Nonprofit organizations are in the middle of a “perfect storm,” where funding uncertainties, increased service demands, and staffing challenges intersect.
In light of these trends, BTQ Financial, a division of Consero Global, surveyed over 100 nonprofit leaders on the top finance challenges they’re facing, and the strategies that can help address them.
BTQ’s Andrew S. Perumal, Partner and Director of Client Operations, and Sisil John, Senior VP of Finance, recently discussed the survey’s findings and shared how BTQ works with nonprofits to navigate these challenges.
Survey Background
The survey included insights from:
| Survey Profile | |
|---|---|
| Participants | Nonprofit CEOs, executive directors, founders, and COOs |
| Annual Budgets | $3 million to $200 million |
| Organizations | Small community-based organizations to large national providers |
| Location | All based in large metropolitan areas |
Despite organizational differences, leaders reported a common set of financial management issues.
The Nonprofit Landscape
Today’s nonprofits must contend with rising service demands, funding complexities and limitations, and political uncertainties.
Maintaining financial health is a balancing act of mission delivery and risk management.
| Nonprofit Facts | Statistics |
|---|---|
| Essential Services | 83% of Americans consider nonprofit services to be essential |
| Financial Risk | Between 60%–80% of nonprofits could face serious financial danger if federal grants are disrupted |
| Policy & Funding Concerns | 70% of nonprofit leaders worry that the current political climate will negatively affect their organizations |
Although these organizations play an essential role in their communities,a majority of nonprofits could be in serious financial risk.
Common Financial Management Challenges
The survey revealed the six most common financial management hurdles for nonprofits:
| Challenges | Impact |
|---|---|
| Financial Sustainability & Risk Management | Leaders need better tools and bandwidth to proactively plan. |
| Accurate & Timely Financial Reporting | Multiple funding sources and reporting requirements cause complexity. |
| Audit Readiness & Regulatory Compliance | Ongoing prep is needed year-round, not just during audit season. |
| Scaling Finance as Organizations Grow | Systems and processes often fail to keep up with rapid changes. |
| Consistent Financial Processes | High staff turnover or remote setups can lead to inconsistent record-keeping. |
| Low Operating Reserves | Many nonprofits run with limited or nonexistent reserves, leaving no margin for error. |
“Many leaders are actively trying to assess their financial sustainability and manage risk, but often without the tools or bandwidth to do it in a proactive way,” observed Perumal.
Hiring and Turnover Challenges in Nonprofit Finance
According to the survey, only 28% of respondents reported that turnover in the finance function was “rare,” whereas the majority deal with frequent or occasional staffing gaps.
| Staffing Challenges | Impact |
|---|---|
| Frequent Turnover | 72% of organizations noted occasional, frequent, or very frequent staff turnover in finance roles. |
| Continuity Gaps | Finance staff turnover can lead to inconsistent reporting processes and institutional knowledge loss. |
| Leadership Strain | Executive directors and CEOs often step in to fill finance roles during vacancies, detracting from strategic tasks. |
| Compliance Risks | Delays in audit preparation and compliance efforts become more likely when teams are short-staffed. |
High turnover in finance roles is a key area for nonprofits to address as it disrupts operations, pulls leaders away from mission focus, and causes knowledge loss and reporting delays.
Systemic Issues in Nonprofit Finance
While turnover is a major concern, the survey data also uncovered deeper challenges that suggest process or infrastructure gaps, ranging from lengthy month-end closes to frequent budget reforecasts.
“It’s not just a hiring challenge… These challenges reflect something more foundational: nonprofits need more scalable, strategic finance operations.”
| Financial Metrics | Nonprofit Industry Statistics |
|---|---|
| Longer Month-End Closings | An average of 19 days to close the books, with some organizations taking 30+ days. |
| Frequent Cash Flow Problems | 74% of leaders experience cash flow issues, underscoring the need for stronger financial planning. |
| Budget Reforecasts | Over half of organizations reforecast frequently, highlighting the difficulty in maintaining stable financial projections. |
“An average of 19 days to close the books isn’t just a staffing lag—it’s a sign that processes and systems may not be fully optimized or resilient.”
Outsourcing Finance: An Underutilized Solution
100% of surveyed nonprofits outsource at least one function (e.g., IT, legal), but only 30% currently outsource finance.
Given the many benefits a specialized finance partner can provide, this could represent a largely untapped opportunity for nonprofits to build resilient finance functions:
Strategic Expertise
Access to professionals skilled in FP&A, grants management, and compliance, providing specialized knowledge that might be difficult to retain in-house.
Reduced Burden on Leadership
Leaders can refocus on mission-driven activities rather than getting bogged down in financial minutiae, enhancing organizational effectiveness.
Systems Optimization
Finance partners often streamline or provide their own financial tools and technologies, improving efficiency and data accuracy.
Scalability
Partners can help organizations effectively manage growth or navigate sudden funding cuts, providing flexibility to adapt to changing conditions.
“Working with a strategic finance partner, if it’s done right, delivers the structure, visibility, and capacity nonprofits need… without burning out their teams.”
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Schedule ConsultationWhy Nonprofits Use Finance Partners
Among the organizations currently working with a third-party finance partner, the survey responses highlighted the most common motivations:
Leadership Focus
More time for executives to handle mission-driven work.
Streamlined Processes
Partners help establish consistent, effective accounting workflows.
Timely & Accurate Reporting
Critical for compliance, audit prep, and strategic decision-making.
Specialized Expertise
Access to experts in grants, audits, revenue recognition, and more.
Cost Savings
Outsourcing can reduce overall finance function expenses (including systems and staffing).
“One of the biggest reasons is more time for leadership to focus on mission-driven activities… It’s really not just about the numbers.”
The Finance as a Service (FaaS) Model
Beyond outsourcing finance, nonprofits should seek partnerships that offer
- Proven expertise in the field
- Deep understanding of the challenges unique to nonprofits
- Access to best-in-class tools
BTQ specializes in providing comprehensive Finance as a Service (FaaS) tailored specifically to nonprofits, a uniquely cost-efficient solution for achieving superior business management.
The comprehensive approach extends beyond typical accounting support, providing strategic insights and continuous operational improvement.
Their support spans from day-to-day transactions and reporting to strategic analysis, grants management, and medical billing.
As Perumal says, “BTQ’s motto is: it’s your mission to create a better world, and ours is to help.”
Lessons for Nonprofit Leaders
Perumal and John highlighted the key takeaways from the survey, noting the top challenges and opportunities for nonprofit leaders:
More Than a Hiring Issue
Financial struggles often point to deeper process and infrastructure gaps that require a strategic solution.
Partnerships Provide Stability
A trusted finance partner can bring stability, expertise, and structure, freeing leadership to focus on mission.
Invest in Infrastructure to Support Growth
Building scalable processes ensures nonprofits are prepared for funding fluctuations and expansion.
Leverage Specialized Teams for Added Value
Fractional CFOs and dedicated finance experts can bolster compliance, audits, and strategic planning.
Increase Outsourcing Utilization
Despite outsourcing in IT or legal, many nonprofits still overlook finance outsourcing, even though it can significantly boost organizational capacity.
“Now more than ever, nonprofits really need a strong financial and accounting partner in their corner… people that understand the landscape and can help build flexibility and planning.”
When Should You Bring in a Finance Partner?
Many of BTQ’s clients came to them “at a critical inflection point—when they experience issues with cash flow, internal crises, or leadership changes.”
However, if your organization struggles with timely closes, ever-changing compliance rules, or staff turnover, proactively exploring a finance partnership with BTQ can pay dividends.
BTQ offers tailored and scalable solutions to help strengthen operational efficiency and mitigate risk, so nonprofit organizations can focus on what truly matters: advancing the mission for maximum community impact.
Request a consultation to begin your financial transformation today.
