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By distributing leadership and drawing upon the talent and viewpoints of people throughout your organization, you can better integrate finance and mission into a single strategy for success.

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Whole Organization Finance: Mapping Nonprofit Financial Leadership

  • Curtis Klotz
  • 8/2/2019

Nonprofit financial leadership encompasses more than tracking revenue and expenses — it is the process of guiding resources through an organization in the service of its mission, tending those resources to support that mission most effectively, and retaining enough of those resources to set up the organization for longevity and stability. It is more than good accounting and requires a diverse set of skills and experience.

Distributing financial leadership widely strengthens your nonprofit by drawing upon the talent and viewpoints of people throughout your organization, rather than isolating the responsibility to only your accountant or finance department. No matter the size of your budget or the number of people on your staff, your nonprofit can more successfully integrate finance and mission by sharing financial leadership across your whole organization. Adopting a whole organization approach gives you the ability to design and map financial leadership across any size nonprofit and any organizational structure.

Shared financial leadership still requires strong accounting

Sharing financial leadership across your whole organization does not mean that good accounting talent is unnecessary. However you choose to distribute financial leadership, your organization will still want to invest in getting the right level of accounting skill and sophistication to match its complexity. This might mean fully staffing a finance department with talent and capacity ranging all the way from transaction-level processes like accounts payable and accounts receivable to big-picture, strategic financial planning experience.

Depending on the size of your organization and your accounting needs, you may decide to outsource your entire finance function. Contracting with an outsourced accounting services provider allows you to use and pay for only the hours of each level of accounting skill that you need. If your organization is small, you may need transaction-level support for two days every week, an additional day’s time and expertise for closing the books at month end, and two to three hours each month with a highly experienced finance leader who can guide you through the analysis and strategy questions that help ensure your future success.

Another option is to create a hybrid structure in which you anchor your organization’s finance function by hiring someone to act as the internal financial coordinator. This could be at any level — CFO, controller, staff accountant, office administrator, or bookkeeper. Having the benefit of a full-time, onsite employee who is tending to the flow of accounting information through your organization helps bring stability to the process. With this anchor in place, you could then outsource other duties on a part-time, contractual basis to give your organization access to high-level skills or more personnel to provide better internal controls or turnover the more time-consuming transactional data entry. There are many creative ways to staff the finance function.

Layer nonprofit financial leadership on top of strong accounting

The power of investing in a strong accounting team truly pays off when you take action based on the financial information that team provides. Whatever structure you choose for your accounting department, shared financial leadership augments the finance function by engaging people in diverse positions — executive director, board member, program staff, finance staff, development officer, and volunteer — working in executive, administrative, development, program, and finance functions across the entire organization. Whatever the position and whatever the function, each person can and should play a valuable part in strengthening your organization’s financial health.

Nonprofits call on their financial leaders to be conveners, connectors, and collaborators in a complex cycle of fiscal management that operates most effectively when it involves the whole organization. Organizations of all sizes do better when they do not rely on a single financial savior — that one rare person who possesses strong leadership skills together with strong accounting acumen. Your nonprofit needs both sets of skills, but it is often more realistic and more effective to weave those skill sets into more than one position.

Focus on responsibilities and roles rather than particular people and positions

Remember that we are defining financial leadership as the process of guiding resources through an organization in the service of its mission. Taking this view frees you up to think about the responsibilities and the roles involved in providing that guidance, rather than being constrained to thinking only of a particular person, position, or department that does the accounting. When you outline the core responsibilities and roles needed to successfully guide your nonprofit’s finances, your organization can creatively shoulder those responsibilities and fill those roles no matter how many staff you have.

Whole Org Finance Responsibilities

Regardless of the size or complexity of your organization, the responsibilities of the finance function break out into three categories based how those responsibilities are oriented in time. The first category is Day-to-Day, which includes the basic processes of taking in resources (accounts receivable), paying out resources (accounts payable), capturing data about those resources (CRM), and converting resources into human effort (payroll). The list of tasks under Day-to-Day may vary from one nonprofit to another, but the types of processes and the skills necessary would have a similar nature. These responsibilities involve making sure that the basic transactions in the finance function are completed accurately and efficiently.

The next set of responsibilities deals with results that have occurred in the Past. Nonprofits are accountable to themselves, their funders, their constituents, and the public for delivering on their mission promises. Financially, this translates into reporting on, monitoring, and analyzing the impact their use of resources has had in the world.

Too often, nonprofits focus their thinking about their financials on the information gathered about the Past. While accurate data about the Past is necessary, it is more useful when we turn toward the Future. Based on good, solid financial reporting, you can plan and strategize how to align your use of resources to accomplish the mission goals you have set for the Future. You are using your financial leadership to its highest purpose when focusing on responsibilities like budgeting, setting goals for reserves, developing a sophisticated financial model for new program initiatives, or tweaking your long-range business model.

Whole Org Finance Roles

Now that you have identified the responsibilities of financial leadership, the next step is to determine the roles necessary to carry out those responsibilities and the tasks associated with them. Rather than looking to any one particular person or defaulting to a single position, you are better off focusing on the roles you need to complete each category. With this perspective, you can broaden your thinking to assign those roles to people in many different positions across the organization. This allows you to scale the distribution of financial leadership to any size organization and any organizational structure.

To accomplish anything, someone has to do it. The first role is that of Doer. For each responsibility or underlying task, you can determine who will implement the task or process the transaction. For some of the basic Day-to-Day responsibilities, you might assign these tasks in traditional fashion to the bookkeeper or staff accountant. For other responsibilities and tasks across the spectrum, you could choose a staff person, board member, or volunteer from outside the accounting team to complete the task. You need a Doer, but with the whole organization approach, you are free to pick the best possible person or persons from within your whole organization.

Similarly, most of the financial leadership responsibilities that we have identified require a person or persons to shepherd the tasks to completion. This is the role of Manager. This role can sometimes be formal, filled by a staff person with a title that includes manager, director, or coordinator. However, as with each of the roles, you are free to assign Manager to the most appropriate person or persons in your organization for each responsibility. Clarifying who will be steering a responsibility or set of tasks through to completion is helpful to everyone involved.

With financial information, creating or compiling it is one thing, communicating it is another. You may have had the experience of sitting through a finance committee or board meeting where financial statements were presented, and come away with the general sense that no one either understood or cared to understand what had been presented. To share financial leadership effectively in your nonprofit, identify the person or persons best suited to take the role of Communicator. Inside your organization, you have several audiences for financial information, so you may have more than one person or team acting as Communicator for various purposes. You may assign a certain program manager to the role for presenting budget versus actual information at the monthly program services meeting. You may assign the board treasurer to the role when reviewing the balance sheet at the board meeting. You are free to defy convention and employ the best possible Communicator for each situation, no matter how disparate from accounting their organizational position may be.

For every category of responsibility — Day-to-Day, Past, Future — and all the various tasks under each, the power of the financial information you gather depends on how well it is employed to make decisions. To ensure that financial data is influencing your organization effectively, you need to assign the role of Strategist. For organizations large enough to have a full-time CFO, you hope that person will lead this role in the appropriate situations. However, the CFO is not the only position or person with whom the Strategist role can rest. Many people have the interest, experience, and aptitude to think expansively about future possibilities. You simply have to match those qualities to this important role as it plays out in each area of responsibility.

Designing and mapping nonprofit financial leadership

When you think in terms of roles and responsibilities rather than people and positions, the challenge is mapping who does what. To cover all the responsibilities associated with strong financial leadership, you assign the right person or team to the intersection of each responsibility and role. Your process of deciding who does what should be intentional. Your organization may not need to assign a person or team to every combination; not every one may be relevant. You may not have the capacity or numbers to cover all the combinations. Nonetheless, you avoid being a victim of your organization’s size or budget when you take the initiative to lay out your financial needs and then assign the right individual or team to cover the priority combinations of responsibilities and roles.

Who Decide Roles

Adopting the whole organization framework for nonprofit financial leadership gives you the ability to design and map all the needed responsibilities and roles across any size organization and organizational structure. You are able to draw on the talents and skills of your entire team, regardless of title, department, seniority, or salary. Reaching across many conventional boundaries and barriers, you may find it wise to invest in professional development for your staff, board, and volunteers to provide them with sufficient technical finance and accounting knowledge to better play the parts assigned to them. A great Communicator still needs to know something about the subject he or she is communicating. A visionary Strategist can only see as far as her or his technical acumen allows.

Proactive, shared financial leadership leads to better outcomes. Gathering insights and perspectives from more staff, volunteers, and board members gives us the best opportunity to come up with effective financial plans and strategies. Nonprofits exist with a variety of organizational charts and structures — the same is true of their finance function. Embracing a whole organization finance approach can be effective no matter what size or shape your nonprofit takes. By considering responsibilities and roles instead of specific people or positions, you can design an effective map for shared financial leadership appropriate to your organization.

How we can help

Whether your organization is seeking to revamp the structure of its current accounting department or looking more broadly at financial leadership across the whole organization, CLA can help. We conduct finance department assessments that can be scaled to fit your organization’s size and complexity. Our nonprofit consulting team is also available to guide your organization through the process of identifying and assigning the roles and responsibilities in a shared financial leadership approach.

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  • Curtis Klotz
  • Director of Nonprofit Innovation
  • CLA Minneapolis