Staffing Your Finance Department to Support Financial Leadership

Posted by Julee Nunley on Tuesday, October 25, 2016

I recently came across an article published by NonProfit Quarterly in 2011 that examines the topic of Financial Leadership.  While this article is a few years old, the points it makes still ring true.  Emphasizing that financial leadership, rather than financial management, is the job of the executive director, the authors outline eight key business principles to guide executives in this area of leadership.

While each of the eight principles highlight important considerations for executives, I found the section on staffing the finance function to be particularly interesting given our work with nonprofit finance departments.   This article states that there are three aspects of the finance function: transactional, operational, and strategic.  The following table shows what these functions include and what skills are required for each.

Finance Functional Area

Tasks

Skills required

Transactional

Copying, filing, making bank deposits

Excellent attention to detail and exposure to basic accounting principals

Operational

Paying bills and producing monthly financial statements

Strong nonprofit accounting knowledge, including managing grants and contracts

Strategic

Systems development, financial analysis, planning, and communication about the organization

CFO-level knowledge and skills

 

When each of these aspects of financial management are being handled by capable staff members or external consultants, executive directors find themselves freed up to take on the financial leadership role of guiding the organization to financial sustainability.

Through our work with nonprofit finance departments, we have seen the importance of each of these roles in organizations of all sizes.  In understaffed organizations, the focus tends to be on what “must” be done, which tends to be the items in the operational area.  When staff is short on time, some transactional tasks, such as filing, may not seem critical and may be pushed to the back burner.  However, having clean and well-organized files makes audits go much more smoothly and quickly, which ultimately can save the organization money. More often, strategic initiatives are not undertaken, which means that opportunities for improvements are missed.

The time and effort for each of these functions varies widely depending on the size of the organization.  Given the resource constraints that nonprofits face, ensuring that each of these roles is filled can be a challenge.  Staffing in the most cost effective way may involve outsourcing one or more of these functions.  If your organization needs to fill in the gap in one of these areas, contact us to see how Outfitters4 can help.