. Consider which activities can be standardized, automated, or supported through templates and workflows.
For example, reporting packages, grant tracking, and routine compliance reviews can often be documented and repeated consistently. As you evaluate processes, keep controls strong without adding steps that create administrative work.
Invest in technology that reduces manual work
Use technology to increase efficiency and accuracy. Automation can reduce manual effort, improve consistency, and free staff to focus on higher-value activities.
CDFIs are increasingly using technology to:
- Streamline loan servicing
- Automate reporting
- Strengthen data collection
- Improve impact measurement
- Support financial management processes
Know when outsourcing makes sense
Building capacity doesn’t always mean adding headcount. Outside support can give your CDFI specialized skills, resources that scale with your workload, and more consistent processes.
Outsourcing is often worth a look for technical roles that are tough to fill, hard to hold onto, or don’t need a full-time hire. The table above shows which functions CDFIs commonly hand off.
Questions CDFI leaders should ask
- Where are we overly dependent on one person?
- Which processes require recurring manual effort?
- Where are we entering or reconciling the same information multiple times?
- Can our current operating model support another funding source, product, or increase in lending?
- What should we own, standardize, automate, or co-source?
How CLA can help CDFIs build capacity
Every CDFI is different, so how you build capacity should fit your size, complexity, and goals. For many CDFIs, a mix of internal staff and outside help works well. Keep the relationship-driven work in-house and bring in support for specialized accounting and finance.
CLA’s scalable accounting and finance resources fit right alongside your team. Since we work with CDFIs every day, we bring ready-made tools like close checklists, audit prep templates, funder reporting tools, and documented procedures to help make your work more consistent and your controls stronger.
We can also look at your systems to find opportunities to streamline workflows, processes to automate, tighten up reporting, and simplify compliance monitoring.
Our goal isn’t simply to perform accounting functions, but to help build long-term organizational capacity. We document processes, share what we know, and train your staff, so your finance team keeps getting stronger as you grow.