April 15, 2025 • 32 mins
Financial storytelling might be the missing piece in your nonprofit's fundraising strategy. Join host Spring Richardson Perry as she and guest Neil Shah explore how financial story telling can help organizations make strategic decisions aligned with their mission. Neil brings two decades of nonprofit financial expertise to the discussion.
Here are some of the key takeaways for this episode:
• Difference between bookkeepers and CFOs
• How to analyze financial data to uncover trends and potential issues
• Creating visual representations of financial information for effective communication
• Using AI tools like ChatGPT to analyze nonprofit financial data
• Understanding one-time revenues vs recurring income for accurate forecasting
• Cash flow management techniques for small and growing nonprofits
• Strategic approaches to hiring based on projected funding
• Resources for nonprofits that cannot afford full-time financial leadership
Remember that nonprofits are businesses too. Your financial story matters and helps secure funding that sustains your mission! Connect with Neil Shah on LinkedIn.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Hey, nonprofit friends, welcome to the Spring
Forward podcast, where we talkabout all things nonprofit, from
board discord to grant writingand strategic planning tips.
If you're an executive director, nonprofit board member or just
someone heavily involved in thenonprofit sector, then this is
the podcast for you.
Let's spring forward intoexcellence.
(00:24):
Welcome, welcome everyone toanother episode of the Spring
Forward podcast.
I'm your host, springRichardson Perry, and today I am
super excited to come to youguys and talk to you about
(00:45):
non-profit financial health andto help us talk about this very
important topic.
Today I have neil shah.
He has spent the past twodecades serving as an outsourced
or in-house chief financialofficer for non-profit
organizations all across the us,and their annual budgets range
from a few million to almosthalf a billion dollars in annual
(01:08):
revenue, from government grantsto philanthropic revenue.
But I am super excited to havethis conversation with him today
.
He has a wealth of knowledge, abunch of experience, and so I'm
just excited to lift this topicup.
So thank you so much for beinghere, neil Welcome.
Speaker 2 (01:30):
Thank you.
Thank you, spring, so excitedto be here.
Speaker 1 (01:33):
Absolutely so.
I always kind of start, Ialways kind of like to start out
with you telling everyone justa little bit about yourself and
what you do, and so tell us alittle bit about that, Neil.
Speaker 2 (01:45):
Yeah, neil, yeah, absolutely.
So I've been like you said.
I've been working withnonprofit organizations
exclusively for almost 20 years.
The majority of my career I'vebeen both a consultant, like an
outsourced you know, fractionalCFO, but also an in-house CFO as
well.
I kind of fell into thenonprofit space about 20 years
ago.
I was a tech entrepreneur, afailed tech entrepreneur, uh,
(02:06):
and and kind of just found thenonprofit world, uh accidentally
, quite honestly, and didn'tthink it was a a permanent road
by by any means.
I thought it was a temporary pitstop, uh, and I just fell in
love with working with nonprofitorganizations, especially the,
the public charter schools thatI was working with uh in los
angeles, um, and I've just beendoing that kind of work since.
You know, I had a company thatdid that back office services
for charter schools for a whileand I became in-house CFO for
(02:29):
education nonprofits.
And now I'm providing theseinterim CFO services where I'm
coming into an organization thathas where their CFO has just
recently left and I'm coming inkind of to stabilize the
organization until they find thenext CFO, but also to improve
the processes, the systems andthe culture of the finance team
such that we prepare the org toset up the next permanent CFO in
(02:53):
a much more stronger place, andI'm finding that work to be so
exciting because it's needed.
There's an opportunity to makeimprovements over a certain
amount of time, and then you'reon to the next challenge, and
I've always found that to bereally, really exciting.
Speaker 1 (03:06):
Oh, that's wonderful, Neil.
Thank you so much, and I wantto say I would not call you a
failed tech entrepreneur, right?
I don't think I think alldisappointments lead to your
next success.
It was by no coincidence thatyou fell into the nonprofit
world, right, and so I love tohear it, love to hear it.
(03:27):
But I want to kind of jump intothis really quickly, because
you sort of described exactlywhat it is that you do, and I
want to talk about thedifference, right, what a CFO
does, and the difference betweenthem and a bookkeeper, because
those are two very differentroles, but I don't think people
really understand the difference.
(03:48):
So can you explain that for us?
Speaker 2 (03:50):
That's a great.
It's a great example.
So with bookkeeping, it'sensuring that the financial
operations are continuing likein any organization, whether it
be a nonprofit organization or aretail shop.
You have bills to pay, you'vegot invoices to send out, you've
got payroll to run, you have abank statement that you need to
(04:12):
ensure there's money in and thatit's reconciled, that you
understand all the transactions.
So the bookkeeper is the holderof all that financial data and
ensures that the transactionsare occurring appropriately,
that they're being accounted forand that you can be able to put
that information into afinancial software.
It's something as basic, assimple as QuickBooks even to be
(04:32):
able to ensure that youunderstand how much money has
been brought in over the courseof the month, how much money has
gone out, what is an incomeversus what's your cash balance
all of that financial data forthe financial operations.
It's necessary for that tax tobe completed in any organization
and ideally you have somebodyas an accounts payable clerk or
a bookkeeper that is doing thatwork on a day-to-day basis,
(04:55):
either part-time or full-time.
For your nonprofit organization.
A CFO brings a different lens toit, so the CFO is able to take
that information and make senseof the data and so to be able to
explain you know what ishappening with the organization
financially are we losing moneyor are we in a profitable state?
What is our, what is our trend?
(05:16):
You know.
So how much money did we makelast year this month versus this
year, this month, to be able tocompare you know.
So I did this.
I brought in this much revenuefrom grants in February of 2024.
And this is how much I broughtin February 2025.
So I understand the differenceand I can start to, when I start
to see that difference, I canstart to blend and create a
story as to what is thereasoning behind that, so that
(05:37):
we can use that to analyzewhat's working, what's not
working, that the CFO can alsolook forward, looking as well,
and to be able to take the datathat's there from the bookkeeper
that's in the accounting systemand say, well, it looks like
last year we did this much.
We did this much in totalrevenues, we did this much in
total expenses.
This year, based on that, thisis what I believe we will do
(05:57):
this year, and it's based on thefact that we believe that
there'll be more governmentgrants available or that we're
going to push harder to raisemore money this year or that.
You know we raised our ourpersonnel expense by three
percent because we gaveeverybody a raise in the
organization.
So we know our costs ofpersonnel are going up by three
percent.
We need to know how much revenuewe need to be able to bring in,
and so we're going to budgetfor that, we're going to
forecast for that and thenduring the year we're going to
(06:19):
track against that as well.
So it's it's using the datathat the bookkeeper has and
creating a story behind it.
Um, both for an analyticalpurpose, but also to be able to
help everyone understand thedynamics of the organization on
a financial basis, so that that,whether it be the executive
director or the ceo of theorganization, it could be the
board of the organization, itcould be funders.
Funders want to know yourfinancial story as well, like
(06:41):
what's working, what's notworking?
Are you going to be sustainablegoing forward?
Am I funding a non-profitthat's going to be here five
years from now?
Right?
Donors want to know this um andthat cfo can help, uh, put a
narrative and understandingbehind those financials before
being behind the um, the, thedata that was brought in from
the bookkeeper and helpedexplain that to the the various
stakeholders and parties oh, Ilove, love that.
Speaker 1 (07:03):
That was a very clear distinction of what bookkeepers
do and what CFOs do.
And I want to kind of focus onsomething that you said here
when you talk about telling thefinancial story, right, because
that is super important when itcomes to getting more money
going after funders, grants,just different things, getting
(07:24):
donations, being able to tellthe story of how your money is
working.
And so what have you found tobe impactful for nonprofits in
telling their financial story?
How can they do that in a waythat is going to bring attention
to the impact that they haveand going to bring in those
(07:47):
major donations, those bigfunders, those government grants
?
What's been your experiencewith that?
Speaker 2 (07:53):
Yeah, absolutely.
So we take the data and westart to build that narrative.
So to understand where we'regoing, we need to understand
first where we are and also,most importantly, where we've
come from.
So the past, the past, presentand future.
So a lot of times I'll comeinto an organization and I'll
look at their most recentfinancial history.
So, depending on how long theorganization has been there, you
(08:15):
know you might have two orthree years of financial data,
or you might have five, or youmight have 10.
So it depends on the length oftime, but let's use five as an
example.
So I'll look at the last fiveyears of financial statements
and you can pull that from youraccounting software, you can
pull that from your financialaudit any of that data and I'll
look at all of the variousrevenues that have come into the
organization.
So that might be, you know, ifyou're government funded, that's
(08:37):
, your government grants, or itcould be just program,
philanthropic donations andfundraising.
It could be any earned servicesor earned revenues that you are
selling services for, all ofyour operational type of revenue
, and I'll look at all of thoseand I'll list it out as
operational income.
Then I'll look at everythingthat affects the business on an
expense side.
So what are your operationalexpenses?
(08:57):
Things like your personnel,consultants that you're hiring,
your rent facilities costs,securities costs, if there's any
building expenses, things likethat.
If you provide food services,if you're an education nonprofit
that has food services forchildren, all of those
operational expenses and I'lllook at what is the difference
between those two.
So operational expenses incomeminus operational expenses
(09:20):
equals operation surplus ordeficit.
So is that a positive number oris that a negative number?
And what's that been thatnumber every single year?
Then I'll look at some of thenon-operating things you know.
So we hear terms likedepreciation, um, or interest
expense, right, um.
These are things that stillaffect the business.
They don't affect it on anoperational basis, um.
But I'll put that kind of belowthe line as well and I'll come
(09:40):
up with what our total netincome is in an organization.
But then, most importantly, whatI'll try to do is I'll list out
below what were the one-timeevents that occurred over the
last five years that we receivedeither by revenue or expenses
that can sometimes mask thefinancial performance of an
organization.
So a lot of us know, with COVID, over the last five years,
(10:01):
education nonprofits got COVIDresponse dollars.
A lot of nonprofits got PPPforgiveness, so they applied for
a PPP loan and then gotforgiveness of that.
These are all one-time events,right, so they don't occur in
the future.
They're affecting it at themoment.
Sometimes a nonprofit mightsell a piece of property and get
a one-time revenue gain ofsomething.
It affects that for the year,but it's not something that you
(10:22):
can depend on in the future.
And then I'll start to look atall of that and I'll start to
form a thesis as to like itseems like over the last five
years our personnel line isincreasing faster than our
revenue line, our total revenueline, or it seems like the
amount of consultants keepsgrowing every single year and
they're not growing at the samerate of our government grants,
(10:42):
let's say.
And so I have a thesis behindit.
I'll take all that data, I'llput it all into Excel or Google
Sheets it's all free servicesand I'll use another free
service.
I'll put all that data intoChatGPT and I'll ask it to say
analyze this data for me.
I am a nonprofit with $3million of annual revenue and
these are my financials for thelast five years and I believe it
(11:04):
seems that my personnelexpenses are growing faster than
my government grants.
I believe that there's theseone-time events that were
masking the performance.
It seems like last year myfinances looked really good, but
is that because, on anoperating basis, I'm bringing in
more money than I'm spending,or did this one-time PPP
(11:26):
forgiveness kind of mask that?
And so I'll ask it to analyzethat data for me.
And it's really for me toconfirm that thesis.
So I had a thesis and nowChatGPT will do the work to
confirm or not to confirm mythesis and it'll give me the
data.
So instead of me having tomanually calculate the growth
rates and all of that, chatgptcan do that for me.
And more times than not, chatgpconfirms my thesis that
(11:50):
personnel expenses have beengrowing by 5% every single year
the last five years, but yourrevenue has only been growing by
1% every single year, andthat's the reason why you're
losing money.
So I kind of felt that way, Ikind of knew what it was.
And then ChatGP creates thatstory for me, Luke Gromen, I can
take that data then and I canstart to analyze it and dig in a
little further if I need to, alittle bit deeper if I need to,
(12:12):
and then it's the storytelling,the true storytelling aspect of
it.
And so I will take thatinformation and I'll create a
slide deck and I'll have greatvisuals and very little text,
because you don't want to throwtoo much text onto that type of
presentation, you don't want toput too many numbers, you don't
want to screenshot your entirespreadsheet of, you know, 8,000
numbers onto 10 different slides, but you know you want to take
(12:34):
the data that is given to you inthe analysis, create some basic
charts.
You can use this, you can dothis in Excel, you can do this
on Google sheets, like just linecharts or column charts or bar
charts to kind of help tell thestory of what's happening here.
In other organizations I've seenthat, you know, uh, over the
last five years the enrollmentof of a school was going down,
um, but the numbers that on hisnumbers still look like they
(12:56):
were, they were good.
So, like every year when welooked at the audit, uh, or when
the organization looked attheir audit, their financials,
they look strong, right, theyhad a strong net income.
But then when you pull outthese one-time dollars that
they're they were getting andyou look out into the future,
they're not going to get thoseone-time dollars anymore, right,
but their enrollment is stillheaded in this trend down.
So that's the reasoning why.
And so now, next year and theyear after, the year after,
(13:17):
they're not going to have theseone-time dollars, but their
enrollment is going to continue.
So the problem is theenrollment.
Right, but we didn't reallyfocus on that too much because
we saw the numbers and thenumbers looked all good on a
total basis.
Or it might be that you know,our union contract mandates a 3%
increase every single year forour personnel, and so that's
been growing every single year.
But our government revenue hasbeen declining like this, and so
(13:37):
I can show that on a chart thatyou know.
Expenses are going up this wayand government grants are going
down this way, and that's achallenge, because by two years
from now it's going to cross,and we've got to be able to
mitigate this problem right now.
What is the reasoning why ourgovernment grants keep going
down?
Or are there other things thatwe can do to mitigate our
personnel expenses and bringthat down?
But you bring the data to lifewith financial storytelling.
(14:00):
It's not just a bunch ofnumbers, it's not a bunch of
percentages.
That's the basis of it, that'sthe foundation, but then you've
got to be able to come out andbe able to show it visually and
explain it visually, especiallyto people that are not finance
experts right, a lot of themembers of your board are not
going to be a finance expert,but you help, you're helping
them understand that story withvisuals, with very little text,
but just giving them like.
(14:21):
This is the situation, this iswhere we're coming from, this is
where we are today and this iswhere we're going.
Speaker 1 (14:27):
I love how passionate you are about this, neil, like
you have described this so verywell.
So many people are scared ofnumbers, like they see numbers
and they just immediately freezeand they're like I don't know,
I can't deal with this.
Bring somebody in to deal withthese numbers.
It's like, whatever they needto do, just let them do it.
(14:47):
And I love how you've describedthis, because it is important
to know exactly what's going onin your organization and
sometimes people don'tunderstand.
They see numbers.
Oh, last year we had a milliondollar budget.
This year we have one hundredand five million dollar budget,
(15:08):
and so we got five milliondollars more.
Or you know whatever.
We had one hundred milliondollars.
This year we got one hundredand five million.
We got five million more.
But is that trend going tocontinue?
Where did that extra fivemillion come from Is it a one
time thing?
Is it your, your earned income,where you're actually earning
this and so you can expect tosee that, over time, those
(15:32):
increases.
What is causing that?
Because I'm also the treasurerof a board that I sit on, and so
these are the things that I'mlooking at, that I'm doing, and
I will tell you, it's probablynot as detailed as what you do,
but also our budget isn't aslarge as what you've encountered
either, and so that makes adifference as well, and that's
(15:55):
one of the things that I'mthinking about too is, you know,
in the things that you'reexplaining, that you're
describing working with thedifferent, you know, education
groups, the charter managementsor the education nonprofits,
whatever they may be, theytypically have these larger
budgets, but what happens forthat smaller nonprofit, who may
(16:16):
not necessarily be able toinvest in a CFO, but they still
want to be able to maintaintheir financial health?
What do they do?
How can they do that?
Speaker 2 (16:28):
Yeah, yeah, absolutely.
I could definitely understand asmaller nonprofit with a $3, $5
million budget $1 millionbudget not being able to hire a
full-time CFO.
You wouldn't, I wouldn't adviseany organization to want to do
that.
The dollars have to go to theprogram, right.
And we're building and we'regrowing as an organization and
at one point, hopefully, theorganization is large enough to
(16:53):
be able to afford a full-timecfo.
Um, so there are a lot ofopportunities, one being, um, uh
, outsourced cfos, fractionalcfos, you know.
So you get that, the value of acfo, a full-time cfo, but, like
you know, at a certainfractional piece.
So somebody's coming in forfive or ten hours a week or even
five or ten hours a month tolook at some of this information
.
But on a basic level, it'simportant for us to understand
that nonprofits are businesses,and so some folks say like no,
we're not businesses.
(17:13):
We're businesses, we're notfor-profit businesses.
But we still have to have cashin the bank.
We still have to ensure thatour revenues most times exceed
our expenses, but we're notdoing it for shareholder value,
right.
We're not trying to increaseour earnings per share, right.
We are trying to increase theimpact for the community, right.
(17:34):
But we have to first understandthat we're a business.
So in that business we've gotto have a good accounting of
money.
So we have to make suresomebody the bookkeeper, whoever
that is make sure that we'repaying bills on time, that we're
accounting for it, that we aremaking sure that money's in the
bank, that we're managing allthat.
So that's forefront, to makesure that that process is strong
.
And you can get an outsourcedbookkeeper.
You can get a part-timebookkeeper if that's the need,
(17:57):
and that's the case.
If we can't hire a full-timeCFO, of course, and even if we
can hire a part-time CFO, then Iwould recommend that the CEO or
the executive director educatethemselves a little bit on how
this works.
And so you know you can doanything from YouTube courses or
YouTube videos to just askingchat to the PT.
Hey, I'm an executive directorwith a $2 million budget every
(18:19):
single year.
I know nothing about finance.
What do I need to do tounderstand the basics of my
balance sheet in my incomestatement?
Right, you know those terrorwords balance sheet, right,
income statement.
But these are still importantdocuments.
We still have to be able tounderstand them and we got to be
able to expand them, becauseevery organization, whether you
have only $100,000 in annualrevenue or $100 million in
annual revenue.
(18:40):
You have a balance sheet andyou have a P&L profit and loss
and income statement.
You have a statement of cashflows and QuickBooks and things
like this you know that are very, very inexpensive can generate
these reports for you, but youhave to be able to explain them
right.
You got to be able to talkthrough them and so a lot of
times I speak about on LinkedIn,about you know, tips for CEOs
on how they can read a balancesheet, how they can explain a
(19:00):
balance sheet.
You've got to educate yourselfa little bit.
But beyond that, the storytelling aspect is also something
that I think the executivedirector, the CEO, can do on
their own as well.
If you just take the data andyou can just take your last five
years of audits because prettymuch every nonprofit gets some
type of audit generally or justthe historical information in
quote books export that data andjust throw it all into AI and
(19:23):
say, hey, analyze this for me,tell me what's going on.
This is my organization.
This is the last five years ofdata and you don't have to break
it down by operating andexpenses and income if you don't
want to, but just take the data, eliminate your name from the
report so the chat sheet doesn'tknow the name of your
organization.
But I'm an executive directorof this organization and this is
the last five years offinancial statements.
This is my profit and loss forthe last five years.
(19:44):
This is my balance sheet.
Analyze this for me.
Tell me what's going on.
Why are we losing money?
At minimum, you can do that andwith a few iterations, you're
going to start to educateyourself and you're going to
start to learn a little bit.
And then it's also important tohave people like you that sit
on a treasure on the board, soleaning on your board to help
(20:05):
you with that.
So if you have a finance personon your board leaning on your
board to help you with that, soif you have a finance person on
your board ensuring a lot ofmost nonprofits, generally their
treasurer has some level offinancial acumen.
It's great if they're in afinance job, but even if they
have a basic understanding, Ithink it's really, really
important and lean on them andeducate yourself and educate and
learn from them as well, andthat's a resource that's there
(20:26):
to support you.
That is a volunteer position andthey can help you as well, so
that there's so manyopportunities to be out to learn
and to not be able to be in aposition where, like I can't
afford a CFO, so I can't do thisanalysis.
You have to do the analysis.
The analysis, the function isimportant, but how you get there
can be different.
If you can afford a great CFO,great.
But if you have to do ityourself, then do it yourself,
(20:46):
right and so that.
But it's important to havesomebody looking at that and you
as the executive director, theCEO of the organization, are
ultimately responsible for thisinformation anyway.
So it's better to educateyourself to be able to learn how
to do this and be able toexplain the financial condition
of your organization.
Speaker 1 (21:03):
I love that.
I love how you incorporated AIinto this right, because it
seems like people are so afraidof AI and they're thinking like,
oh, ai is going to take all ofour jobs.
Well, no, because I still.
You still had to create theExcel spreadsheet.
You still had to look at thenumbers that were going in and
(21:24):
out.
You still had to actuallycreate the report to put into
the AI platform.
Speaker 2 (21:31):
And so.
Speaker 1 (21:32):
I just I love how you're utilizing the resources
that are available to you andalso that you're holding these
CEOs accountable, right, andthese executive directors
accountable, because it's likeyou know, that's no excuse if
you don't have a CFO or somesort of financial person who
does forecasting or somethinglike that.
There's no excuse for you notto understand your financials
(21:56):
and what it looks like andwhat's going on.
So I just love how you, how youdescribe that, and just your
knowledge is so, so interestingto me.
Speaker 2 (22:07):
Thank you.
Speaker 1 (22:09):
Because numbers fascinate me, and so it's never
been something that I've beenafraid of.
I used to be a math teacher.
So, it's fun to me to look atthese things like, oh wait, well
, this doesn't really make sense, Because if we take this out,
then this shows our true budget,right with those one-time
things.
Right, and this shows our truebudget, right With those
one-time things.
And I think that's what reallykills it for some people,
(22:30):
because they're looking at thewhole of it to say, well, our
budget was, you know?
I don't know what happened.
Our budget was 5 million lastyear, but now we're down to
three and a half.
And what happened?
Where'd the money go and whatdid y'all do and who spent all
this money and what?
did y'all do and who spent allthis money, and it's like let's
take a closer look and see whatactually happened.
(22:52):
But then also, sometimes I thinkpeople jump the gun because,
just like you were sayingearlier, as you were describing
payroll expenses and you justgave an example of, say, your
union contract which, by the way, guys, you can tell if you
didn't know he's a true Chicagoand just by that, just just by
(23:15):
that reference there.
But, um, you know you talkedabout the payroll expenses going
up, because you know your unioncontract um dictates that it
has to be, you know, 3% more orwhatever, but your revenue, just
your baseline revenue, is onlyincreasing by 1%, but payroll
expenses are increasing by 3%.
So that's really important foryou to understand how that works
(23:39):
.
Because if it keeps increasingat that rate, where you have 3%
in payroll costs but 1% inactual revenue costs, the
increases like you're going tobottom out.
And if you don't find a way tofix that gap, to fill that gap
with revenue from eitherrecurring grants or you get some
(24:04):
donors, which is probably goingto be your best bet is to find
some major donors who can fillthat gap for you, there's no way
that you're going to be able tokeep up and have the
organization to be sustainable,and then you're kind of like
going to be on this hamsterwheel and so-.
Speaker 2 (24:23):
That's exactly right.
You nailed it, because that'sthe story you want to be able to
tell that donor so you can helptell that, tell that donor that
you know.
Look at, look at the last fiveyears of our personnel expenses
and this is what we're trackinggoing forward and our government
grants, as you know, cannotafford our, our full program and
you can see the gap that iscreated next year and this is
the gap that we need tofundraise for and this is where
your dollars are going to be sosupportive in that and you can
(24:45):
sell them the fact that it couldbe unrestricted general
operating funds because it needsto be applied everywhere across
the organization and not onespecific program.
But you can be able tounderstand that story and tell
that story so the donorunderstands where the need truly
is and that helps sell thatstory to them and make that sale
for them.
Speaker 1 (25:03):
I love it, I absolutely love it, and this is
what helps you to create animpactful story for your
organization.
This is what helps you to tellyour donors, or just anyone who
is interested in yourorganization, where the
opportunities lie for them to beinvolved.
(25:24):
And so that's, that's amazingto me.
And I think, just on, just on alast note here Right, because
we've seen a lot of nonprofitsstart up over the last few years
, right, there's been anincrease in nonprofits starting
up, and so I want to look at howreally quickly they can sort of
(25:47):
manage their budgets, becausesometimes I think people kind of
put the cart before the horseand they feel like, oh, I have
this amount of money, so I wantto start hiring people and start
, you know, doing this and doingthat.
And so I just kind of want toget your thoughts and tell the
listeners.
You know how you can reallytell when you're ready, number
(26:10):
one, to start hiring, whenyou're ready to really start
spending.
You know big dollars on certainthings.
You know how can you reallygauge your readiness in the
organization with your budget.
Speaker 2 (26:23):
Yeah, I mean, depending on where you are, if
you're just starting out, ifyou're about to launch a
nonprofit, or you've been inoperations for a few months, six
months a year I think it'sreally important to start to lay
out and you can start very,very simply with Excel or Google
Sheet and just lay out all ofthe pieces of revenue that you
either are receiving or expectto receive, and so you can
create a category for governmentgrants, if you're getting
(26:45):
government grants, earnedrevenue, philanthropic dollars
and just keep it that.
And look at the next 12 months.
I have a column for everysingle month July, august,
september.
I think I'm going to get thismoney here.
I'm going to get this moneyhere.
You know what you've gotten thelast couple of months, so you
can use it as a baseline.
It's just a projection.
At the end of the day it's notgoing to be perfect.
There's no way that we're notfuture tellers, right, we're not
(27:10):
going to know exactly what'sgoing to happen a year from now,
but we can try to do our besteducated guess in the next 12
months.
This is what I'm going to getin terms of revenue, and now I
know that these are my currentcosts.
So this is how much I spend onpersonnel, this is how much I
spend on consultants, this ishow much I spend on rent, et
cetera, et cetera, et ceteraAgain, high level, and you're
projecting that out.
So I know that my rent lease isX for the next 12 months, so I
can put that in there.
(27:30):
I know I'm going to spend thismoney every single month, right,
and then you sum up the totalexpenses, you summed up the
revenue, you summed up theexpenses and you got to this net
number and now you know, like,over the next 12 months, this is
how much I'm going to haveevery single month in terms of
earnings.
Right, I'm going to bring inthis much.
(27:52):
You know we're in March rightnow.
So let's say, I'm going tobring in this much in June and
this is how much I think I'mgoing to spend in June.
So then you get a sense of likeI'm spending.
You know, I know how much I'mgoing to spend.
I've spent so far year to dateJanuary, february, march.
This is how much I'm going tocertain amount of money in the
bank.
So I started this year off witha hundred thousand dollars and
then in January I brought in$10,000 and I spent $20,000.
(28:16):
So now I'm down $10,000.
Right, so now my cash is$90,000.
Right, but next month I'm goingto bring in a hundred thousand
dollars grant.
This is, this is going to behuge and they've already
committed to me and in April I'mgoing to get this $100,000.
And so now you know, I've spent$10,000 in February, $10,000 in
March, $10,000 in April.
So now I'm down to, let's say,$60,000.
But now, next month I'm goingto get this big $100,000 in.
(28:43):
And so, knowing when the grantsare going to come in, a check,
right, because a grantor mightsay, hey, I'm awarding you a
grant next month, right?
So in April you learn thatyou're going to get this grant.
Awesome, right, huge.
You're going to get this ahundred thousand dollars, but
you're not going to get thecheck until July, right?
(29:03):
So now, like it's, it's, it'sgreat that you're not that
income, but you can start tomake those investments, because
you can't hire somebody in Apriland then start paying them in
July either, right, so you haveto have the cash in your bank to
be able to do that.
So I know, I've got this grant,it's committed grant, the
money's coming in July, so I canstart my hiring process with a
goal of being that I startrecruiting somebody to take over
(29:24):
this new program or newfunction or whatever it might be
.
Specifically for that grant, Ican start April with job
postings and look to dointerviews in May and do a hire
in June and have that personstart in July, and now I know
I'll have the cash to do it.
So now I'm going to spend$20,000 in payroll in July
because I've got this $100,000grant that's going to pay.
So just basic level planning, Ithink, is really, really
important in terms of likeknowing when you are expecting
(29:46):
to have cash and revenue cominginto the organization and when
those outlays are going to goout.
When are those outflows?
When are we going to actuallyspend some of these dollars?
It will give you a view for therest of the year.
By the end of the year I'mgoing to be in good shape, but
there's going to be some tighttimes here in the summer where
I'm not going to have as muchcash.
What am I going to do about it?
What can I do to mitigate that?
Well, maybe I can negotiatewith one of my consultants to go
(30:09):
if I can pay them quarterlyrather than monthly or something
whatever that might be to startto think about.
I know this issue is going tocome up how am I going to
mitigate?
And start mitigating for thatnow, so that you're not stuck in
July with oh my God, my bankbalance just went negative
because I had more cash goingout this month than I, than I in
the revenue.
So it's, it's, that's what aCFO does.
(30:30):
But when you don't have a CFO,these are tools and tips that a
CEO can do, an executivedirector can do, to at least at
a minimum understand wherethey're going in terms of cash.
Speaker 1 (30:41):
Oh, I love that.
It was funny, but not funnybecause some people really don't
look at it like this.
When you said, well, we can'thire you in April but start
paying you in July, like it justdoesn't work like that.
And I think another thing thatpeople have to understand and
remember is that even though youhire someone, maybe at a
$45,000 salary, it's actuallygoing to cost you closer to 47
(31:03):
to $50,000 to actually pay them.
So those are other things thatyou have to keep in mind.
Speaker 2 (31:11):
Yep, absolutely.
Speaker 1 (31:12):
I appreciate you, Neil.
Thank you so much.
This was such a greatconversation.
Thank you so much.
Speaker 2 (31:17):
Thank you, I was really happy to be here.
Thanks so much for theopportunity Spring.
Speaker 1 (31:21):
Guys, I hope you were able to catch all of these gems
that Neil dropped.
It was amazing.
If you are a small nonprofitout there and you're trying to
figure things out, he gave somegreat tips, Neil.
If they want to get in touchwith you or learn more about the
things that you do and how youmay be able to help their
organization, how do they get intouch with you?
Speaker 2 (31:40):
Appreciate that you can find me on LinkedIn.
I'm pretty active on LinkedIn.
I provide interim CFO solutionsor services for nonprofit
organizations.
I also host a group of CFOsthat is called the Nonprofit CFO
Roundtable, where we havenonprofit CFOs from all
different types of nonprofitscome in every other week to talk
(32:01):
through their variouschallenges and issues, and it's
a really great opportunity forprofessional development for
your CFO if you have a CFO, andso I host that group and I
provide these services, and soit's cfogroupscom for the
nonprofit CFO roundtable and youcan find me on LinkedIn.
Love to connect with you.
Speaker 1 (32:18):
Awesome, awesome.
Well, guys, thank you so muchfor tuning in and, as always,
until next time on the SpringForward podcast.
Bye guys.
Hey, nonprofit friends, welcome to the Spring
Forward podcast, where we talkabout all things nonprofit, from
board discord to grant writingand strategic planning tips.
If you're an executive director, nonprofit board member or just
someone heavily involved in thenonprofit sector, then this is
the podcast for you.
Let's spring forward intoexcellence.
(00:24):
Welcome, welcome everyone toanother episode of the Spring
Forward podcast.
I'm your host, springRichardson Perry, and today I am
super excited to come to youguys and talk to you about
(00:45):
non-profit financial health andto help us talk about this very
important topic.
Today I have neil shah.
He has spent the past twodecades serving as an outsourced
or in-house chief financialofficer for non-profit
organizations all across the us,and their annual budgets range
from a few million to almosthalf a billion dollars in annual
(01:08):
revenue, from government grantsto philanthropic revenue.
But I am super excited to havethis conversation with him today
.
He has a wealth of knowledge, abunch of experience, and so I'm
just excited to lift this topicup.
So thank you so much for beinghere, neil Welcome.
Speaker 2 (01:30):
Thank you.
Thank you, spring, so excitedto be here.
Speaker 1 (01:33):
Absolutely so.
I always kind of start, Ialways kind of like to start out
with you telling everyone justa little bit about yourself and
what you do, and so tell us alittle bit about that, Neil.
Speaker 2 (01:45):
Yeah, neil, yeah, absolutely.
So I've been like you said.
I've been working withnonprofit organizations
exclusively for almost 20 years.
The majority of my career I'vebeen both a consultant, like an
outsourced you know, fractionalCFO, but also an in-house CFO as
well.
I kind of fell into thenonprofit space about 20 years
ago.
I was a tech entrepreneur, afailed tech entrepreneur, uh,
(02:06):
and and kind of just found thenonprofit world, uh accidentally
, quite honestly, and didn'tthink it was a a permanent road
by by any means.
I thought it was a temporary pitstop, uh, and I just fell in
love with working with nonprofitorganizations, especially the,
the public charter schools thatI was working with uh in los
angeles, um, and I've just beendoing that kind of work since.
You know, I had a company thatdid that back office services
for charter schools for a whileand I became in-house CFO for
(02:29):
education nonprofits.
And now I'm providing theseinterim CFO services where I'm
coming into an organization thathas where their CFO has just
recently left and I'm coming inkind of to stabilize the
organization until they find thenext CFO, but also to improve
the processes, the systems andthe culture of the finance team
such that we prepare the org toset up the next permanent CFO in
(02:53):
a much more stronger place, andI'm finding that work to be so
exciting because it's needed.
There's an opportunity to makeimprovements over a certain
amount of time, and then you'reon to the next challenge, and
I've always found that to bereally, really exciting.
Speaker 1 (03:06):
Oh, that's wonderful, Neil.
Thank you so much, and I wantto say I would not call you a
failed tech entrepreneur, right?
I don't think I think alldisappointments lead to your
next success.
It was by no coincidence thatyou fell into the nonprofit
world, right, and so I love tohear it, love to hear it.
(03:27):
But I want to kind of jump intothis really quickly, because
you sort of described exactlywhat it is that you do, and I
want to talk about thedifference, right, what a CFO
does, and the difference betweenthem and a bookkeeper, because
those are two very differentroles, but I don't think people
really understand the difference.
(03:48):
So can you explain that for us?
Speaker 2 (03:50):
That's a great.
It's a great example.
So with bookkeeping, it'sensuring that the financial
operations are continuing likein any organization, whether it
be a nonprofit organization or aretail shop.
You have bills to pay, you'vegot invoices to send out, you've
got payroll to run, you have abank statement that you need to
(04:12):
ensure there's money in and thatit's reconciled, that you
understand all the transactions.
So the bookkeeper is the holderof all that financial data and
ensures that the transactionsare occurring appropriately,
that they're being accounted forand that you can be able to put
that information into afinancial software.
It's something as basic, assimple as QuickBooks even to be
(04:32):
able to ensure that youunderstand how much money has
been brought in over the courseof the month, how much money has
gone out, what is an incomeversus what's your cash balance
all of that financial data forthe financial operations.
It's necessary for that tax tobe completed in any organization
and ideally you have somebodyas an accounts payable clerk or
a bookkeeper that is doing thatwork on a day-to-day basis,
(04:55):
either part-time or full-time.
For your nonprofit organization.
A CFO brings a different lens toit, so the CFO is able to take
that information and make senseof the data and so to be able to
explain you know what ishappening with the organization
financially are we losing moneyor are we in a profitable state?
What is our, what is our trend?
(05:16):
You know.
So how much money did we makelast year this month versus this
year, this month, to be able tocompare you know.
So I did this.
I brought in this much revenuefrom grants in February of 2024.
And this is how much I broughtin February 2025.
So I understand the differenceand I can start to, when I start
to see that difference, I canstart to blend and create a
story as to what is thereasoning behind that, so that
(05:37):
we can use that to analyzewhat's working, what's not
working, that the CFO can alsolook forward, looking as well,
and to be able to take the datathat's there from the bookkeeper
that's in the accounting systemand say, well, it looks like
last year we did this much.
We did this much in totalrevenues, we did this much in
total expenses.
This year, based on that, thisis what I believe we will do
(05:57):
this year, and it's based on thefact that we believe that
there'll be more governmentgrants available or that we're
going to push harder to raisemore money this year or that.
You know we raised our ourpersonnel expense by three
percent because we gaveeverybody a raise in the
organization.
So we know our costs ofpersonnel are going up by three
percent.
We need to know how much revenuewe need to be able to bring in,
and so we're going to budgetfor that, we're going to
forecast for that and thenduring the year we're going to
(06:19):
track against that as well.
So it's it's using the datathat the bookkeeper has and
creating a story behind it.
Um, both for an analyticalpurpose, but also to be able to
help everyone understand thedynamics of the organization on
a financial basis, so that that,whether it be the executive
director or the ceo of theorganization, it could be the
board of the organization, itcould be funders.
Funders want to know yourfinancial story as well, like
(06:41):
what's working, what's notworking?
Are you going to be sustainablegoing forward?
Am I funding a non-profitthat's going to be here five
years from now?
Right?
Donors want to know this um andthat cfo can help, uh, put a
narrative and understandingbehind those financials before
being behind the um, the, thedata that was brought in from
the bookkeeper and helpedexplain that to the the various
stakeholders and parties oh, Ilove, love that.
Speaker 1 (07:03):
That was a very clear distinction of what bookkeepers
do and what CFOs do.
And I want to kind of focus onsomething that you said here
when you talk about telling thefinancial story, right, because
that is super important when itcomes to getting more money
going after funders, grants,just different things, getting
(07:24):
donations, being able to tellthe story of how your money is
working.
And so what have you found tobe impactful for nonprofits in
telling their financial story?
How can they do that in a waythat is going to bring attention
to the impact that they haveand going to bring in those
(07:47):
major donations, those bigfunders, those government grants
?
What's been your experiencewith that?
Speaker 2 (07:53):
Yeah, absolutely.
So we take the data and westart to build that narrative.
So to understand where we'regoing, we need to understand
first where we are and also,most importantly, where we've
come from.
So the past, the past, presentand future.
So a lot of times I'll comeinto an organization and I'll
look at their most recentfinancial history.
So, depending on how long theorganization has been there, you
(08:15):
know you might have two orthree years of financial data,
or you might have five, or youmight have 10.
So it depends on the length oftime, but let's use five as an
example.
So I'll look at the last fiveyears of financial statements
and you can pull that from youraccounting software, you can
pull that from your financialaudit any of that data and I'll
look at all of the variousrevenues that have come into the
organization.
So that might be, you know, ifyou're government funded, that's
(08:37):
, your government grants, or itcould be just program,
philanthropic donations andfundraising.
It could be any earned servicesor earned revenues that you are
selling services for, all ofyour operational type of revenue
, and I'll look at all of thoseand I'll list it out as
operational income.
Then I'll look at everythingthat affects the business on an
expense side.
So what are your operationalexpenses?
(08:57):
Things like your personnel,consultants that you're hiring,
your rent facilities costs,securities costs, if there's any
building expenses, things likethat.
If you provide food services,if you're an education nonprofit
that has food services forchildren, all of those
operational expenses and I'lllook at what is the difference
between those two.
So operational expenses incomeminus operational expenses
(09:20):
equals operation surplus ordeficit.
So is that a positive number oris that a negative number?
And what's that been thatnumber every single year?
Then I'll look at some of thenon-operating things you know.
So we hear terms likedepreciation, um, or interest
expense, right, um.
These are things that stillaffect the business.
They don't affect it on anoperational basis, um.
But I'll put that kind of belowthe line as well and I'll come
(09:40):
up with what our total netincome is in an organization.
But then, most importantly, whatI'll try to do is I'll list out
below what were the one-timeevents that occurred over the
last five years that we receivedeither by revenue or expenses
that can sometimes mask thefinancial performance of an
organization.
So a lot of us know, with COVID, over the last five years,
(10:01):
education nonprofits got COVIDresponse dollars.
A lot of nonprofits got PPPforgiveness, so they applied for
a PPP loan and then gotforgiveness of that.
These are all one-time events,right, so they don't occur in
the future.
They're affecting it at themoment.
Sometimes a nonprofit mightsell a piece of property and get
a one-time revenue gain ofsomething.
It affects that for the year,but it's not something that you
(10:22):
can depend on in the future.
And then I'll start to look atall of that and I'll start to
form a thesis as to like itseems like over the last five
years our personnel line isincreasing faster than our
revenue line, our total revenueline, or it seems like the
amount of consultants keepsgrowing every single year and
they're not growing at the samerate of our government grants,
(10:42):
let's say.
And so I have a thesis behindit.
I'll take all that data, I'llput it all into Excel or Google
Sheets it's all free servicesand I'll use another free
service.
I'll put all that data intoChatGPT and I'll ask it to say
analyze this data for me.
I am a nonprofit with $3million of annual revenue and
these are my financials for thelast five years and I believe it
(11:04):
seems that my personnelexpenses are growing faster than
my government grants.
I believe that there's theseone-time events that were
masking the performance.
It seems like last year myfinances looked really good, but
is that because, on anoperating basis, I'm bringing in
more money than I'm spending,or did this one-time PPP
(11:26):
forgiveness kind of mask that?
And so I'll ask it to analyzethat data for me.
And it's really for me toconfirm that thesis.
So I had a thesis and nowChatGPT will do the work to
confirm or not to confirm mythesis and it'll give me the
data.
So instead of me having tomanually calculate the growth
rates and all of that, chatgptcan do that for me.
And more times than not, chatgpconfirms my thesis that
(11:50):
personnel expenses have beengrowing by 5% every single year
the last five years, but yourrevenue has only been growing by
1% every single year, andthat's the reason why you're
losing money.
So I kind of felt that way, Ikind of knew what it was.
And then ChatGP creates thatstory for me, Luke Gromen, I can
take that data then and I canstart to analyze it and dig in a
little further if I need to, alittle bit deeper if I need to,
(12:12):
and then it's the storytelling,the true storytelling aspect of
it.
And so I will take thatinformation and I'll create a
slide deck and I'll have greatvisuals and very little text,
because you don't want to throwtoo much text onto that type of
presentation, you don't want toput too many numbers, you don't
want to screenshot your entirespreadsheet of, you know, 8,000
numbers onto 10 different slides, but you know you want to take
(12:34):
the data that is given to you inthe analysis, create some basic
charts.
You can use this, you can dothis in Excel, you can do this
on Google sheets, like just linecharts or column charts or bar
charts to kind of help tell thestory of what's happening here.
In other organizations I've seenthat, you know, uh, over the
last five years the enrollmentof of a school was going down,
um, but the numbers that on hisnumbers still look like they
(12:56):
were, they were good.
So, like every year when welooked at the audit, uh, or when
the organization looked attheir audit, their financials,
they look strong, right, theyhad a strong net income.
But then when you pull outthese one-time dollars that
they're they were getting andyou look out into the future,
they're not going to get thoseone-time dollars anymore, right,
but their enrollment is stillheaded in this trend down.
So that's the reasoning why.
And so now, next year and theyear after, the year after,
(13:17):
they're not going to have theseone-time dollars, but their
enrollment is going to continue.
So the problem is theenrollment.
Right, but we didn't reallyfocus on that too much because
we saw the numbers and thenumbers looked all good on a
total basis.
Or it might be that you know,our union contract mandates a 3%
increase every single year forour personnel, and so that's
been growing every single year.
But our government revenue hasbeen declining like this, and so
(13:37):
I can show that on a chart thatyou know.
Expenses are going up this wayand government grants are going
down this way, and that's achallenge, because by two years
from now it's going to cross,and we've got to be able to
mitigate this problem right now.
What is the reasoning why ourgovernment grants keep going
down?
Or are there other things thatwe can do to mitigate our
personnel expenses and bringthat down?
But you bring the data to lifewith financial storytelling.
(14:00):
It's not just a bunch ofnumbers, it's not a bunch of
percentages.
That's the basis of it, that'sthe foundation, but then you've
got to be able to come out andbe able to show it visually and
explain it visually, especiallyto people that are not finance
experts right, a lot of themembers of your board are not
going to be a finance expert,but you help, you're helping
them understand that story withvisuals, with very little text,
but just giving them like.
(14:21):
This is the situation, this iswhere we're coming from, this is
where we are today and this iswhere we're going.
Speaker 1 (14:27):
I love how passionate you are about this, neil, like
you have described this so verywell.
So many people are scared ofnumbers, like they see numbers
and they just immediately freezeand they're like I don't know,
I can't deal with this.
Bring somebody in to deal withthese numbers.
It's like, whatever they needto do, just let them do it.
(14:47):
And I love how you've describedthis, because it is important
to know exactly what's going onin your organization and
sometimes people don'tunderstand.
They see numbers.
Oh, last year we had a milliondollar budget.
This year we have one hundredand five million dollar budget,
(15:08):
and so we got five milliondollars more.
Or you know whatever.
We had one hundred milliondollars.
This year we got one hundredand five million.
We got five million more.
But is that trend going tocontinue?
Where did that extra fivemillion come from Is it a one
time thing?
Is it your, your earned income,where you're actually earning
this and so you can expect tosee that, over time, those
(15:32):
increases.
What is causing that?
Because I'm also the treasurerof a board that I sit on, and so
these are the things that I'mlooking at, that I'm doing, and
I will tell you, it's probablynot as detailed as what you do,
but also our budget isn't aslarge as what you've encountered
either, and so that makes adifference as well, and that's
(15:55):
one of the things that I'mthinking about too is, you know,
in the things that you'reexplaining, that you're
describing working with thedifferent, you know, education
groups, the charter managementsor the education nonprofits,
whatever they may be, theytypically have these larger
budgets, but what happens forthat smaller nonprofit, who may
(16:16):
not necessarily be able toinvest in a CFO, but they still
want to be able to maintaintheir financial health?
What do they do?
How can they do that?
Speaker 2 (16:28):
Yeah, yeah, absolutely.
I could definitely understand asmaller nonprofit with a $3, $5
million budget $1 millionbudget not being able to hire a
full-time CFO.
You wouldn't, I wouldn't adviseany organization to want to do
that.
The dollars have to go to theprogram, right.
And we're building and we'regrowing as an organization and
at one point, hopefully, theorganization is large enough to
(16:53):
be able to afford a full-timecfo.
Um, so there are a lot ofopportunities, one being, um, uh
, outsourced cfos, fractionalcfos, you know.
So you get that, the value of acfo, a full-time cfo, but, like
you know, at a certainfractional piece.
So somebody's coming in forfive or ten hours a week or even
five or ten hours a month tolook at some of this information
.
But on a basic level, it'simportant for us to understand
that nonprofits are businesses,and so some folks say like no,
we're not businesses.
(17:13):
We're businesses, we're notfor-profit businesses.
But we still have to have cashin the bank.
We still have to ensure thatour revenues most times exceed
our expenses, but we're notdoing it for shareholder value,
right.
We're not trying to increaseour earnings per share, right.
We are trying to increase theimpact for the community, right.
(17:34):
But we have to first understandthat we're a business.
So in that business we've gotto have a good accounting of
money.
So we have to make suresomebody the bookkeeper, whoever
that is make sure that we'repaying bills on time, that we're
accounting for it, that we aremaking sure that money's in the
bank, that we're managing allthat.
So that's forefront, to makesure that that process is strong
.
And you can get an outsourcedbookkeeper.
You can get a part-timebookkeeper if that's the need,
(17:57):
and that's the case.
If we can't hire a full-timeCFO, of course, and even if we
can hire a part-time CFO, then Iwould recommend that the CEO or
the executive director educatethemselves a little bit on how
this works.
And so you know you can doanything from YouTube courses or
YouTube videos to just askingchat to the PT.
Hey, I'm an executive directorwith a $2 million budget every
(18:19):
single year.
I know nothing about finance.
What do I need to do tounderstand the basics of my
balance sheet in my incomestatement?
Right, you know those terrorwords balance sheet, right,
income statement.
But these are still importantdocuments.
We still have to be able tounderstand them and we got to be
able to expand them, becauseevery organization, whether you
have only $100,000 in annualrevenue or $100 million in
annual revenue.
(18:40):
You have a balance sheet andyou have a P&L profit and loss
and income statement.
You have a statement of cashflows and QuickBooks and things
like this you know that are very, very inexpensive can generate
these reports for you, but youhave to be able to explain them
right.
You got to be able to talkthrough them and so a lot of
times I speak about on LinkedIn,about you know, tips for CEOs
on how they can read a balancesheet, how they can explain a
(19:00):
balance sheet.
You've got to educate yourselfa little bit.
But beyond that, the storytelling aspect is also something
that I think the executivedirector, the CEO, can do on
their own as well.
If you just take the data andyou can just take your last five
years of audits because prettymuch every nonprofit gets some
type of audit generally or justthe historical information in
quote books export that data andjust throw it all into AI and
(19:23):
say, hey, analyze this for me,tell me what's going on.
This is my organization.
This is the last five years ofdata and you don't have to break
it down by operating andexpenses and income if you don't
want to, but just take the data, eliminate your name from the
report so the chat sheet doesn'tknow the name of your
organization.
But I'm an executive directorof this organization and this is
the last five years offinancial statements.
This is my profit and loss forthe last five years.
(19:44):
This is my balance sheet.
Analyze this for me.
Tell me what's going on.
Why are we losing money?
At minimum, you can do that andwith a few iterations, you're
going to start to educateyourself and you're going to
start to learn a little bit.
And then it's also important tohave people like you that sit
on a treasure on the board, soleaning on your board to help
(20:05):
you with that.
So if you have a finance personon your board leaning on your
board to help you with that, soif you have a finance person on
your board ensuring a lot ofmost nonprofits, generally their
treasurer has some level offinancial acumen.
It's great if they're in afinance job, but even if they
have a basic understanding, Ithink it's really, really
important and lean on them andeducate yourself and educate and
learn from them as well, andthat's a resource that's there
(20:26):
to support you.
That is a volunteer position andthey can help you as well, so
that there's so manyopportunities to be out to learn
and to not be able to be in aposition where, like I can't
afford a CFO, so I can't do thisanalysis.
You have to do the analysis.
The analysis, the function isimportant, but how you get there
can be different.
If you can afford a great CFO,great.
But if you have to do ityourself, then do it yourself,
(20:46):
right and so that.
But it's important to havesomebody looking at that and you
as the executive director, theCEO of the organization, are
ultimately responsible for thisinformation anyway.
So it's better to educateyourself to be able to learn how
to do this and be able toexplain the financial condition
of your organization.
Speaker 1 (21:03):
I love that.
I love how you incorporated AIinto this right, because it
seems like people are so afraidof AI and they're thinking like,
oh, ai is going to take all ofour jobs.
Well, no, because I still.
You still had to create theExcel spreadsheet.
You still had to look at thenumbers that were going in and
(21:24):
out.
You still had to actuallycreate the report to put into
the AI platform.
Speaker 2 (21:31):
And so.
Speaker 1 (21:32):
I just I love how you're utilizing the resources
that are available to you andalso that you're holding these
CEOs accountable, right, andthese executive directors
accountable, because it's likeyou know, that's no excuse if
you don't have a CFO or somesort of financial person who
does forecasting or somethinglike that.
There's no excuse for you notto understand your financials
(21:56):
and what it looks like andwhat's going on.
So I just love how you, how youdescribe that, and just your
knowledge is so, so interestingto me.
Speaker 2 (22:07):
Thank you.
Speaker 1 (22:09):
Because numbers fascinate me, and so it's never
been something that I've beenafraid of.
I used to be a math teacher.
So, it's fun to me to look atthese things like, oh wait, well
, this doesn't really make sense, Because if we take this out,
then this shows our true budget,right with those one-time
things.
Right, and this shows our truebudget, right With those
one-time things.
And I think that's what reallykills it for some people,
(22:30):
because they're looking at thewhole of it to say, well, our
budget was, you know?
I don't know what happened.
Our budget was 5 million lastyear, but now we're down to
three and a half.
And what happened?
Where'd the money go and whatdid y'all do and who spent all
this money and what?
did y'all do and who spent allthis money, and it's like let's
take a closer look and see whatactually happened.
(22:52):
But then also, sometimes I thinkpeople jump the gun because,
just like you were sayingearlier, as you were describing
payroll expenses and you justgave an example of, say, your
union contract which, by the way, guys, you can tell if you
didn't know he's a true Chicagoand just by that, just just by
(23:15):
that reference there.
But, um, you know you talkedabout the payroll expenses going
up, because you know your unioncontract um dictates that it
has to be, you know, 3% more orwhatever, but your revenue, just
your baseline revenue, is onlyincreasing by 1%, but payroll
expenses are increasing by 3%.
So that's really important foryou to understand how that works
(23:39):
.
Because if it keeps increasingat that rate, where you have 3%
in payroll costs but 1% inactual revenue costs, the
increases like you're going tobottom out.
And if you don't find a way tofix that gap, to fill that gap
with revenue from eitherrecurring grants or you get some
(24:04):
donors, which is probably goingto be your best bet is to find
some major donors who can fillthat gap for you, there's no way
that you're going to be able tokeep up and have the
organization to be sustainable,and then you're kind of like
going to be on this hamsterwheel and so-.
Speaker 2 (24:23):
That's exactly right.
You nailed it, because that'sthe story you want to be able to
tell that donor so you can helptell that, tell that donor that
you know.
Look at, look at the last fiveyears of our personnel expenses
and this is what we're trackinggoing forward and our government
grants, as you know, cannotafford our, our full program and
you can see the gap that iscreated next year and this is
the gap that we need tofundraise for and this is where
your dollars are going to be sosupportive in that and you can
(24:45):
sell them the fact that it couldbe unrestricted general
operating funds because it needsto be applied everywhere across
the organization and not onespecific program.
But you can be able tounderstand that story and tell
that story so the donorunderstands where the need truly
is and that helps sell thatstory to them and make that sale
for them.
Speaker 1 (25:03):
I love it, I absolutely love it, and this is
what helps you to create animpactful story for your
organization.
This is what helps you to tellyour donors, or just anyone who
is interested in yourorganization, where the
opportunities lie for them to beinvolved.
(25:24):
And so that's, that's amazingto me.
And I think, just on, just on alast note here Right, because
we've seen a lot of nonprofitsstart up over the last few years
, right, there's been anincrease in nonprofits starting
up, and so I want to look at howreally quickly they can sort of
(25:47):
manage their budgets, becausesometimes I think people kind of
put the cart before the horseand they feel like, oh, I have
this amount of money, so I wantto start hiring people and start
, you know, doing this and doingthat.
And so I just kind of want toget your thoughts and tell the
listeners.
You know how you can reallytell when you're ready, number
(26:10):
one, to start hiring, whenyou're ready to really start
spending.
You know big dollars on certainthings.
You know how can you reallygauge your readiness in the
organization with your budget.
Speaker 2 (26:23):
Yeah, I mean, depending on where you are, if
you're just starting out, ifyou're about to launch a
nonprofit, or you've been inoperations for a few months, six
months a year I think it'sreally important to start to lay
out and you can start very,very simply with Excel or Google
Sheet and just lay out all ofthe pieces of revenue that you
either are receiving or expectto receive, and so you can
create a category for governmentgrants, if you're getting
(26:45):
government grants, earnedrevenue, philanthropic dollars
and just keep it that.
And look at the next 12 months.
I have a column for everysingle month July, august,
september.
I think I'm going to get thismoney here.
I'm going to get this moneyhere.
You know what you've gotten thelast couple of months, so you
can use it as a baseline.
It's just a projection.
At the end of the day it's notgoing to be perfect.
There's no way that we're notfuture tellers, right, we're not
(27:10):
going to know exactly what'sgoing to happen a year from now,
but we can try to do our besteducated guess in the next 12
months.
This is what I'm going to getin terms of revenue, and now I
know that these are my currentcosts.
So this is how much I spend onpersonnel, this is how much I
spend on consultants, this ishow much I spend on rent, et
cetera, et cetera, et ceteraAgain, high level, and you're
projecting that out.
So I know that my rent lease isX for the next 12 months, so I
can put that in there.
(27:30):
I know I'm going to spend thismoney every single month, right,
and then you sum up the totalexpenses, you summed up the
revenue, you summed up theexpenses and you got to this net
number and now you know, like,over the next 12 months, this is
how much I'm going to haveevery single month in terms of
earnings.
Right, I'm going to bring inthis much.
(27:52):
You know we're in March rightnow.
So let's say, I'm going tobring in this much in June and
this is how much I think I'mgoing to spend in June.
So then you get a sense of likeI'm spending.
You know, I know how much I'mgoing to spend.
I've spent so far year to dateJanuary, february, march.
This is how much I'm going tocertain amount of money in the
bank.
So I started this year off witha hundred thousand dollars and
then in January I brought in$10,000 and I spent $20,000.
(28:16):
So now I'm down $10,000.
Right, so now my cash is$90,000.
Right, but next month I'm goingto bring in a hundred thousand
dollars grant.
This is, this is going to behuge and they've already
committed to me and in April I'mgoing to get this $100,000.
And so now you know, I've spent$10,000 in February, $10,000 in
March, $10,000 in April.
So now I'm down to, let's say,$60,000.
But now, next month I'm goingto get this big $100,000 in.
(28:43):
And so, knowing when the grantsare going to come in, a check,
right, because a grantor mightsay, hey, I'm awarding you a
grant next month, right?
So in April you learn thatyou're going to get this grant.
Awesome, right, huge.
You're going to get this ahundred thousand dollars, but
you're not going to get thecheck until July, right?
(29:03):
So now, like it's, it's, it'sgreat that you're not that
income, but you can start tomake those investments, because
you can't hire somebody in Apriland then start paying them in
July either, right, so you haveto have the cash in your bank to
be able to do that.
So I know, I've got this grant,it's committed grant, the
money's coming in July, so I canstart my hiring process with a
goal of being that I startrecruiting somebody to take over
(29:24):
this new program or newfunction or whatever it might be
.
Specifically for that grant, Ican start April with job
postings and look to dointerviews in May and do a hire
in June and have that personstart in July, and now I know
I'll have the cash to do it.
So now I'm going to spend$20,000 in payroll in July
because I've got this $100,000grant that's going to pay.
So just basic level planning, Ithink, is really, really
important in terms of likeknowing when you are expecting
(29:46):
to have cash and revenue cominginto the organization and when
those outlays are going to goout.
When are those outflows?
When are we going to actuallyspend some of these dollars?
It will give you a view for therest of the year.
By the end of the year I'mgoing to be in good shape, but
there's going to be some tighttimes here in the summer where
I'm not going to have as muchcash.
What am I going to do about it?
What can I do to mitigate that?
Well, maybe I can negotiatewith one of my consultants to go
(30:09):
if I can pay them quarterlyrather than monthly or something
whatever that might be to startto think about.
I know this issue is going tocome up how am I going to
mitigate?
And start mitigating for thatnow, so that you're not stuck in
July with oh my God, my bankbalance just went negative
because I had more cash goingout this month than I, than I in
the revenue.
So it's, it's, that's what aCFO does.
(30:30):
But when you don't have a CFO,these are tools and tips that a
CEO can do, an executivedirector can do, to at least at
a minimum understand wherethey're going in terms of cash.
Speaker 1 (30:41):
Oh, I love that.
It was funny, but not funnybecause some people really don't
look at it like this.
When you said, well, we can'thire you in April but start
paying you in July, like it justdoesn't work like that.
And I think another thing thatpeople have to understand and
remember is that even though youhire someone, maybe at a
$45,000 salary, it's actuallygoing to cost you closer to 47
(31:03):
to $50,000 to actually pay them.
So those are other things thatyou have to keep in mind.
Speaker 2 (31:11):
Yep, absolutely.
Speaker 1 (31:12):
I appreciate you, Neil.
Thank you so much.
This was such a greatconversation.
Thank you so much.
Speaker 2 (31:17):
Thank you, I was really happy to be here.
Thanks so much for theopportunity Spring.
Speaker 1 (31:21):
Guys, I hope you were able to catch all of these gems
that Neil dropped.
It was amazing.
If you are a small nonprofitout there and you're trying to
figure things out, he gave somegreat tips, Neil.
If they want to get in touchwith you or learn more about the
things that you do and how youmay be able to help their
organization, how do they get intouch with you?
Speaker 2 (31:40):
Appreciate that you can find me on LinkedIn.
I'm pretty active on LinkedIn.
I provide interim CFO solutionsor services for nonprofit
organizations.
I also host a group of CFOsthat is called the Nonprofit CFO
Roundtable, where we havenonprofit CFOs from all
different types of nonprofitscome in every other week to talk
(32:01):
through their variouschallenges and issues, and it's
a really great opportunity forprofessional development for
your CFO if you have a CFO, andso I host that group and I
provide these services, and soit's cfogroupscom for the
nonprofit CFO roundtable and youcan find me on LinkedIn.
Love to connect with you.
Speaker 1 (32:18):
Awesome, awesome.
Well, guys, thank you so muchfor tuning in and, as always,
until next time on the SpringForward podcast.
Bye guys.
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