Does my nonprofit need a bookkeeper or a CFO?
In this article, we’ll define the general duties of each position as they relate to nonprofit accounting and their respective roles within an organization.
Bookkeeper or Accountant
A bookkeeper performs basic financial record-keeping and can create simple financial reports. A bookkeeper typically performs the following tasks:
- Keeps accurate records of financial transactions and performs basic A/P, A/R and payroll entries into the accounting system.
- Creates month-end functions such as bank reconciliation, balance sheet reconciliation, and budget-to-actual reports.
Although the tasks are basic, attention to detail is of the utmost importance for competent bookkeepers who are managing a nonprofit’s accounting. A few data entry errors can cost an organization a significant amount of time and money. The bookkeeper of any organization is an essential element of an accounting team.
Adding a controller lends more power to a nonprofit’s financial management. In fact, a good controller will pay for itself in a growing nonprofit organization that needs more advanced systems. A good controller does so by helping to maintain costs and manage cash flow. This role performs all of the tasks of a bookkeeper, or supervise the staff that does, in addition to the following:
- Create customized daily, weekly, and monthly financial reports to meet the specific needs of the organization.
- Select and maintain accounting software.
- Perform basic cash flow management with the understanding that major cash flow decisions will still be up to the Board.
- Create and implement an annual budget to control expenses and manage cash flow.
An efficient controller is worth their weight in gold to small-or-medium-sized nonprofit organizations where cash management is a strategic factor in success.
Chief Financial Officer
The CFO is in charge of the overall financial management of the organization. Under the CFO’s umbrella of duties includes planning, projecting, measuring and tracking financial and operational progress. The CFO supervises your nonprofit’s accounting and operational departments and performs all functions of a controller as well as:
- Analyze and review the monthly Income Statement, Balance Sheet and Cash Flow with the management team. The CFO looks at the story behind the numbers, not just the numbers, and drives toward data-driven decision-making.
- Create complex financial projections to aid in decision-making and is an active player in the strategic management of the organization.
- Focus on the effectiveness and efficiency of operations, reliability of financial reporting, and compliance with laws and regulations.
- Be the key contact for financial relationships in the banking and legal community as well as with major vendors and funders.
There is a strategic and tactical difference between the value a CFO brings to the leadership of an organization and that of a bookkeeper. Because most small-and-medium-sized nonprofits cannot afford a full-time CFO, an outsourced, part-time CFO becomes an ideal arrangement. The key is to find an outsourced nonprofit accounting service provider that has the necessary knowledge. Similarly, the provider can act as a trusted advisor on financial, operational, and business ventures. For a more in-depth assessment, consider reading Financial Stewards, Risk Mitigators, Digital Pioneers: What Don’t Nonprofit CFOs Do?
Why separate nonprofit accounting roles?
In the absence of a true CFO, key responsibilities are delegated to inexperienced, lower-level employees. This results in missed opportunities and reactive decision-making. Alternatively, senior administrators (typically the executive director) assume the duties of a CFO (or bookkeeper in smaller organizations) in their “spare time.”
We must then ask, is it advisable for an executive director, or anyone else not trained in accounting or finance, to take on CFO responsibilities to their schedule? An executive director’s role is vital. If they are taking even a part of their day to perform accounting responsibilities, those hours, which should’ve been spent on matters that support the nonprofit’s mission, are wasted.
As organizations transition through the growth stages, it needs to be mindful of the complexity of the organization’s accounting infrastructure and proactively seek solutions to manage this challenge.