How can an arts and culture nonprofit know whether it has enough cash to support its operations and growth?
Rapid growth, successful capital campaigns, and increased contributions are positive signs for a nonprofit. But growth can also expose weaknesses in financial systems, reporting, and cash management.
That was the challenge facing a regional arts and cultural institution that had experienced a successful capital campaign, a significant increase in annual contributions, and a major accounting system upgrade. Despite that growth, leadership could not get a clear answer to a fundamental question:
How much cash was actually available to spend?
The Challenge
This Charles River CFO client had experienced significant growth and investment, but its financial systems and processes had not kept pace.
- A new accounting system had been purchased but was never fully implemented or optimized.
- Financial statements did not consistently reflect audit findings, and reliable financial reporting was not always available.
- Restricted donor funds were not clearly distinguished from funds available for general operations.
- The finance team was stretched thin and lacked the specialized nonprofit accounting expertise needed at a critical time.
- Leadership and the Board needed timely, reliable financial information, but the organization was spending significant time simply trying to produce it.
The result was a finance function operating in crisis mode rather than as a strategic resource for the organization.
How Charles River CFO Helped
Charles River CFO worked with the organization to rebuild the financial foundation while strengthening the internal team.
- Reestablished financial integrity: Reconciled the general ledger back to the organization’s last clean audit, creating a reliable foundation for ongoing reporting.
- Simplified the chart of accounts: Restructured an overly complex chart of accounts into a more manageable framework that the internal team could maintain.
- Standardized financial reporting: Developed consistent reporting templates and processes and trained staff to maintain them going forward.
- Added specialized financial resources: Provided additional team members to handle detailed reconciliation work, allowing interim finance leadership to focus on higher-level priorities and strategic needs.
The Results
With the financial foundation rebuilt, the organization gained the clarity and infrastructure it needed to move forward.
- Reliable, audit-ready financial statements after years of inconsistent reporting
- Clearer visibility into restricted and unrestricted funds, including a better understanding of cash available for operations
- Stronger financial processes and reporting that the internal team could maintain
- A finance function positioned for forecasting, planning, and strategic decision-making, rather than simply responding to immediate issues
Perhaps most importantly, leadership could begin using financial information to make decisions about the organization's future rather than questioning whether the numbers could be trusted.
Five Strategic Questions for Arts & Culture Nonprofits
As your organization grows, consider whether your finance function can keep pace:
- Does our spending budget reflect our strategic priorities?
- Do we know what our cash position is today and what it is likely to be three months from now?
- Are we closing the books on time, and is our Board receiving financial information it can actually use?
- Are we properly accounting for grants and contributions with donor restrictions?
- Do we have the right people, processes, and financial expertise to support where our organization is headed?
Is Your Finance Function Ready for Your Next Stage of Growth?
Growth, new funding, capital campaigns, and organizational change can create significant demands on a nonprofit's finance function.
Charles River CFO provides flexible, experienced financial leadership and accounting support to help arts and culture organizations strengthen their financial foundation, improve visibility, and make more informed decisions.
Let's have a conversation.
Wondering whether a financial assessment makes sense for your organization? We're happy to talk through what the process looks like and whether it is right for where your organization is today.
Visit www.crcfo.com to learn more about our nonprofit financial services or schedule a consultation.