Nonprofit Trends with Tim Hudson

Welcome back to the Modern Nonprofit Podcast at The Charity CFO. Whether you are a consistent listener or joining for your first time, the podcast dives deep into the world of nonprofits, and sometimes for profit spaces to share industry specific principles, unique business practices, and much more. 

Today, the show hosts someone very special to Charity CFO and that is the group’s very own partner & COO, Tim Hudson. 

The host, founder and CEO, Tosha Anderson outlines The Charity CFO’s business, as the group works with hundreds of nonprofits every month. Based out of St. Louis, MO, the group serves clients from coast to coast with vastly different missions: 

• Religious Organizations
• Healthcare Organizations
• Children & Family Social Services
• Basic Needs 
• Veteran Organizations
• Animal Rescue 
• Early Childhood Education
• Higher Education
• Legal Assistance Organizations

All of this to say, The Charity CFO has a mission to give nonprofits the tools to fulfill their missions. 

What better guest to point out the hottest trends and biggest client facing issues, than the individual who works so closely with each organization day in and day out, Tim Hudson. 

Want to jump right into the episode? You can watch it on our Youtube channel here. 

The Charity CFO Model 

Volume and repetition are what make the professionals scale from good to great and as mentioned the group services over 200 clients monthly, which is quite the extensive resume.

However, Tosha and her team did not make it there overnight. This was a compound effort over 7 years. Tim has made his impact as well, dating back to 2018 and officially earning partnership closer to 2020.  

Combing all experience and exposure to the industry, The Charity CFO has had the opportunity to work closely in: 

• Accounting
• Financial Management 
• Fundraising 
• Grant Management 
• Board Engagement 
• Hiring/Firing 
• Succession Planning 

Although their main focus is accounting, yes, they certainly stay busy in conversations outside of it as well. 

Four Burning (Accounting) Flames 

• Covid Related Funding 

Even three years later, COVID is still a huge discussion in nonprofits, especially in business. Clients are beginning to see their stimulus packages drying up and the conversations are shifting towards creating a budget in the post-COVID era. 

Tim outlines 2 ‘camps’ or categories that businesses can fall into, cash abundance and cash scarcity (as a result of ERTC, PPP loans, and several other factors). 

For those businesses that fall into the cash abundance category, Tim encourages clients to avoid falling into complacency. Just because the cash is here today, it does not mean it will be there forever. Developing a 2-3 year plan to manage budgets long term is a wise idea for those with an abundance of cash. 

As for the second group, well unfortunately this is the worst of the two positions. Tim calls this emergency mode. He encourages these clients to primarily act, but also manage capital. For example, maintaining 3-6 months of cash reserves is a wise move as well. He also gives a simple formula to achieve these numbers: 

(Annual expense budget/12) = average monthly expenses

Then take cash on hand divided by the average monthly expenses. 

If the business spends $50,000 a month on average (average monthly expenses)  and has $150,000 in the bank (cash), then they have 3 months cash on hand. 

As the cost of business has changed over the last few years and whether two of these camps fit your organization, it’s important to consider the current operating budget as of today and begin to have those conversations with your accounting, and better yet how to fill these gaps. 

• Talent Shortages & Turnover 

It’s no secret that there is an accounting shortage in the industry today. A major issue that this creates is the ability for businesses to fulfill their contractual obligations. Especially in governmental agencies, they will redeploy contracts to organizations that have proven their capability to fulfill them. 

So, the ability to recruit effectively becomes a pinpoint for this challenge. Tosha shares that The Charity CFO focuses intentail energy on recruiting and their recruiters. 

They have one job – to recruit. 

Oftentimes, business will throw recruiting under the vast umbrella of Human Resources. It becomes difficult to effectively recruit when these employees are wearing multiple hats. A Swiss army knife is capable of many things, but not great at them. 

Tosha and Tim cover recruiting but what about the aspect of turnover? 

• Reassess the organization from the bottom up 
  • What must absolutely be done?
  • What can be cut?
• Be honest about the current programs and how well they fit into the mission 
  • Sometimes programs are more time consumers than they are mission producers 
• Accept the reality of a smaller workforce 
• Make sure employee compensation is competitive with the market 
  • This may be a significant piece of the pie, especially with nonprofits, however it’s likely more cost effective to keep current employees than it is to hire new ones. 

• Board Engagement 

Ahhh, the boardroom, and more importantly those who have access to it. Board engagement is an area that is rather subjective. From those that are overly excited and eager to those who rarely attend the meetings, how does a business manage the entire spectrum of board members? 

Tim points out that the first step to success in any CEO, Executive Director, Sr. leadership position at a nonprofit organization is to have a dependable board. Having a board that is reliable is crucial to business outcomes. With this, it’s also important to have a board that expresses a level of trust and empowerment towards the leaders. 

In essence, it is truly a balancing act.

The first step to attack this equation is simply to identify where the board falls in reference to this vast spectrum and to understand that a business can be most successful with a truly balanced board. (Much easier said than done). 

Better Business Bureau or Charity Navigator have some quality starts that can act as great starting points for where a board could make the most impact. 

• Finding Auditors 

Finding auditors can be quite the challenge, and this challenge is enhanced given their importance to the accounting industry. 

Tim shares that  because of issues shared in the second point, the industry will see auditors becoming very selective about their clients. In some cases, they may even drop clients to manage their workload. 

Because of the lack of auditors in the field, traditional economics would suggest that pricing will increase. Tim also reminds us to reevaluate expectations for an audit, as he will often see audits for greater than $20,000. 

Even then, in some instances, a business has accepted the fact of great audit costs being built into their budget, but still cannot find an auditor to complete the work. 

In this case, it can be promising to find mid-tier firms with great reputations, especially if the business is below a $2 million annual budget. 

For the best interest of all parties, being as prepared as possible for the auditor can go a long way. They are busy enough, so for an organization to supply them with the pieces they need to perform the audit can go a long way. 

If you found any of this information helpful, leave us a review. Wherever you’re listening to audio or watching on Youtube, let us know what you think! 

This allows nonprofits to be able to find our content. 

You can find The Charity CFO team on Youtube or our website, thecharitycfo.com!

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