Streetsmart Financial Basics for Nonprofit Managers

Chapter 26When Do You CFO?

Many challenges come with growing a nonprofit, and one of the trickiest is deciding what kind of financial help one needs, when it's needed, and what kind of professional can best supply it at a given point in time. Many non-financial executives seem to think of the financial system as a kind of spreadsheet that keeps adding new tabs—if you run out of capacity, just add more tabs. The problem with this interpretation is that it is a step-by-step model when the financial system is more like an organism that grows and evolves. It doesn't help that there tends to be confusion about the focus, size, and depth of financial management jobs because financial titles are often opaque to nonfinancial types.

We'll sort out these financial tribal norms by using common titles that correspond to one or more stages of a nonprofit's growth. Note that these correspondences are not stipulated by any accounting or financial authority. Instead, as a growing nonprofit adds revenue and creates fiscal complexity, it needs change and so do the kinds of financial managers it employs. There is no generally accepted connection between revenue stages and positions, but there do tend to be patterns based on complexities and outsider demands. For example, the IRS requires a simple version of its Form 990 from nonprofits with revenues under $500,000 per year, with the more complex versions of the 990 kicking in after that level has been exceeded. The purpose of the correlations ...