Are there any clients better positioned to benefit from Client Advisory Services (CAS) than nonprofits? CAS practices provide a variety of services to clients, ranging from monthly financial statement preparation and accounting with controller-level oversight to differentiated advisory services. These services, which are critical to position firms as a trusted advisor to clients, are especially valuable for clients who may not have the deep financial knowledge they need to make informed decisions when facing difficult finance-related challenges.
Meanwhile, nonprofit leaders are challenged with maintaining a laser focus on their core missions while also grappling with persistent funding, talent, and other resource challenges. They need the type of strong, strategic leadership that gives them the confidence to answer tough questions from their boards, on everything from operational finance to term issues and more. Their finance and accounting departments are at the top of the list of organizational functions that nonprofits could outsource – and today, a growing number of them are doing just that. Even for those that initially use CAS services to tackle routine bookkeeping tasks, firms are well positioned to grow these services into more valuable advisory-level relationships.
Taking advantage of advances in cloud-based software tools that facilitate easy data sharing and collaboration, many nonprofits are allowing CPA firms to take over critical accounting and finance tasks, from baseline accounting to CFO-level advisory roles. According to Accounting Today’s 2022 Top Firm report, sixty percent of the top 100 firms report seeing an increase in demand for CAS services from nonprofit clients. As a result, these nonprofits benefit from the stability, continuity, and deeper insights into their financial picture that CPAs can provide, tailored to the unique requirements of nonprofit organizations. Meanwhile, the firms that deliver these services quarter after quarter get a predictable revenue stream and deeper relationships with their clients.
What does it take for CAS firms to succeed with nonprofits? Firm leaders with experience in this industry recognize that their clients’ goals are worlds apart from those of their business counterparts and have learned to modify their approach to nonprofits accordingly. CAS is no exception. In this article, we’ll share current insights from some of the leaders in delivering CAS to nonprofits, drawing from their hands-on experiences.
CAS for nonprofits really is different. Approach it that way.
As firms turn to meet the growing demand for CAS offerings from nonprofit clients, it can be tempting to simply apply the same approach used for other industries to nonprofit clients. But nonprofit clients are truly different – they operate with fundamentally different financial assumptions and seek different goals than their counterparts in profit-making organizations. They need their own template.
Having the right leadership helps. “One of the missteps we made as a firm, when we first started down the CAS path with nonprofits, was that we had a partner focused on CAS for small businesses try to apply the same approach to nonprofits,” says Jennifer Arbore, partner at The Bonadio Group. “He thought ‘okay, I can just take this and turn it over into its own advisory services group for nonprofits,’ but really didn’t have the experience to serve this specific type of client. There really was a need for CAS on the nonprofit side, but we didn’t align the right resources behind nonprofits initially.”
Word of mouth travels further and faster in the nonprofit world
Nonprofits are part of a tight-knit community. They seek to learn from one another, often share board members, and draw from overlapping talent pools. For CAS firms seeking to expand their presence in the nonprofit world, this can be a boon for their new business efforts. “We work with CEOs who are truly excited to share the work we’re doing with them and want to share it with their peers,” says Arbore. “They see that their counterparts don’t have metrics and timely reporting, for example, so they talk to them about what we’re helping them accomplish and the technology we use to do it. As a result, at this point our business with nonprofits is mostly built off of referrals.”
Nonprofits are preparing for a recession
Many firms report that their nonprofit-focused CAS businesses grew considerably as a result of the pandemic. These organizations faced unprecedented financial challenges during that time, and were simultaneously more open to remote collaboration – a perfect opening for CAS offerings. Now, many are girding for a recession, which could bring similar challenges.
“Many of the people in finance roles at nonprofits today have never been in a financial role during a recession,” says Arbore. “So today they’re asking “how could we outsource these finance-related tasks to professionals who can help us ensure that we’re recession-proofing our organization, for long-term stability?” In this environment, nonprofit clients need services that go beyond bookkeeping – they need trusted advisors who understand their missions, their goals, their financial opportunities and challenges, and can help steer them through potentially perilous economic times.
Value-based pricing works
Given that many nonprofits operate on extremely tight operating budgets, it makes sense that many firms default to pricing structures based on hours spent. But leaders at successful CAS practices say that this approach can be short-sighted – and that their nonprofit clients are more open to value-based pricing than might be expected.
“I know a lot of firms working with nonprofits will say ‘it’s going to take us 10 hours a month to do this work, so let’s multiply that by our rate and here’s the flat monthly fee for the client,’” says Ahsan Ijaz, CEO of The Ijaz Group in Arlington, VA. “We’ve stepped away from that, and I think charging for the value we deliver to a client is a better approach. It puts the responsibility back on our firm to manage efficiency, technology, and staffing. Look at the client’s budget, look at the scope of work they need, and set a fee based on the value you can deliver to that exact client, based on their revenue.”
Nonprofit CAS clients should use your technology
Clients always bring their own technology to their relationships with firms. Often, firm leaders will decide that it’s best not to rock the boat, and will find ways to accommodate clients’ preferences. In CAS, this is a particularly bad idea. Because successful CAS practices are built on uniformity and repeatability – the fewer variations, the easier it is for firms to serve more clients at a higher level, profitably.
CAS leaders in the nonprofit realm are united in their conviction that clients should use the firm’s preferred solutions, and not their own. “We’re at the point today where clients have to be willing to switch to our system,” says Ijaz. “Not just technology, but all our systems – all within coming on board within a period of time. We know that can’t happen on Day 1, but within six months we want clients to migrate off of their systems. That’s how we’re going to be able to deliver on the promises we’re making to nonprofit clients. We’re promising metrics, instant information, and up-to-date financials. It can’t happen if they’re only halfway in. We’ll stick to their systems in the beginning, but make sure they’ve committed to onboard with us.”
It helps for firms to show clients what is possible using the advanced technology solutions deployed in their CAS practices. Dashboards have a big role to play here. “Say you want to break down the nonprofit’s spending on grants,” says The Arborio Group’s Jennifer Arbore. “At our firm, we’ll pull up a Sage Intacct dashboard populated with their grant data to show them what’s possible. It always gets a big smile from these clients because the dashboards are incredible. It makes it easy to sell them on our firm – and on the software tools we want them to use as part of our relationship.”
What to do now
Whether your firm already has a CAS practice and is looking to expand its nonprofit portfolio, or you’re just seeking new ways to better serve nonprofit clients, you can learn from the experiences of peers who have been operating at the front lines of client service to this important sector. Delivering high-value client advisory services (CAS) to the nonprofit industry, a webinar hosted by CPA.com, is a great place to start. This webinar features leaders from The Bonadio Group, The Ijaz Group, CPA.com, and Sage Intacct, speaking to their experiences and insights gained working with CAS practices focusing on nonprofits.
For even more CAS insights and examples of how they can be applied to SaaS and Professional Services practices, join a December 20 webinar, Unlocking Higher Value CAS Engagements from Non-Profit, Professional Services, and SaaS Clients, hosted by Boomer Consulting.