Financial best practices that help attract and retain top executive directors and board members
The not-for-profit sector is in transition―succession planning has become an important risk factor for many volunteer boards of directors (boards).
As those executive directors (EDs) with, often, long tenures retire and younger professionals build on the accomplishments of their predecessors, the role of the executive director is evolving―it's become more demanding and more diverse.
Shifting priorities
Whether at a local food bank or a national arts organization, executive directors still continue to be responsible for the traditional items―delivering on the mandates, and managing the staff and resources of not-for-profits on a day-to-day basis.
Board members still must oversee the top executive and mitigate the risks in the sector:
- managing the personal and professional liabilities of volunteer board members,
- executing the short-term actualization of strategic plans, the long-term success and viability of the organization
- upholding the reputation and legacy of the not-for-profit
But, with far more risk than resources, the most important mission for both EDs and boards is implementing best practices in a time of constant flux. This transitional period in the not-for-profit sector―a sector in which legacy operations are slow to change―provides an opportunity to become more effective, even innovative.
Assessing current state
Administrative acumen and financial management may not be the core competencies of an ED, whether the "top manager" has had a long tenure or is relatively inexperienced. EDs are often passionate about a cause and most effective using a skill set that complements the core mission of the not-for-profit. They may have significant impact delivering social programs, fundraising with donors, or getting in front of politicians―but be less effective creating annual budgets and producing accurate monthly financial results to position an organization for long-term financial success.
Boards should consider whether they are leveraging the highest and best use of all staff resources, including the executive director.
Implementing best practices
The first step toward implementing best practices is an assessment of existing processes. Some inefficiencies are obvious. Others are unexpected:
- Many not-for-profits cut manual cheques and search for multiple signatories, while electronic cheque approvals and transfers are much more timely and less costly.
- Many not-for-profits utilize a local bookkeeper, unaware that outsourcing the bookkeeping and payroll processes to designated accounting professionals ensures best practices, while also being more cost-effective.
Outsourcing financial tasks is a best practice for not-for-profits for a series of reasons. Outsourcing is:
- Cost-effective―pay less than the expense of an existing bookkeeper
- Streamline manual processes by reallocating administrative, bookkeeping, and payroll tasks to focus on strategic initiatives
- Shuffle duties without worries about absences, stat holidays, or benefit costs
- Connect with a dream team 24/7/365―outsourcing the bookkeeping and payroll functions to designated professionals means experts are always 'on hand' to answer ad-hoc questions or consult on complex issues, including tax and audit compliance, and reducing year-end adjustments and surprises
- Efficient―accomplish more with less effort
- Integrate modern software seamlessly with existing operational systems, including customer-relationship management (CRM) systems
- Improve financial tracking and controls over designated funds
- Reliable and predictable―evaluate financial results with improved confidence
- Implement standardized processes to get accurate and comparable figures
- Track budget against actuals and identify issues or opportunities, including innovative programming
- Know―confidently―that financial data supports current and future cash-flow management
- Develop forecasts and budgets based on reliable historical data
- Accessible―access critical information online in real time
- Access all financial data on the cloud
- Allow multiple users―board members and staff can have access to the finances
- Manage key-performance indicators (KPIs) using dashboards to assess financial and program-delivery metrics
- Facilitate timely decision-making―allow for pivots and innovation
- Integrate benchmarks and KPIs into annual budgeting and future modelling
How BDO can help
Proactively adopting best practices, through outsourcing, helps not-for-profits effectively deliver core services―and innovate.
Best practices, and better service delivery, help attract new people to excel in the role of executive director―and to take an NPO to the next level in a changing marketplace in which succession is an increasingly important issue. Outsourcing frees executive directors to focus on their highest and best purpose.
Contact us today to get started.