Leading Financial Practices of Non-Profits: A Conversation with Moez Bawania, CPA, CA

One of the key responsibilities of non-profit boards is to provide financial stewardship that not only ensures compliance, but adds value by connecting the dots between strategic objectives and financial goals. However, often the financial machine may not be functioning appropriately. This compounds the challenge of ensuring financial activity is in order and of generating insights that support sound analysis and decision making. 

In this month’s article, I switch gears to the exciting world of Non-Profit Finance and provide highlights of my interview with Moez Bawania, CPA, CA and Co-Founder of AMLB CPAs and Consulting, a virtual CFO business that takes care of accounting and financial management for a number of leading non-profits across Canada. 

Heather: What are three finance-related best practices that you can share?

Moez: The last couple of years have been incredibly challenging, yet have taught us lessons that it may have taken many more years to otherwise learn. I observed some non-profits that quickly adapted and thrived during the pandemic, using it as a catalyst for positive change, while others unfortunately stumbled. Here are three non-profit finance best practices I’ve seen among the ones that thrived:

#1 - As an Executive Director or CEO, surround yourself with at least one financially literate leader who you can rely on to be your ‘financial advisor’. This person should understand the organization’s strategic priorities and guide the finance function to actively contribute to those priorities, rather than just ticking a box. This person may be the CFO, Treasurer or the Finance Committee Chair. Many finance professionals in these roles think they are just there to sign cheques or ensure the organization is staying compliant. Indicate that you’d like them to bring insight and foresight to the table - you may be pleasantly surprised at the results!

#2 - Time and money are constraints that can limit the impact a non-profit can make - anything you can do to optimize these is well worth the effort. Take stock of your financial management framework, processes and tools, to understand how much time you and your team spend on finance-related tasks each day, week and month. We worked with an ED this year who thought his management team spent a few hours a month on finance but when we wrote down the tasks each of them complete, it was closer to four hours a week (10% of their time). Upon streamlining their processes and applying innovative technology to automate highly repetitive manual tasks, each team member got back two hours of their time per week.

#3 - Establish a well-defined budgeting process and create the budget before the start of a fiscal year, then monitor actual versus budget results every month to identify material risks and opportunities. This may seem like a simple practice, but we’ve seen many instances where an organization doesn’t establish a budget at the beginning of the year, is several months behind in its bookkeeping and all of this leads to frustration amongst both staff as well as certain donors or sponsors who request recent – or specific - financial information to make giving decisions.

Heather: The pandemic has exposed many weaknesses in non-profits and many scrambled to put policies and procedures in place where there were gaps. What financial policies should a non-profit have in place? 

Moez: Financial policies, broadly speaking, are meant to outline the controls in place to reduce the likelihood of fraud and error, and to optimize the use of the organization’s resources. I would say the following policies are foundational for all non-profits with at least $250,000 in revenue:

•  Signing Authority Policy, which outlines how commitments made on behalf of the organization are reviewed and approved, including the appropriate segregation of duties between requester and approver for higher levels of spend.

• Terms of References (TORs) for the Treasurer and/or the Finance Committee. We’ve worked with many non-profits that do not have documented TORs which leads to an expectations gap between stakeholders. 

• Expense and Procurement Policy to clarify what expenses are eligible/ineligible, how they can be incurred and the vendor selection process for contracts over a certain dollar threshold.

• Reserve Fund Policy; although this is not always applicable. If an organization does have reserves, there should be a policy outlining the purpose of the reserve, how it should be used and replenished, and who has the authority to transfer funds to and from.

Heather: What is one golden nugget of financial wisdom that you can provide to my readers?

Moez: The pandemic has shown us that, even when it seems the sky is falling, opportunities emerge to think differently and create possibilities that did not exist just 18 months ago. I’ve been inspired by many non-profits that are thinking and acting boldly. 

Some are setting up cryptocurrency donation programs and others are using cloud-based tools to streamline their financial workflows. I would encourage your readers to challenge the status quo and implement just one change that will improve their and their teams’ financial work lives in some way - it is easier than you think!

--------------------------------------------

Hope you are having a wonderful Autumn season! As always, if you need help with any governance projects, don't hesitate to reach out. 

Yours in Good Governance,
Heather Terrence, CAE
Pinpoint Governance Group
647.984.9857

info@pinpointgg.ca