Nonprofit organizations must also navigate complex tax laws and regulations to remain compliant. 1099 Best practices will help.

In the latest episode of A Modern Nonprofit podcast, host Tosha Anderson sat down with Sawyer Nyquist, a data expert who specializes in analytics and data management for nonprofits. Their conversation explored the strategic role of data in the nonprofit sector and how organizations can leverage it to achieve their goals more effectively.

The Data Dilemma

Tasha kicked off the discussion by highlighting a common issue in the nonprofit world: many organizations have an abundance of data but struggle to make sense of it or convert it into meaningful stories of impact. Sawyer agreed, noting that while there was once a push to collect as much data as possible, organizations now need to be more intentional about their data practices.

“Data by itself isn’t valuable,” Sawyer explained. “Data that is purposeful and thoughtful and designed with intention can be extremely valuable for an organization.”

See the full video here via Youtube:

From Data Warehouse to Decision Driver

The conversation touched on the evolution of data use in nonprofits. Sawyer shared an example of a camping organization that used data to optimize their bus deployment, saving staff time and reducing maintenance costs. This illustrates how data can serve a decision-making function within an organization.

Sawyer introduced the concept of “decision-driven data” – figuring out what decisions need to be made, then determining what data will provide the necessary context for more informed choices.

Understanding Data Maturity

Sawyer outlined a four-level scale of data maturity:

1. Descriptive: Answering “what happened?”
2. Diagnostic: Answering “why did it happen?”
3. Predictive: Forecasting “what will happen?”
4. Prescriptive: Determining “what should we do?”

He emphasized that organizations can’t jump straight to the highest level – it’s a process of building foundations and developing both technological capabilities and data literacy within the organization.

Measuring What Matters

When it comes to deciding what to measure, Sawyer cautioned against tracking too much. He suggested focusing on:

1. A North Star metric tied to the organization’s mission
2. 2-3 key progress metrics that indicate movement toward the main goal
3. Decision metrics with built-in action points

Tasha agreed, stressing the importance of customizing metrics to each organization’s unique mission and operational context.

Data Transformation in Action

Sawyer shared two case studies of how organizations have used data to improve their operations:

1. A nonprofit accounting team that streamlined their reporting process using Power BI, saving hours of work each month.
2. A child safety organization that gained crucial visibility into their child visitation program, allowing them to ensure more children were being checked on regularly.

These examples demonstrate how data can both increase operational efficiency and directly support an organization’s core mission.

The Data Journey: From Small to Large Nonprofits

Sawyer walked through what the data journey typically looks like for nonprofits of different sizes:

• Small organizations often have all their data in one system and may start by simply becoming aware of what data they have and giving it “a seat at the table” in decision-making.
• Medium-sized organizations might introduce business intelligence tools like Power BI or Tableau and have a part-time or full-time data analyst.
• Large organizations often have dedicated data teams and use data warehouses to centralize information from multiple systems.

Overcoming Data Overwhelm

Tasha noted that many nonprofits feel overwhelmed by their data and don’t know where to start. Sawyer’s work helps bridge this gap, assisting organizations in connecting their mission to measurable outcomes and making better decisions along the way.

He emphasized the importance of data in nonprofit work, stating, “Their mission is too important to ignore data and to waste their data.”

Key Takeaways for Nonprofit Leaders

1. Be intentional about data collection and use. Not all data is valuable – focus on what supports decision-making and mission achievement.
2. Start where you are. Even small organizations can begin to use data more effectively by simply becoming aware of what they have and incorporating it into decision processes.
3. Consider your data maturity level and work on building foundations before trying to jump to advanced analytics.
4. Focus on a few key metrics rather than trying to measure everything.
5. Look for opportunities to use data to improve both operational efficiency and mission impact.
6. Don’t be afraid to seek help. Experts like Sawyer can provide guidance on the journey to becoming a more data-driven organization.

As nonprofits continue to face pressure to demonstrate their impact, embracing data-driven decision-making becomes increasingly crucial. By understanding the strategic role of data and taking steps to mature their data practices, organizations can enhance their operations, tell more compelling stories, and ultimately make a greater impact in their communities.

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Follow Sawyer online:

• Linkedin: https://www.linkedin.com/in/sawyernyquist/ 
• Data Daily: https://www.thedatashop.co/daily
• The Data Shop: https://www.thedatashop.co/ 

Being prepared can help you avoid accounting mistakes that could come up in a nonprofit audit.

The finance director role is critical to the success of any nonprofit, making it one of the most important hires an organization can make. They are responsible for the financial health of the organization. They create and maintain financial records, prepare financial reports, and oversee the organization’s budget.

Financial managers often work closely with the organization’s executive director to ensure that the organization’s financial needs are met and help drive best financial practices within the organization. They handle all payroll and accounting functions and manage investments and fundraising efforts.

If you are looking for a finance director, it is important to find someone who is not only qualified for the position but also fits well with the organization’s culture. Here’s a look at some of the qualifications you should look for in a nonprofit finance director and tips on how to verify those qualifications:

Qualifications For A Nonprofit Finance Director

1. A Bachelor’s Degree In Accounting, Finance, Or A Related Field Is Required.

This is the minimum educational requirement for most nonprofit finance director positions. A bachelor’s degree will give the candidate a strong foundation in accounting and finance principles, which is essential for the role.

They should demonstrate an extensive understanding of accounting and finance regulations and best practices for financial management in a nonprofit setting. 

Why this is important

A bachelor’s degree in accounting, finance, or other related fields prepares them to analyze financial data and advise the nonprofit on financial decisions. This background helps them provide oversight for and manage all forecasts, budgets, and investments for the organization.

How to verify

The best way to verify that a candidate has the necessary educational qualifications is to request a certified copy of their transcript from their college or university. If in doubt, you can always contact the school to confirm that the candidate did indeed graduate with the degree they claim to have.

2. Certification As A Certified Public Accountant (CPA), Chartered Financial Analyst (CFA), Or Certified Financial Planner (CFP) Is Preferred.

While not always required, certification from one of these professional organizations is highly preferred for finance director positions. These certifications demonstrate that the candidate has the necessary skills and knowledge to perform the job effectively.

CFAs are best known for investment analysis and wealth planning, CPAs for tax preparation and financial statement auditing, and CFPs for financial planning. Working with a CPA with additional certification, such as a CFA or CFP, can bring a well-rounded perspective to the finance director role.

Why this is important

Nonprofits are subject to a unique set of financial rules and regulations. A CPA, CFA, or CFP designation shows that the candidate is familiar with these rules and regulations and is, therefore, better suited to advise the organization on financial matters. CPAs. CFAs and CFPs will provide a more micro analysis of how the organization’s finances and assets are managed and allocated.

How to verify

The best way to verify that a candidate has the necessary certification is to request a copy of their certificate from the issuing organization.

3. 5+ Years Of Experience Working In Accounting, Finance, Or A Related Field Is Required.

You want to work with someone with extensive industry-specific experience. Look for a nonprofit finance director with at least five years of experience working in accounting, finance, or a related field.

The candidate should be able to show that they have progressively more responsibility in their previous roles, as this will demonstrate their ability to take on more complex tasks. 

Why this is important

Work experience ensures the candidate can hit the ground running and be an effective team member from day one. It also allows them to bring their own unique perspective and insights to the role.

How to verify

Candidates should have a clear career progression that shows they have taken on more responsibility over time. This progression should be evident from their resume and/or LinkedIn profile.

4. A Strong Background In Nonprofit Management

This is quite a common requirement, as most organizations will want to see that the candidate has some experience working in the nonprofit sector. This experience is essential for understanding the unique financial challenges that nonprofits face.

Why this is important

The success of a nonprofit organization depends on its ability to deploy its financial resources efficiently. The finance director plays a vital role in ensuring that the nonprofit uses its resources and assets in the most effective way possible.

How to verify

The best way to verify that a candidate has the necessary experience is to request references from previous employers. These references should be able to attest to the candidate’s experience and skills.

5. Experience In Integrating IT Systems

Today, technology is at the center of most businesses—and nonprofits are no exception. As nonprofits become increasingly reliant on technology, finance directors must have experience working with and integrating various financial systems and software programs. This experience will be invaluable in ensuring that the organization’s finances are managed effectively and efficiently.

Why this is important

With the right technology in place, nonprofits can save time and money by automating various financial tasks. Expertise in various technology systems also helps improve bookkeeping and accounting productivity, accuracy, and compliance.

How to verify

When reviewing a candidate’s resume, look for evidence of experience working with various financial software programs and systems. You can also ask them specific questions about their experience during the interview process.

6. Robust Analytical Skills

A finance director must be able to understand and analyze complex data sets. They should also be comfortable working with spreadsheets and other financial software programs.

Why this is important

Analytical skills are critical for evaluating financial data and making sound decisions about where to allocate resources.

How to verify

Verify by asking the candidate to describe a time when they had to analyze complex data in their previous role. You can also ask them specific questions about their experience working with spreadsheets and financial software programs.

7. Excellent Communication Skills

The ability for communication, with various stakeholders, is essential for the finance director role. The candidate should be able to distill complex financial information into layman’s terms and present it in a way that is easy to understand.

Why this is important

The finance director is often the bridge between the accounting/finance department and other departments within the organization. As such, they need to be able to clearly communicate financial information to people with non-financial backgrounds.

How to verify

Communication skills can be difficult to assess, but you can get a good sense of a candidate’s ability by paying attention to how they communicate during the interview process. Do they speak clearly and concisely? Are they able to explain complex concepts in simple terms?

8. Leadership And Management Skills

In addition to being an expert in financial matters, the finance director must also be a competent leader and manager. They should have experience leading and motivating teams, as well as experience developing and implementing strategic plans.

Why this is important

The finance director is responsible for leading the organization’s finance team and ensuring it functions effectively. They must also be able to work closely with other department heads to develop and implement strategic plans that achieve the organization’s goals.

How to verify

Do they exhibit high emotional intelligence? Are they able to take charge and motivate a team? Do they have experience leading and managing people? These are all qualities that will be important in a successful finance director.

9. Strategic Thinking

The finance director should be able to think long-term, anticipate future trends, and develop strategic plans accordingly.

Why this is important

The finance director plays a key role in developing and implementing the organization’s strategic plan. They must be able to anticipate future trends and be able to adjust and execute the plan.

How to verify

Does the finance director have a track record of successfully implementing strategic plans? Do they have a history of being able to anticipate future trends? 

What If Your Budget And Staffing Needs Don’t Support a Full-Time Finance Director?

If your organization doesn’t have the budget or staffing needs to support a full-time finance director, you may want to consider hiring a part-time or freelance finance consultant. This can be a cost-effective way to get the expertise you need without breaking the bank.

When hiring a part-time or freelance financial consultant, be sure to verify their experience and qualifications just as you would for a full-time finance director. In addition, be sure to clearly define the scope of work and expectations upfront to avoid any misunderstandings down the road.

Get Outsourced Nonprofit CPA & CFO Services

If your organization is in need of top-notch financial leadership but doesn’t have the budget to support a full-time finance director, outsourcing your accounting and finance functions may help you close the gap and get the expert help you need.

At The Charity CFO, we offer a full range of professional outsourced CFO and accounting services to nonprofits of all sizes. Our team of experienced financial leaders can provide the expertise you need to keep your organization on track without breaking the bank.

Our bespoke services are designed to meet each client’s unique needs and can be customized to include as much or as little support as you need. Whether you need help with financial planning and budgeting, grant management, short and long-term planning, or a team leader who will play a formative role in building the culture, we’re here to help.

Contact us today to learn more about our nonprofit CPA and CFO services and how we can help your organization thrive and succeed in its mission. 

Starting from 2019, all nonprofits must follow ASC 606 rules for revenue recognition. What is ASC 606? And does it apply to you? Find out here!

Many nonprofit board committees are put in place without much thought or strategy. Learn how to get more from your board committees in this article.

Today we’re very proud to announce that Zack Meyer is joining our team in the newly-created role of Director of Quality Assurance.

Zack joins us after two decades as a not-for-profit accountant in both public accounting and the nonprofit industry. In this new role, he will serve as one of our in-house experts on existing and emerging nonprofit accounting standards and auditing best practices.

His primary role will be to lead the organization’s quality control and training programs. In doing so, Zack will help ensure that our clients’ financials are prepared in accordance with general accepted accounting principles (GAAP) and their 990s meet IRS guidelines.

In an ever-evolving world of accounting and tax regulations, Zack will be the primary resource to the Charity CFO team and lead company-wide accounting training and technical updates.

Zack is a CPA and graduate of one of the nation’s top 3 accounting programs at the University of Illinois. And he began his career in public accounting focusing on audits of local and national nonprofit and governmental organizations.

In 2015, Zack moved across the desk and joined the finance team of a $100 million national not-for-profit organization based in Missouri. During his time there, he led the organization’s migration from a 15-year old legacy accounting system to a cloud-based solution, changed its basis of accounting, and implemented their first cloud and app-based expense reporting and time entry systems.

Zack has served as a volunteer and advisor to numerous local nonprofits. He looks forward to continuing to work with nonprofits both in St. Louis and nationwide.

Please join us in welcoming Zack Meyer to The Charity CFO!