For small to mid-sized nonprofits, the finance question isn’t “Do we need a CFO?” It’s “What do we absolutely need covered—and how do we afford it?” The answer: five core finance functions. Four are non-negotiable. The fifth adds real value, but it’s the hardest (and most expensive) to get.
Must-haves:
Payroll processed accurately and on time
Vendor bills approved and paid
Deposits recorded correctly with supporting docs
Why it matters: Late payroll and unpaid vendors create operational risk and reputational damage. Clean inputs make clean financials
If you aren’t reconciling monthly, you’re guessing. A disciplined close turns activity into reliable numbers.
Must-haves:
Bank and credit cards reconciled every month
Recurring journal entries posted on schedule
Balance sheet reviewed (not just the P&L)
Why it matters: Prevents audit headaches, catches errors early, and builds trust with your board and funders.
Boards and funders don’t want noise. They want clarity tied to operations.
Must-haves:
Monthly budget vs. actuals via statement of activities
Statement of financial position
Statement of cash flows
Additional tailored reports if your finance team has the skillset, but above three are a MUST
Why it matters: Timely, clear reporting powers decisions—hiring, programming, grants, and risk management.
Grants, restrictions, 990s, and audits—skip the prep and you’ll pay for it later.
Must-haves:
Restricted funds tracked separately and reconciled
Donor acknowledgments/letters queued in real time
Audit PBC list maintained all year (not last minute)
IRS and state filings submitted correctly and on time
Why it matters: Protects funding, credibility, and future grant eligibility.
This is where finance becomes leadership: scenario planning, risk analysis, and aligning dollars with strategy. It often requires seasoned CFO expertise—and that’s expensive.
Smart ways to bridge the gap:
A sharp CEO with an operator’s mindset + clean reports = 80% of the value
An engaged finance committee for oversight and perspective
Outsource targeted CFO tasks (cash runway modeling, pricing new programs, debt/facility planning) instead of hiring full-time
Use this checklist to confirm you’re covering the essentials before chasing “nice-to-have” strategy:
Payroll, payables, deposits are timely and accurate
All bank/credit cards reconciled monthly
Close happens on a set cadence with a balance sheet review
Monthly BvA and simple cash forecast go to leadership/board
Restrictions tracked; donor letters and audit PBC prepped year-round
Strategic items are tackled as budget allows (CEO/committee/outsourced)
Hire for functions, not titles.
The first four functions are non-negotiable.
Strategic guidance is valuable, but it’s the costliest and can be partially covered by a strong CEO + finance committee.
Clean books and compliance are the foundation; strategy is the bonus layer.
Outsourcing can plug gaps without carrying full-time payroll.
