Navigating the Generosity Crisis: Post-COVID Funding Surge – What’s Next?

Jason Kruger is kind of a badass when it comes to accounting. Don’t be fooled by his impressive resume and professional demeanor, he’s shaking up the way business owners think about running their organizations. Gone are the days of the traditional office model with an accounting team that stays with a company for 35 years and then retires with a pension. Today’s business owners have to make strategic decisions to optimize profitability. The only way to do that is with good data from their accounting teams. Jason’s 20+ years of accounting and business advisory experience puts him in a prime position to help guide business owners to make smarter business decisions. Often, that means choosing outsourced solutions to provide next-level expertise at a fraction of an in-house cost. Founded in 2008, Signature Analytics brings the expertise and benefits of large company financial and accounting tools and processes to small and medium-sized businesses and larger non-profit organizations. Since that time under Kruger’s leadership, Signature Analytics was recognized as an Inc. 5000 company for FIVE straight years for growth and as a “Best Place to Work”. Signature Analytics still has a headquarters in Southern CA while delivering exceptional service to clients across the US. Before founding Signature Analytics, Kruger spent 10 years in public accounting, finishing as a Senior Audit Manager at Deloitte. He holds a Bachelor’s degree in Accounting and Finance from the University of Arizona. With Kruger’s expertise and Signature Analytics’ commitment to delivering reliable financial insights, businesses and nonprofits can make smart decisions based on real numbers.

More at – https://signatureanalytics.com 

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The Interview Transcript

Hugh Ballou:
Welcome to the Nonprofit Exchange. This is Hugh Ballou, founder and president of SynerVision Leadership Foundation. We help leaders create synergy around a profound vision. David Dunworth, co-host, and I welcome you today and our guest. is Jason Kruger from San Diego, California. So Jason, our topic today is navigating the generosity crisis, post-COVID funding surge. What’s next? But before we get to that content, tell our listeners, viewers, a little bit about you and your background, please.

Jason Kruger:
Sure. Thanks. Thank you so much, Hugh and David, for having me on. So right now, I’m the president and founder of a company called Signature Analytics. It’s a fancy name for a company that provides accounting and financial leadership for companies and organizations. A big part of what we do is supporting the nonprofit community, and so it’s very important to us. My background, I started the company in 2008, and we have about 75 full-time employees now. So we’re not a recruiting or staffing firm, We have full-time employees that are dedicated to our clients, and we work on a fractional basis to fill in the gaps and to provide that level of support that they need to grow and achieve the goals they have. My background before that was in public accounting. I spent a lot of years with Deloitte, which is one of the big four companies. I actually was in serviced and worked with a number of our nonprofit clients at the time as well. And so just really have a passion for the nonprofit community. As you guys know, sometimes the levels of sophistication in finance and accounting can be improved upon, and we’re there to support and help their existing teams, provide their existing teams the level of support they need, along with help to bring those organizations to the next level in their adventure as a nonprofit. And so we work with nonprofits across the United States in doing that.

Hugh Ballou:
Wow. That’s, that’s a whole lot of stuff to talk about. We’re going to sequence some questions today, but let’s set the context for the title. So during this COVID shutdown, you were telling us before we went on the air, um, that there was a surge in donations and now that’s cooled off. So that’s a different kind of problem. So, so what approaches do you recommend for organizations that are experiencing this decline in donations?

Jason Kruger:
Yeah. Yeah, I think as we talked about during COVID, there was an influx of generosity, but that was not maintained indefinitely. So it was a challenge for organizations to understand if that was the new normal or if that was a one-time spike and how do I budget for that into the future to build the infrastructure of an organization Obviously, there’s some cost involved and part of that is hiring and bringing on new employees. And now if you have a decline in that generosity or your budget decreases, now all of a sudden nonprofits are having to make difficult decisions. And so it starts with the number one thing that’s what’s most important for a nonprofit is the annual, the operating budget, the budgeting process. It’s critical. Non-profits are better at doing that, I would say, than for-profit companies. For-profits, you know, a lot of times you would think that they might, you know, be a little bit ahead of the game from that perspective, but a lot of times they’re just, you know, keep moving and they’re too busy to do the budget, right? But in the non-profit community, the boards tend to be stronger, and it is a requirement in most cases that the non-profit present an annual budget to the board. And most nonprofits have a year end of June 30th. So we definitely want to recommend not starting the next fiscal year budget on July 1st. We want to start that process much earlier. You know, we like to start that in February, March, April at the latest, because that gives us an opportunity to really understand what’s happening within the organization, go back and forth. We talked earlier about getting the board involved in the process. and their understanding of what’s happening. And so the budgeting process is critical to the success of how a nonprofit navigates. But what we find and an error that we find in the ways of managing against that budget is that budget can change. A lot of times we see a nonprofit will set the budget and they think, okay, well, as long as we just manage and perform and expend against this budget, we’re good. But if future results aren’t, if they’re not getting the future results that they anticipated in the budget, there has to be modifications. And what we see a lot of times is that happens too late. And so setting the budget in place and then having consistent look back against the budget and forecasting based on changes is what’s critical as well. Depending on the situation, that could be monthly or quarterly, And then what we also talked about is cashflow and being able to look forward into the organization from a cashflow perspective to ensure that we can manage the business effectively from a cashflow perspective, not just from what our budget says, because the timing of cash can be different than what our budget may see from, you know, donors or funding coming in versus our expenses going out. So that’s a handful and I’ll stop right there and let you guys kind of digest that for a second.

David Dunworth:
Well, you took the words right out of my mouth. Before I got into this particular point in my career, I spent a lifetime in the medium and enterprise organizations. The ones that I was most successful in, though, was that we didn’t rely on the P&L or the balance sheet. We looked at cash flow. and you know cash if they say cash is king well cash flow is the crown of the king and so that I know that you know you’re just bit by what we talked about. You’re you take a different approach than most accounting firms that I have had experience with because they will talk about everything but cash flow forecasting. And, you know, we we were fortunate enough in my day to have a daily cash flow, six week cash flow forecast document that came out first thing every morning. So we knew exactly what our numbers were and how we could live or die by them. Tell us a little bit what you think more organizations in the nonprofit arena can do to work that cash flow better.

Jason Kruger:
Yeah. Yeah. And I think, you know, just an example that we’ve seen recently with one of our clients is grants can make, can create significant challenges from a cash flow perspective. So a cost reimbursement grant means you have to actually front the cost and cash before you actually get reimbursed for those costs. And so that can create a significant strain on an organization. So then you’re trying to balance the other unrestricted fundings to cover that cost and that cash outflow before you receive the cash reimbursement. So those are the nuances that happen. And to your point, David, we like to put together at a minimum a weekly forward-looking cash flow analysis. The industry standard is a 13-week cash flow. looking forward one quarter in advance. Beyond one quarter, it gets a little fuzzy and you may probably go back to your long-term forecast, your monthly forecast, or your budget at that point. But we like to look at it from a weekly perspective. If cash is very, very challenging, we may look at it daily, right? And just like you mentioned, depending on how challenging that is, we’re looking at that daily. But at a minimum, we’re looking at that weekly And if you’re looking at that weekly, you can start every week off by knowing, OK, these are going to be my disbursements or my cash outflows or my payments. Here’s what’s coming out of the bank this week. Here’s where you can start to then manage your accounts payable process, who I’m going to be paying. OK, we got payroll this week. OK, maybe I can extend this one payment to this one vendor to the following week because I know I have cash coming in from a grant or from a donor this week that’s going to make up for that. So all of that None of that can be seen in the budget per se, because the budget is, a lot of times it’ll be on, it’s on an accrual basis. It’s not really impacting the day-to-day cash out activities. There may be timing differences between what’s in the budget and when things actually hit the bank or come through. So really managing that cap flow tightly, looking at it from a minimum, a weekly basis, and really, and having a process to walk through and understand your outgoing payables that week, what’s coming in that week, so you can continue to update as you move forward is the best practice that we go through. And we do that for every single client. The first thing we do when we start with a company is let’s put together a forward-looking cash flow. Because if you don’t have anything else, you have to be able to at least be able to manage your business while we start to help them build that infrastructure to better financial reporting.

Hugh Ballou:
Yeah, part of that, there’s ups and downs. And we teach that there’s a basic streams of revenue and that we should be receiving money from all of those. And you’re right, the grant thing throws us off in many, many ways when we don’t get it and we do get it. Right. There’s some hidden costs. So as we, especially for those nonprofits that have facilities, um, let’s, will you talk a minute about, um, unforeseen expenses? How do you build long-term sustainability? And then, you know, you’ve got some, um, reserves like maintenance reserves or other reserves, because you don’t spend money the same amount each month and there’s unexpected expenses. So talk about how do we set up and manage reserves and that part of this profile?

Jason Kruger:
Yeah, I think when we look at the budgeting process and when you’re looking forward into an organization, I know where an organization is non-profit or not-for-profit, but you still have to look at it as a business, right? And If you’re running a net zero budget every year, you’re creating significant risk in your business or organization. That’s why we see our government is never able to balance the budget, because they basically run a net zero budget, something bad happens, and all of a sudden, we’re under again. And because politicians don’t have the long-term vision, because they’re elected officials, it creates some challenges from that perspective and actually balancing a budget from a government perspective. From a nonprofit perspective, we want to establish a budget that gives us, that allows for some level of reserve or profitability so that we can use that either if we don’t hit our funding levels, which would be a negative situation scenario, or to more appropriately invest positively into the future growth of the organization in a good way. And so it’s important from not only setting reserves, as you mentioned, Hugh, and that impacts potential cashflow situations, but when we look at just business, or sorry, organizational reserves, we’re looking at, we still wanna run an organization that’s a profitable organization that gives us flexibility to take this organization from the $5 million or $10 million we’re at now to the $20, $30, $40 million organization. And to do that, we have to have cash flexibility along the line. So it’s not like we’re trying to build a big war chest, but we also want to have that flexibility moving forward. And if we don’t do that, that’s where we see organizations that are constantly stuck, constantly having challenges with cash, not able to invest in the organization to support the infrastructure and the growth that they want. And so that additional reserves and managing the organization that way gives them that flexibility to invest in new systems and do other things along the way.

David Dunworth:
Good point.

Hugh Ballou:
What do you think, Hugh? We’re hindered by the word non-profit.

David Dunworth:
Well, you know that’s a bad word to begin with.

Jason Kruger:
It doesn’t mean no profit.

David Dunworth:
Yeah, it’s actually creates a scarcity mindset in most people. So yeah, it’s a terrible nomenclature, but yeah, you touched on it. It’s a business and you have to treat it like a business. It’s just tax reporting is the only change to it. We haven’t really touched on some of the, what I’ll call the drier aspects of things. And that’s called compliance, reporting, audits, What can a small organization do from a best practices standpoint to get more in touch with what that stuff is all about and how maybe they can use that cash flow forecasting to address some of those things at the same time? Is there a possibility there?

Jason Kruger:
Yeah, absolutely. I think what’s most important in my mind is to have a process. Everything is about process, as we know. Whether we’ve defined it or not, there is a process. Sometimes it may be good and defined and working. And sometimes we say there’s no process, but there is a process. There’s just not much there to give us support. So when we look at processes of accounting and finance, we talk about the day-to-day activities of the organization. So what’s our process to pay bills? What’s our process to, what’s our, um, process to, to bring in funding or invoicing process, or depending on the organization, how do we, what’s our process to bring that cash in the door? So then you have your day to day activities. And then what’s critical and what we see lacking a lot of times in organizations that, you know, maybe are a little bit less sophisticated or they don’t have the bandwidth of the team to, to get there is they don’t have a. a defined month-end close process for their financial statement, for their financial aspect of their business, for accounting. And what that means is, to close the books every month means you have to reconcile each of the accounts, starting with bank statements, starting with the credit cards, and then reconcile each of the other balance sheet accounts associated with the organization. I call it balance sheet. I know it’s, you know, the nomenclature is different with nonprofits, but We want to look at each of those accounts need to be reconciled on a monthly basis. And if we can do that, we have confidence that we have good financial information and numbers. And that gives us two things. One is it gives confidence in management leadership that they can make good decisions. We can understand how that then ties back to the cash flow and the forecasting that we’re looking at. And it also gives confidence to the board and the finance committee that’s tied to the board that the organization is being run effectively to achieve the goals that they have. And it’s giving them confidence that we’re moving towards and we can track how we are doing against our mission. The last thing that it does is it gives outside donors confidence that when they are providing good, when they are providing funding to the organization, that it’s being spent in the right way, it’s being managed effectively. So you close the books every month, and when you get to the end of the fiscal year, now it’s time for the audit. Well, if you’re closing the books, you have a process and supporting schedules for the financial information of the organization, 80% of the audit is done. You’re now providing that information, the supporting schedules to the auditors. You’ve done that on a consistent monthly basis. You’re not trying to catch up from six months historically. You’re not trying to clean things up, which we see a lot of times, and scramble to the end. You’re done with 80%. Now you can answer the questions. You can pull the detail of the support. You’re organized. And so that’s the critical side of really preparing for an audit is having that process to close the books each month, having a process of reconciliations that you can then provide to the auditors.

David Dunworth:
Can I ask just a little follow on to that before we move on? Yeah. That all sounds great for the people who can afford an organization like yours. But what about the startups? What about the small, small hand to mouth organizations? Do you have any tips for them that they can do what you’re trying to do or do what you’re trying to say, but give it to them in a language that maybe they can understand? Yeah, I would.

Jason Kruger:
Yeah, absolutely. I think. What there’s there’s a couple of things, one, Smaller organizations, hiring a full-time employee is expensive. And so surrounding yourself with good advisors is very important. That’s why we’re big proponents of our model. We’re a fractional model that supports the existing team. And so we are not an employee of our clients, but we work with them on an ongoing basis to ensure that they are successful and able to perform in the way that I described before. And so we provide that accounting leadership. For very small organizations, I would say rely on the board. The board, I’m sure you probably have bankers, you probably have CPAs, you have others that can be there to be that sounding board and advisor, probably, and they’re on the board, so probably at limited to no cost. So rely on those outside advisors to come in and give that organization the flexibility and the person that’s in the accounting seat for the organization, the support to allow them to be successful. Beautiful.

Hugh Ballou:
Yeah, thank you. And there’s an interface with the work you do with the treasurer, the officer, the non-private, the treasurer that’s on the board. And really, the treasurer doesn’t do the work. They could be a financial person, but they’ve got to be somebody that explains this to the Lord, right?

Jason Kruger:
Right. Yeah, absolutely. that our role in a lot of cases, we are a liaison to the board and to the finance committee. And so we, a full-time CFO is obviously very expensive. The term CFO is used very broadly as well. You know, a lot of times we think, we hear someone’s having issues, they can’t get through the audit and they’re told just hire a CFO and they’ll cure all, right? And a good CFO is, you know, very expensive, over $200,000 a year, which is expensive for a lot of organizations. And a good CFO is really on the strategic side of things. A lot of times it might be more on the fundraising side of things, and they don’t really have a CFO issue, they have an accounting issue, right? And so, and the CFO will come in and say, well, your books are a mess, you need to hire a controller. And they said, well, we just hired you, you’re the CFO, you figure it out. And the CFO says, well, I don’t do that. you know, we need to bring in somebody else to do that. And so, yeah, exactly. Yeah, pointing both directions. And so that’s where we can, that’s where we provide that support is we’ll bring in the high powered controller, we’ll bring in the high powered team to support their existing team at a cost point and the flexibility and scalability that makes sense. And then layer in the CFO level resource as it’s needed in a manner to provide the strategic side and the communications potentially to the board as well. And so it’s all about leveraging your board to be effective, but giving them the tools and the financial information so that you can work collaboratively with them as a board.

Hugh Ballou:
And that’s a big gap that I see in the market is that boards are not getting relevant information that they can make good decisions on. And it’s really not the cash forecasting. And that might be getting, I forget what you call it in non-private language, but the equivalent of a P&L, I guess an income statement, a financial position as your balance sheet. So if you have those, and I’ve seen boards look at them with glassy eyes, like, okay, what am I supposed to be seeing? What I’m hearing is that you work, and many times a board treasurer might be an accountant or a banker, might have some financial, Um, experience, but like you said, businesses don’t do it right either. So what I’m hearing is that you help interface with that person so they can make appropriate reports to the board so they can make decisions. And also, I also hear you saying that you can help them think about the upgrades they’re going to need to scale for the next phase of their work.

Jason Kruger:
Right. Yeah. We talked about process before, and so there’s a lot of collaboration too, with the executive director or CEO. even with the program managers or program directors, so that they have visibility into their program and the budget for the program and the numbers as well. And so if you have a high operating financial department, finance department, you’re able to, it’s not just about paying bills and making sure that we’re managing cash. It’s about then you can take it to the next level And you can start to build out the reporting to be able to then provide more visibility and better decision-making as you move forward. And so with some of our clients in the nonprofit space, we’re able to provide them with a daily automated report, each program manager of what the cost incurred for their program was for that month against their budget, where they are against their budget so they can manage that on an ongoing basis. So giving them that visibility and the tools to allow them to be successful and run more independently and not have to worry about, hey, where am I? I don’t know if I’m over budget, under budget, what’s going on? And get the information three months later.

Hugh Ballou:
Well, in a lot of this data, I’m thinking there’s a whole lot of small nonprofits that just aren’t tracking. I don’t have all that data. But even if you’ve got a small budget and do a small amount of work, it’s still important to be able to understand what what information the board needs and how to get that information on a regular basis. So that even if you’re small, you don’t need all that other stuff, but you do need some accountability and some cash flow forecasting, a lot of these tools. So to make sure that we were inclusive of all levels, and I’m sure you work with various levels of nation. So, we’re not here to sell anything, but golly gee, I don’t know why. If you say you can’t afford to hire an outside financial person, maybe you can’t not afford it. I mean, you can’t afford not to do it, rather. So, Jason, this has been very helpful today, and I do all this. We’ve been doing it for years. Damn, I learned some new stuff today. I’m still… So your website, if people want to find you, is signatureanalytics.com. Signatureanalytics.com, no spaces, just that. What do they find when they get there? And people are listening and watching both.

Jason Kruger:
Yeah, there’s a couple of things. So if you hover over industries, you’ll see that nonprofit, I think, is the top one. Yeah, that’s because that is probably our highest concentration of clients. Um, and, uh, if you actually click, yeah, on the nonprofit icon there, there we go. That’s the, that’s our highest concentration. So we are, we have a dedicated team, um, that has significant. Uh, background and history and skill in the nonprofit space. Um, there’s some good information on our website about, um, some of the things that we’ve talked about. You can see myself and our nonprofit leader, Laura. on some of the videos that we’ve done here talking about some of these same topics. So there’s some good information there. You know, if I’m happy to have conversations with anybody, if we can provide value, that’s great. If not, usually we’re able to provide some sort of introduction to somebody that can. So I can be emailed at letter J Kruger. That’s K-R-U-G-E-R at signatureanalytics.com. You can find me directly on LinkedIn. You can find our company on LinkedIn and obviously direct to our website.

Hugh Ballou:
Great, great. So there’s a whole lot of ways people can reach out to you. This has been helpful. How do you want to leave this? Do you want to give people a thought challenge? What do you want to leave people with today?

Jason Kruger:
Yeah, I would say, you know, especially at the executive level, executive directors, the CEOs of organizations, The newer CEOs, newer executive directors, we see a lot is their background, obviously in a lot of cases is not finance. It’s not HR, it’s not sales, it’s not marketing in a lot of cases, but they have extreme foundational experience in nonprofits as a whole in certain areas. And what I tell all leaders and just from my experience being an entrepreneur on my side and business owners is, it’s so important to know every aspect of your organization. Even if you’re not an expert, and I’m not an expert in sales and marketing, I still need to understand our process, what our goals are, how we’re gonna achieve those goals so that I can manage those individuals effectively. Same with HR, and then obviously finance and accounting. So knowing all aspects of your organization is critical versus the alternative of saying, well, I’ll just hire a CFO, or I’ll just hire someone and they’ll just do it, right? And what ends up happening is they, over time, you start to veer off of the mission or veer off of the appropriate levels of communication. And you find out after the fact that, you know, we have a real issue here because I thought somebody was doing something that they’re really not doing. And now we have an issue and we have a problem that we have to deal with. And so I always say, know every aspect of your organization, hire the experts, but you still have to manage the experts because you have to align them with the mission and the culture of your organization.

Hugh Ballou:
Jason, it’s been wonderful. Thank you for being our guest today on the Nonprofit Exchange. Thanks so much, Hugh and David.