Monday December 6, 2021
Any accounting business and tax advice contained in this podcast is not intended as a thorough in depth analysis of specific issues. Nor is it a substitute for forming information. Nor is it sufficient to avoid tax related penalties. If you have specific questions that you need advice for, be sure to schedule a strategy session and not solely rely on information in this podcast. All right, back to the episode.
Hey, it's Chyla Graham and I wanted to give you this bonus episode. So when I started off, I was like, Ooh, this will be a great January episode but the more I talked to our guest, Tosha Anderson, the more I was just like, we are going to release this early. So listen in to this snippet of my conversation with Tosha, for more be sure to tune into season nine of The Nonprofit Ace Podcast, which will drop in January.
I am here with Tosha Anderson of The Charity CFO. Tosha, it is the beginning of a new year and I want to know how do you prepare for a new year? What are some tips that you think that people should implement in their own new year plan or kickoff?
The first thing I do, so I'll talk personally, and then we'll talk about what I advise our clients. So I am a leader of a business like you all, whether it's for profit or nonprofit, at the end of the day, I am a leader of a business, right? I have to take into consideration my business and what I'm going to do for the new year, and usually in the fourth quarter.
So we're on a December year end, just like probably most of you and we put together what our projections are going to be for budgets would be the words that you all would use. Now I'm taking into consideration a couple of different things. When I think of a new year I look at revenues and expenses and what that's going to look like in a very specific detail. So for me, we earn revenue by offering accounting services to nonprofits and the trigger point for us earning more revenue is typically finding new clients.
I have it narrowed down to how many new clients do I need in order to hit the revenue targets for every single month and then compound that over the year and I generally know where that's going to go? I also could look at other considerations, we're in hyper growth mode. So space, real estate of our office, like when are we going to outgrow our office? That's something that we need to take into consideration? When do we need to hire new people? So I have it kind of drilled down to a science.
If I'm going to grow at this level, I need to hire somebody in March and two people in June and etc, etc, etc. Based on the seasonal nature of typically when are our busier months for taking on new business and when are slower months so we can predict hiring patterns and get ahead of that and do that proactively.
With new hires also comes new equipment, so purchasing additional laptops, those sorts of things. All of that is important, because if you've heard me talk before I talk a lot about cash flow. So I'm looking at where I expect my cash balance to be every month, and then throughout the year, I will project this month, I'm expecting to spend more in cash because I have to buy new computers or things like that.
So in the nonprofit world, in the budgeting sense, we tend to focus just simply on revenues and expenses. Sometimes we forget to include those cash flow items, specifically as it relates to repayment of debt, maybe the purchases of equipment, a build out of your office, any leasehold improvements or anything like that. So take that into consideration. I do
that in the fourth quarter.
Soon after year end, I start tweaking any assumptions that might have changed during the year. Like, okay, we have now gone to a hybrid model, I don't necessarily need to add square footage every time I hire somebody or, we expect to expand our office, which is the case, so we're going to be spending some more money in April or in your case as a nonprofit, you know, oh, in the fourth quarter, usually we have to get all the budgets done by November.
We all know mid December to the end of the year, we get a lot of grant notifications, award letters, modifications, our year end appeal might be more successful or less successful than we thought. All of the things can change between the time that budget for the next year was approved or finalized until the year actually starts.
So what I would encourage you all is certainly have those budgets if you don't have them, that incorporate other things other than just revenues and expenses, and then take that back out and have specific milestones that you expect to achieve during the year. So maybe look at it on a quarterly basis or more frequently than that. So, January one, what's changed between November and January?
Usually there's quite a few things and update your assumptions with that and then have some other trigger points. For example, I have a lot of clients that have big galas in March and they’re on a December year end. So if their gala is more or less successful than they had anticipated, they should be able to roll that out through the end of the year and see what the impact is going to be, especially if it's less successful.
And with the revenue assumptions, if we're going to be successful or not successful, we also have expenses that we can either defer, or forego it's kind of have a B list, these are the ones that get chopped first, if our revenue coming out of the first quarter is not as successful. Or if you have other milestones, maybe it's a summer event, right? So if you're six months in and you're missing your mark, you have things that you can forego in order to balance your budget by the end of the year.
So kind of identify what those things are, and manage those. So look at that budget and ask those questions. Not just review the report but have an understanding of how we are going to pivot if we need to and know when those points are during your year, for which pivoting is important.
Thank you. Everyone Tosha’s info will be in the notes. Thanks for listening to another episode of The Nonprofit Ace Podcast.
Okay, so what did you think? Are you glad that I gave you a bonus episode? Let me know. There are still a couple more episodes for this season before we wrap up the year. Be sure to follow The Nonprofit Ace Podcast and follow me on social media. I'm most active on LinkedIn.
Check out the website CNRGaccountingadvisory.com. If Tosha sounds like a good fit and someone you want to be connected to be sure to reach out to Tosha at thecharitycfo.com. Thanks for listening to another episode of The Nonprofit Ace Podcast. Until next time, bye.