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Monday, December 4 2017

Smoothing with your CFO

There is an accounting term called “Smoothing” that every Development Officer should know. Basically, it means that over a long period of time there are peaks and valleys – highs and lows - when it comes to income, so Smoothing gives you a constant number to work with when planning for the future.

Now I am definitely NOT recommending that all Development Officers go talk to the CFO about Smoothing your fundraising numbers. But a “Smooth” relationship with your CFO can make life so much easier.

At one point or another, every Development Officer feels the tension. A loyal donor makes a major pledge in December and hands you a check in January. You are all excited because this year’s numbers are going to look really good for the next Board meeting. But wait, that contribution was in the December financials. Restricted gifts won’t count toward your Annual Campaign Goal. No, you can’t give your favorite donor a letter gratefully acknowledging that the painting she is donating is worth at least $5,000 since she sold one for that very same amount last year at the art show! I’ve been there and my relationship with my CFO suddenly took a dive.

Now I will tell you at this point that I am married to a CPA and she is quick to tell me when the CFO is correct. I have also worked with three excellent nonprofit CFO’s in my career. They taught me a lot and I have found that just a little time invested in understanding accounting basics has been extremely valuable.

Three lessons that I have learned over the years are:

  • Your CFO Doesn’t Make the Rules. Accountants have to follow Generally Accepted Accounting Principles or GAAP. The annual audit assesses your organization’s compliance with GAAP. It was well worth the time understanding these rules and it significantly increased my effectiveness as a Development Officer.
  • Counting is different from Accounting. The AICPA website blog has a great entry dated June 8, 2017 on this very subject, “Not-for-Profit Contributions: Counting v Accounting.” Your CFO will be thrilled that you read the AICPA blog.
  • A Good Relationship Makes You Look Good. Board members, Executive Directors and donors always appreciate a Development Officer and CFO who are on the same page. My CFO became one of my biggest advocates and helped cultivate donors and prospects.

A little “Smoothing” with your CFO can go a long way toward building a great development program in your organization.

 

If you have trouble finding the AICPA blog entry, email me at david@swellfundraising.com and I will send you a link.

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