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James Lum, CFO of GuideStar, the organization that tracks nonprofit financial and impact performance, was recently named a 2014 Nonprofit CFO Transformational Leader. The award goes to an outstanding CFO of a nonprofit who has played a major role in the transformation of the operations of their nonprofit. Lum was instrumental in leading GuideStar to multimillion dollar turnarounds in cash flow and operating income the past two years.
Before joining GuideStar, he spent more than a decade in the New York City-area leading financial planning and analysis for media companies in the internet, television, radio and publishing. He served on the board of nonprofit Pacifica radio stations in both New York and Virginia and was a juror for the International Emmys.
Since you have a for-profit background as well, what's the biggest difference in working for a nonprofit as a CFO?
The two sectors are very similar. Under all the superficial details, at a financial level, there aren’t many fundamental differences. The best things in life are free but you have to pay for the rest. One difference is often people's attitudes towards financials and money, whether it be earning money or controling expenses. And it's just a different terminology - whether it's "grants" or "revenue," you have to bring in more than what you pay out.
What do you believe is the biggest challenge facing finance professionals in the nonprofit space?
I say it's the same as [for-profits] – taking away the fear factor and making sure your organization understands that finance is there to help, not hinder. Bad finance can be a distraction but good finance provides focus. And good financials allows you to be more productive and serve your mission even better.
What kind of vendors/partners can help you best tackle this challenge?
The best vendors are the one who comes in knowing what you need to get done and have a wider industry perspective. They offer better ways to do things than what you're doing now, to achieve better results.
On how often to review vendors:
I'd say every three years or so but it depends on the vendor and what they perform for you. Some services are rapidly evolving, particularly ones tied to the Internet and e-commerce. Those are areas that should be looked at the most frequently.
When searching for a banking partner, what is the best advice you can give your colleagues in the nonprofit community?
Banking relationships are very important. They're not front and center every day, but at the end of the day it's important to have the right one. I'd say it's the personal relationship and trust, otherwise you're just dealing with a big bank that can't help you in those times you need important advice.