For this Nonprofit, Children are the Stakeholders



October 30, 2019, 10:18am ET

Jeff Thomson, 

MANA’s mission is simple; to “Feed Kids,” and for CFO Chris Whitfield, understanding the financial requirements to support that mission is of utmost importance. MANA’s mission is to help end malnutrition through production of low-cost, ready-to-use therapeutic food (RUTF). I connected with Chris this month to learn more about the organization, his take on technology and how operations drive financial transactions – a crucial understanding for all staff.

Jeff Thomson: Nearly half of all deaths in children under 5 are attributable to undernutrition, according to UNICEF. As a finance and accounting professional in the RUTF market, how are you able to keep costs low despite relying on a complex manufacturing supply chain? What skills do you leverage to accomplish this difficult task?

Chris Whitfield: We keep costs low in two very distinct ways. First, we have systems and controls in place that capture our costs in a very accurate and timely way. We also have a budget system that projects costs out in the same way that actual costs are captured. This allows us to not only monitor our cost, but drill down into the drivers of variances such as unit costs or units consumed in production. We then monitor these cost drivers daily, weekly or monthly depending on their significance and complexity so that we can keep the distance between variances and reactions as short as possible.

Second, we require our operating managers to be accountable for their cost center and to engage in understanding drivers of cost. We conduct semi-monthly meetings to review expenses and anticipate outcomes for the upcoming 30 to 60 days. Monthly, we review all the same cost drivers that senior management looks at throughout the month. We require much of our staff to understand how operations drive financial transactions they are working in every day, which in turn makes them better financial managers on top of their role.

As for skills, foundationally I leverage learning that goes back to my college days, particularly cost accounting. I have certainly built on those skills through experience in the years since, but I still call on specific concepts I learned back then. I combine these skills with my experience over the years to empower my team and our organization at MANA to positively engage in financial management.

Thomson: Before joining MANA, you worked primarily in the private sector – both within organizations and as a consultant with leading global advisory firms. How have you employed for-profit accounting and reporting practices in a non-profit environment? Do other non-profits – which likely lack MANA’s level of complexity and global supply chain – operate along similar lines that you manage the finance function at MANA?

Whitfield: MANA is a manufacturer and as such we employ the same principles of revenue recognition, cost accounting and expense control as any other manufacturer. At the other end of the management spectrum, our board of directors is made up predominately of individuals who made their success in the for-profit world of business, so traditional management reporting that measures revenue, gross margin, EBITDA and net income just like any other business is what they want to see. In terms of other measures of financial performance – return of investment, working capital, inventory turnover and debt to equity, etc. – our board of directors has the same expectations of financial management as any other business.

When it comes to financial management, I handle our business at MANA just like I would any other organization I have worked with in the for-profit world. We retain enough earnings to sustain ourselves financially; the only real difference for us is that the “dividend” we generate results in lowering the pricing in the market of the live-saving food products we sell or re-invest it into new ways of lowering the overall cost of manufacturing our product. The lower the cost, the lower the price. The lower the price, the greater the number of children that can be saved. MANA’s mission is simple; to “Feed Kids.” The children we serve are our shareholders.

Thomson: MANA is both a non-profit and a startup. Having worked extensively with more established organizations in your prior career, what challenges did you find when you transitioned to MANA? In your leadership role, what did you do to help the organization find its footing?

Whitfield: MANA has been at it for nine-plus years now, so I am not sure we would still be considered a start-up. But MANA had and continues to have two distinct financial challenges. The first is working capital. Our sales transactions are low-volume and high-dollar. Our sales cycle fluctuates quite a bit from month to month; one month is a new record high and the next there is almost none. As a result, our working capital is subject to large swings up and down. Our average inventory turn is only four to five times a year! One of our earliest challenges was understanding the financial requirements of maintaining the working capital our mission required.

recent study found that 71 percent of nonprofits are struggling to measure outcomes. We’ve been fortunate to have systems and technology in place that allow us to connect our outcomes to dollars invested. When I first started off at MANA, it was my job to make sure our leadership team understood the financial constraint of growth, that we generated enough margin to build adequate cash reserves and that we established banking relationships that allowed us to put a working capital line of credit in place to help absorb some of the larger swings.

The second challenge for us is funding for capital projects. That funding is going to come from new investments (for an NFP that comes in the form of beneficial investors or grants), retained earnings and credit. For us, the first step is finding beneficial investors or grantors with a mission that aligns with ours and that understand that driving down costs through investment multiplies the number of children saved compared to simply using the money to buy more product. Secondly, as I described earlier, we have to generate some surplus to re-invest. These two steps strengthen our financial position and provide leverage to go to traditional creditors for help with some of our capital projects.

Thomson: Increasingly, major global corporations are embracing social responsibility, not just for public relations but because it can boost long-term profits – and investors and consumers are demanding it. MANA puts humanitarian goals at the center of what it does, but how can finance professionals in the private sector, answerable to shareholders, factor all stakeholders into the company’s financial goals? Will this be a challenge, or do you believe executive leaders are recognizing that corporate social responsibility and profitability are not mutually exclusive? 

Whitfield: All organizations have a responsibility to measure the impact of their activities on our society. That is no less true for MANA than it is any other business. I believe corporate citizens large and small understand this better today than at any other time in modern history.

Whether that social impact is pollution, waste or injustice, more is needed to measure that otherwise unrecorded cost. These issues need to continue to be elevated to the executive suites and board rooms perhaps ahead of the missions of organizations like MANA. That doesn’t mean that businesses should do less than they do today to support humanitarian causes like MANA. I am in fact quite proud of how much the U.S., other first-world corporations, and private citizens do to support world issues like severe acute malnutrition, and I hope they continue to do more. That generosity, though, places a great responsibility on organizations like MANA to use that financial support wisely and to its maximum benefit.

Thomson: A key element of keeping costs low at many organizations is automation and technology. What role does technology play in finance at MANA? What role do you see it playing in the future?

Whitfield: Today, our organization does not employ a single in-house server. The most important technology inside our four walls is the device that connects us to SaaS solutions we rely on today and in the future. We leverage Oracle NetSuite, a unified cloud-based business platform that allows us to not only automate tracking of our manufacturing process but gives us the control and agility to make decisions that will strengthen our business and the overall market. The platform has also allowed us to be more transparent with our board of directors and show our investors where the organization is headed as we look to eradicate childhood hunger.

Being predominately cloud-based, we will continue to improve because our technology solutions, like NetSuite, continue to improve. As we meet new challenges with technology, such as increased data collection and analysis from the factory floor, or computerized maintenance management systems, or distributed budgeting, our focus will be squarely on the solution and not an infrastructure to run it on.

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