: Successful Nonprofits : Your Nonprofit’s Sustainability Team

Enlist your treasurer and banker to your sustainability team (with Chad Wolver)

Enlist your treasurer and banker to your sustainability team (with Chad Wolver)

by GoldenburgGroup

Every nonprofit leader dreams of achieving and maintaining financial sustainability, and every good board member knows that fiscal stewardship is one of their sacred duties.  To explore the roles your board treasurer and banker play in sustainability and fiscal stewardship, we speak with seasoned board member, nonprofit tech entrepreneur and extraordinary banker, Chad Wolver. 

In this episode you will discover:

    • What your nonprofit should look for in its next board treasurer
    • The key financials your board should monitor
    • The many ways your banker can help you (beyond depositing your  donor checks)
    • And more!

Listen to the Episode Here!

Links

Azul Analysis

Chad’s Email

Timestamps

(03:14) Chad’s secret to be a successful nonprofit board treasurer 

(03:54) What to look for in your next board treasurer

(06:51) What financial statements your not-for-profit board and management team should be reviewing regularly

(15:42) Ways Azul Analysis can help you understand and communicate your financial data

(19:01) What your nonprofit should expect from your banker

Transcript

Dolph Goldenburg (00:00):

Welcome to the Successful Nonprofits® Podcast. I’m your host, Dolph Goldenburg. It’s every nonprofit leader’s dream to reach a point of financial stability. When you no longer sweat as you think about payroll next week or you think about the organization’s rent payment being due next month. When you no longer juggle which vendor you’re going to pay this week and which one you’re going to pay next month or next quarter. And then of course, it’s also every nonprofit leader’s nightmare to lose it. Financial stability is hard enough to accomplish in the best of times, but now we have the additional challenge of a global pandemic and a recession that is very rapidly setting in.

Dolph Goldenburg (00:44):

Your board treasurer is at the top of your organization’s finance totem pole. This person takes the lead in fulfilling the board’s role of financial oversight and stewardship. In many small and medium-sized organizations the board treasurer plays a significant role in shaping and directing the organization’s financial policies, gaining or losing funders’ trust, and ultimately helping a nonprofit achieve or lose financial stability. So what exactly does a treasurer do besides just showing up at meetings with boring reports? And what skills should your treasurer really possess to do that effectively? Here to discuss the ins and outs of the board treasurer role is Chad Wolver. I had the pleasure of working with Chad when I was the interim executive director at the Southwest Center in Phoenix. Chad was the immediate past chair when I stepped in and he later became the board treasurer. In this role, he expertly demonstrated what a great board treasurer does and he did so diplomatically, with a smile on his face and a very congenial personality.

Dolph Goldenburg (01:58):

For his day job, Chad is a vice president at Bank of America’s Global Commercial Banking. And as a banker, he is an expert in assessing organizations’ financials and determining their long-term financial strength and challenges. But Chad also has a nonprofit background thanks to his previous work with international nonprofits, his experience in leadership positions on multiple boards, and his work in the Peace Corps. Chad has a particular interest in helping organizations find financial stability and position themselves for growth. So on top of everything I’ve already shared with you about Chad, he recently founded a financial data visualization company geared toward nonprofits called Azul Analysis. They help nonprofit organizations build financial sustainability by helping board members better visualize data, whether or not they have a financial background. So please join me in welcoming my friend, and perhaps the world’s greatest board treasurer, Chad Wolver, to the podcast. Hey Chad, welcome to the podcast.

Chad Wolver (03:11):

Thank you very much for having me. It’s a pleasure to be here.

Dolph Goldenburg (03:14):

So I genuinely mean this when I say: Chad, you perform the role of board treasurer with more grace, more diplomacy and more effectiveness than I have seen almost anyone else do. So what’s the secret?

Chad Wolver (03:30):

I think the secret is recognizing that everybody comes from a different place and a different skill set, and you just have to work with the cards that you’re dealt. So as board treasurer, you have to keep focused on the mission and figuring out how you can deliver that mission with what you have.

Dolph Goldenburg (03:54):

I know you’ve also chaired the nomination and governance committee. And so when you’re looking for prospective treasurers to join your board, what are you looking for?

Chad Wolver (04:10):

Yeah, that’s an interesting question because when organizations first start out saying, “Oh, we want somebody who is a finance person on the board,” that means a lot of different things. First, you as an organization need to understand your gaps and what needs to be filled in that moment in time. So if you’re a small organization and you need someone who can potentially do bookkeeping or be more hands on, then you’re going to need somebody who’s really strong at accounting who knows their policies and how to set up internal controls. But if you’re a larger organization and you have somebody who’s responsible for that day-to-day in the organization, then maybe you need somebody who is good at managing investments. So you’re going to need somebody who is more of a wealth advisor or a financial planner. So really think about your organization’s needs and find someone who fills those.

Dolph Goldenburg (05:32):

I think one of the traits that you’ve really brought to the treasurer role is you have this amazing ability to think about finance things strategically, whether that’s long-term financial planning or short term. Can you say a little bit about what you’re looking for as you’re thinking about what an organization needs in one year or two years or three years?

Chad Wolver (05:55):

Again, I think it’s meeting the organization where it’s at. As a banker, I’m constantly meeting organizations where they are at. I’ll go to one organization and realize, “Oh wow, they really have a lack of internal controls. They just need a person to help them with their basic accounting and finance.” But I’ll go to another organization and they have an entire built-out team. And that conversation is going to be very, very different. You just have to realize not every organization is in the same place and meet them where they are at.

Dolph Goldenburg (06:38):

Keeping in mind that not all organizations are in the same place, I imagine there’s probably a baseline. So as the treasurer, you want to make sure the board is getting some specific information at each of its meetings.

Chad Wolver (06:51):

Yeah. There’s three basic things that every organization should have: the statement of financial position, statement of activities, and the statement of cash flows. Sometimes you’ll hear “balance sheet income statement” or “cashflow statement;” those are just nonprofit lingo for those things. A lot of organizations only look at the income statement because they think that’s what’s most important. But in reality, you should look at the balance sheet first because that’s how you’re going to achieve your goals. Look at your income statement second, because that’s what you have now to create that path forward. And then your statement of cash flows, because that’s your cash you’re dealing with every day, week in and week out.

Dolph Goldenburg (07:41):

And one of the things that I love is that when you look at these statements, there’s a quick equation that you do to see the days of cash on hand. Can you say a little bit about that? Because I think a lot of nonprofits are not producing that information for their board or their management even though it is easy to produce.

Chad Wolver (07:59):

Yeah. There was a 2019 study by GuideStar that showed that more than 50% of nonprofit organizations have less than 30 days operating cash on hand. And that is terrifying. But the reason this happens is because, as we both know, revenue isn’t always certain in this industry. And also things like the global pandemic have a huge adverse effect on organizations. And organizations that don’t have that cash on hand don’t have the ability to adjust as quickly as organizations that do have cash on hand. So just for everybody’s level setting, the way I look at day’s cash on hand, I take the total cash on hand and I divide it by an average of operating expenses over a certain period of time. So, for Southwest Center for HIV/AIDS, we typically do 6 or 12 months to find out what’s that daily operating expense. And then we put that into the amount of total cash we have. We can see how many days we could operate if no more additional cash came into the organization.

Dolph Goldenburg (09:16):

A lot of organizations have a fiscal year that mirrors the calendar year. So right now it’s really super easy to figure out what your average daily burn rate, or how much you spend every day, is. Because, as of this recording, we’re six months into the year. You just look at your total expenses and you divide that by 182 days. And boom, you’re there.

Chad Wolver (09:37):

Exactly.

Dolph Goldenburg (09:39):

I know there are some other equations that you like to quickly create when you’re looking at the financial statements. Can you say a few words about those?

Chad Wolver (09:47):

Sure. I look at what is most important on the income statement/statement of activities and what’s most important on the balance sheet/statement of financial position. And then I look them together because the two statements work together. So I look at the revenue trend over time, the net income trend over time, and the operating expense ratio. Basically, I look at what percentage of revenue to income you are bringing in. A lot of nonprofit organizations, because that word “non” in “nonprofit,” think they have to operate at a zero net margin. When in reality, you should be operating in a positive net margin because you want to set some aside for potential debt or rainy days and you want to set your organization up for long-term sustainability. So you really have to look at your net income and understand how it is trending over time.

Dolph Goldenburg (11:12):

One of the things that I love Chad, is that you’re insistent that organizations not just present those as numbers to their boards, but also present them as charts and graphs. Because so many people who join boards are not numbers people. If they look at one of these documents, their eyes glaze over. But when they look at a chart, they can tell if the number is going up or going down.

Chad Wolver (11:36):

Let me tell you: no one likes financials. You can just see it. I’ve been in a lot of boardrooms and met with a lot of boards in my time. And every time we bring up financials, the eyes glaze over. It’s not an invigorating topic. It’s not why people go into nonprofit work. It’s not why people join a board. But the reality is, unless you’re upholding your fiscal responsibility to the organization and talking about your finances and how you can build a sustainable organization to continually deliver the mission, you’re not fulfilling your role as a board member.

Dolph Goldenburg (12:18):

Right. I always say that it never seems that important until the organization can’t meet its payroll taxes and the IRS comes knocking or the State Department of Labor comes knocking. And suddenly it’s really important.

Chad Wolver (12:33):

Yeah. And the reality is distressed nonprofits have very limited ways to recover. And if you’re already distressed and you have no days cash on hand, you can’t make any pivots or any strategic decisions. The whole idea of strategy is you plan very far in advance for multiple outcomes. And that’s really what a nonprofit treasurer has to do: they have to push the organization in a kind, gentle way to realize that not everything is going to end up as they think it will.

Dolph Goldenburg (13:09):

Absolutely. You’ve probably heard me use this analogy. I often think of days of cash on hand as a runway. So if your plane needs to take off, you need to have a long enough runway that your plan can take off. And the bigger your plane, the longer your runway needs to be or you’re going to crash at the end of the runway.

Chad Wolver (13:27):

And that’s why I think that all boards really need to take a look at the balance sheet because that’s really what determines whether or not an organization is going to succeed or fail in times of adversity. So you really have to think about, what assets your assets are and what your liabilities are. If something were to happen, do you have enough assets to cover your obligations in the short-term and in the long-term? And you have to have those conversations because that strategic mind frame comes from the balance sheet. That’s a balance sheet discussion. That’s not an income statement discussion. Income statement tells you what is happening now, between today and the end of the year. Whereas the balance sheet is what could potentially happen from now until the end of time.

Dolph Goldenburg (14:21):

Right. And there’s so much valuable information on the balance sheet. As an example, your accounts receivable are the people, organizations, and funders who owe your organization money. So if you only have a week of cash in the bank but your accounts receivable is equal to three months of operating expenses, then you need to figure out why you aren’t getting paid.

Chad Wolver (14:52):

And I think what your organization needs determines what you should be looking at. So not every organization needs to review the same thing. For example, the Southwest center for HIV/AIDS finance committee reviews the balance sheet, income statement, cash flow, accounts payable, accounts receivable, and the accounts receivable aging schedule. But if you don’t have significant payables or receivables, it might not make sense to look at those. Maybe it would be better to review your grant pipeline.

Dolph Goldenburg (15:42):

I love that because it’s not a one-size-fits-all approach. And I think this is part of why you realized there was a need for Azul Analysis, which is this tech platform that you’ve created.

Chad Wolver (15:55):

Yeah. That same study I mentioned earlier also says that 30% of organizations have consistently reported deficits over the past three years, 30% are technically illiquid and 7% to 8% are technically insolvent.

Dolph Goldenburg (16:16):

And until recently, as in the last three years, the economy has been booming. So if that’s what it’s like when times are good, what’s it going to be like when times are bad?

Chad Wolver (16:29):

I think we’re going to see a lot more consolidation in the nonprofit space or just organization failure, depending on what organizations decide to do. But I think it’s going to hit hard. We’ve already seen the numbers in Arizona and there’s been close to a 50% swing in terms of revenue impact and operating impact. So something like this is a huge challenge for organizations.

Dolph Goldenburg (16:57):

Absolutely. And for every organization it’s going to vary depending on what your funding mix is. But if you’re an organization that relies heavily on individual donations, you’re probably going to see a dramatic decrease as we move into the huge giving season of the fall. I’ve seen some screenshots of what Azul Analysis is doing, and one of the things I love is that Azul Analysis really helps those non-finance board members visualize financial data in a way that it’s easy to digest and understand.

Chad Wolver (17:26):

Yeah. So Azul Analysis really is as much about education as it is about data visualization. It plugs in directly to QuickBooks, pulls the financial data and displays it on seven distinct graphs to display the income statement, balance sheet and the interrelated metrics. Experts have shown that monitoring and managing those metrics is the key to building nonprofit financial sustainability. So the idea is to help organizations engage their board members in the process of building sustainability in a fun and exciting way, even those members who don’t understand financial management. Or as exciting as it can be for financials.

Dolph Goldenburg (18:16):

I love that. And as I said, part of what I love about financial data visualization for board members is everyone can look at a graph and get a sense of whether things are going in the right direction, they’re stable, or they’re going in the wrong direction. It’s really easy to see and understand that in a graph.

Chad Wolver (18:31):

The software also allows you to overlay benchmark data, too. So you can see if your operating profit margin or your leverage is in line with the industry profit or leverage. You might think you’re doing good, but being able to compare it to industry data might give you a different perspective. You can see that in real time, every single month.

Dolph Goldenburg (19:01):

I want to pivot because this is a little bit of a twofer episode. For years I’ve said that one of the most important relationships you have is that with your banker. But I think most nonprofits don’t treat it that way. Most nonprofits treat it the way they do their personal checking accounts; they make deposits and get statements and that’s it. But a good banker can do so much more for you. Even if you’re a quarter million dollar organization, they can do so much more for you. So Chad, what should our listeners be expecting from their banker?

Chad Wolver (20:03):

People have to realize that every bank is different. First, I want to talk about a bank as an organization. Every bank has a credit policy that drives credit decisions and acquisition decisions for new clients. You have to understand the credit appetite of the bank you are talking to. The easiest way to understand that is to ask them who some of their other clients are that are in your industry or asking them their familiarity with nonprofit organizations. Typically, small banks will have a deeper understanding because they don’t have as many regulatory hurdles that they have to go around. But there are large banks out there that are familiar with nonprofit organizations. So you really have to understand the bank’s appetite for nonprofit organizations and how that fits in with your organization.

Chad Wolver (21:06):

And once you understand the credit policy and the appetite, then you can figure out whether or not the person you’re working is familiar with nonprofits. Have they ever been in a nonprofit? Do they work with other nonprofit organizations? Do they know that the statement of financial position is really a balance sheet? Do they understand net assets and how that flows with donor restrictions? ,Do they have a basic comprehension of nonprofit accounting versus for-profit accounting? Those are some of the qualifying questions that you can ask to figure out whether or not the banker you are talking to knows what he or she is talking about.

Dolph Goldenburg (21:44):

When I’ve been an executive director, my expectations for my banker has been pretty high. And one of the things that I’m looking for is a little bit of free consulting. They see lots of financials all the time and I want their feedback. Even if it’s just doing a line of credit underwriting process, I’m looking for that free consulting like, “We’d feel better about this if you had more days of cash on hand.” Or “It would be better if your accounts payable wasn’t so high; you seem to be juggling a lot so you have days of cash, but you’re not paying your vendors.”

Chad Wolver (22:15):

Absolutely. A lot of nonprofits do not listen to their bankers, and that is a big mistake. Your banker can be your biggest ally. I was working with a large, international nonprofit organization that wanted a line of credit. The issue was that all of their receivables were from foreign organizations; they were based in the US but they had a lot of operations in the UK. And it’s really hard for a bank to collateralize foreign receivables. So I told them that they should look at moving their relationship to an offshore bank or move their headquarters to the UK so they can get financing through a UK bank. I don’t think they ever took my advice and I saw something recently they they’re still trying to find a line of credit. But the reality is they’re not going to be able to find it because it’s something that no bank is going to touch, not even a small bank that has a really aggressive credit appetite. Your banker is going to give you good advice most of the time, and might even serve on your board one day. So you should listen to him or her.

Dolph Goldenburg (23:54):

Exactly. And your banker is probably also a well-networked person, because to succeed in banking you have to have a strong, vast, mutual network. So I also think nonprofits should expect their banker to open up their network for them in some strategic ways. That does not mean that your banker asks all of their clients to contribute to your organization. But if they happen to be doing some private banking with a wealthy individual who cares deeply about your mission, then you should expect them to quietly approach that person and say, “Hey, would you have an interest in meeting the executive director of this organization whose mission you care deeply about?” So I also think there are these deep networks that organizations need to ask their banker to open up.

Chad Wolver (24:47):

Absolutely. I think that bankers are some of the most connected people in the finance area and organizations should be finding creative ways to work with them. But a banker isn’t going to know what’s going on in the day to day life of your organization unless you keep them informed. The impetus is going to be on you. But bankers want to keep you happy. So they’re going to give you connections in the community. They’re going to connect you to people they know because that’s how they build relationships.

Dolph Goldenburg (25:22):

You also might ask your bank to sponsor your gala, so they would have a table at your event. And they are probably doing that with hundreds of organizations every year. So your banker could invite you to a few galas a year so that you can get out there and network and meet prospective board members and prospective donors. That’s another way your banker can support you.

Chad Wolver (25:57):

That’s something you should ask your banker before you move banks or before you establish a new relationship. Find out what their giving strategy is. For example, the bank I work at focuses on hunger, housing, and employment. It’s hard to divert funds to anything outside of that, even if you’re on the board. Whereas the organization I was at previously didn’t really care. They had an open checkbook and they would just give out $5,000 checks like it was nothing. So you have to think about your organization and how it could potentially align with that bank.

Dolph Goldenburg (26:42):

Chad, we’re quickly running out of time and you are an incredible person with a rich personal history and I know you pretty well. So I have lots of things choose from for the off-the-map question so our Listeners will get to know you a little bit better, as well. You are an incredibly well-traveled person. I think you’ve been to more than three dozen countries. What I did not know about you, though, is you’ve been to 48 of the 50 states. So my off-the-map question for you is: What states have you not been to and what’s your plan for getting there?

Chad Wolver (27:18):

So I haven’t been to is Tennessee. The crazy thing about that is I have a lot of friends who live in Nashville and I just haven’t had the opportunity to get out there yet. So, it has to happen sooner than later. And the second is Vermont. I’m just hoping there’s going to be a Bernie rally up there and I can go and see that in person. Maybe next presidential run.

Dolph Goldenburg (27:49):

Oh my gosh, I would never have guessed that I was expecting, I’m going to say Alaska or Wyoming. I would never have guessed those things.

Chad Wolver (27:57):

I know. I’ve been all around them and I should have gone to them, but I haven’t,

Dolph Goldenburg (28:03):

I’m in Georgia, which is just one state away from Tennessee. So when you make it to Tennessee, let me know. I recently listened to a podcast series about Dolly Parton. So now Dollywood is on my bucket list. So I will meet you in Dollywood. Chad, thank you so much for chatting with us today. Listeners, if you would like to learn more about nonprofit finance, then check out the Azul Analysis website at azulaanalysis.com. Azul Analysis is currently in beta testing and looking for organizations that want to participate in this very initial beta test. The website is up and running. So you should go there, check it out and see how you might be able to participate in beta testing and build your own organization and your own board’s financial acumen. I also want to direct you to Chad’s vlog series. That’s a video blog. It focuses on all things finance for nonprofits from recruiting finance professionals for your board to board relations during COVID-19. Chad also puts these on LinkedIn. It is so worth checking out the vlog series and also connecting with Chad on LinkedIn so that you can get this video series.

Dolph Goldenburg (29:29):

If you take a look at Azul Analysis’s website and are just too excited and cannot wait for beta testing to be over, then reach out to Chad and see how you can participate. And just so you know, they are giving away the software for free to a limited number of organizations in exchange for candid feedback about the product. So this is not only an opportunity to get in on the ground floor, it’s getting in on the ground floor when it may not cost you anything. So if you’re interested, check out the Azula Analysis website and email Chad at chad@azulaanalysis.com. Hey, Chad, thanks again for coming on.

Chad Wolver (30:06):

Thanks for having me. It’s been great.

Dolph Goldenburg (30:08):

If you got excited about testing the Azula Analysis software and promptly forgot all those links and URLs, head over to our website, successfulnonprofits.com. I say it every week so you can remember that URL. In addition to a transcript and time stamped highlights, you will also find Azul analysis’s website and Chad’s email address. While you’re on our website, please take a few minutes to do two things. The first is sign up for our weekly email newsletter. The second is to take three minutes and tell us how we’re doing via the Listener Survey. Answering those questions will help make sure our content and our guests are relevant and useful to you as someone who is in the trenches in the nonprofit sector. So please share your feedback with us. And if your board needs help recruiting a great treasurer, reach out to me. I do a lot of board development work and would love to start a conversation with you about how we can help your organization identify and recruit the right talent for your board. That, Listeners, is our show for the week. I hope you have gained some insight to help your nonprofit thrive in a competitive environment.

Dolph Goldenburg (31:20):

I am not an accountant or attorney and neither I nor the Goldenburg Group provide tax legal or accounting advice. This material has been provided for informational purposes only and is not intended to provide and should not be relied on for tax, legal or accounting advice. Always consult a qualified, licensed professional about such matters.

 

 

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