Building A Financially Strong Construction Business With Timothy Wingate Jr.

COGE Timothy Wingate Jr. | Financially Strong Construction Business

 

Building a financially strong construction business requires mastering job costing, strategic credit solutions, and effective communication between the field and the back office. But achieving this goal requires careful attention to every aspect of your financial management. In this episode, Timothy Wingate Jr., Founder and President of G+F Business and Financial Consulting, explores the world of construction accounting. Timothy shares his firsthand knowledge of the industry, discussing everything from managing your cash flow to strategic credit solutions. He explores crucial topics like calculating margins, securing loans/credit, and improving communication between the field and the office. As Timothy emphasizes, if you build it, you deserve to get paid for it. Tune in now and learn how to build a financially strong construction business.

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Building A Financially Strong Construction Business With Timothy Wingate Jr.

Communication, Job Costing Mastery, And Strategic Credit Solutions

How do you determine the correct margins to cover operating costs so that you can submit and win more profitable bids? When is the right time to apply for a loan or a line of credit for your construction company? How can you bridge the communication gap between your field and the back office? These are a few of the questions we cover with my guest, Timothy Wingate Jr., the Founder, and President of G+F Business & Financial Consulting.

He is a licensed enrolled agent and construction accountant. The nice thing about Timothy is he worked for many years with his father, a licensed GC. He has plenty of firsthand knowledge of the construction industry. We are going to talk about all things construction accounting, how to manage your cashflow, how to make sure that profit doesn’t fade at the end of the project, and how you manage your margins. We have a great discussion towards the end of the show on the perspective that the back office should have on the field and the perspective the field should have on the back office. It is an important piece of information that you need to lay hold of and communicate throughout your organization.

The final thing to read, and I’m a big advocate of this, is we take a dive into how you can make sure your AR, your Accounts Receivable, is not out of wack. If you build it, you deserve to get paid for it. Timothy is an advocate of that. I’m an advocate of that. I know you are an advocate of that. Read that particular part of the interview for some additional insights. Feel free to share this episode with other construction company owners and leaders that would benefit from it. As always, thank you for reading. I deeply value your support. Enjoy my conversation with Timothy.

Timothy, welcome to the show.

Thank you. I’m glad to be here. I’m a little tired because I’m on the East Coast. This is the end of the day for me.

The audience is on the edge of its seat, ready to tap into your expertise. What are the two things construction owners need to understand in their business?

Those two things will be estimating and scheduling. Some people get confused about what is more important. It may surprise you that scheduling is the most important out of the two because if the schedule gets off track, that throws the whole project off whack. You can’t invoice your clients on time because things are not completed for you to invoice them. You may not have materials on site on time. Therefore, the guys can’t work. You may have paid the guys to be there. It is a lot of things that can happen from a bad schedule that can kill your margins. If you get estimating halfway decent, and the schedule goes perfect, you will be okay, but if you get estimating right and the schedule goes to shambles, you are in bad shape.

Scheduling and estimating are tremendously important. Tell me, how do those two things tie into the accounting side of the business because that is your specialty?

The way that ties in is I’m looking to see if the margins you are generating or you set out to generate in your estimate have met those margins at the end of the project. I want to compare those. I want to see if you are marking up your estimates enough to get a good margin to cover operating costs. You may be hitting your margins, but you may not have great margins to cover operating costs or to do even better to grow your company. First identified, where are we trying to go? What is the vision? What margins do we need to have to make sure we reach the goals we set out for the company?

In your experience, why do construction companies struggle to set their margins correctly?

Most of them don’t have a vision. You will be surprised. As an accountant, I come in, and I want to know your vision. There is no way I could help you if I don’t understand where you are going or where you want to go. Most companies, when you come in, these guys are great, excellent tradesmen. They know how to build a home or go out and do whatever the specialty trade is, but they haven’t been taught that this is what you need to do to grow your company.

Going out and doing the work is one thing, but there are leading people, goal setting, meeting those goals, evaluating your KPIs, making sure that things are hitting the mark, and marketing. There are a lot of things that these guys haven’t been equipped to learn those things and to make sure their business becomes profitable and successful. That is a big part.

How do I determine the correct margins to cover operating costs so that I can submit and win more profitable bids?

It starts off with what I call the desire operating profit margin. That is a fancy phrase for whatever I want my company to make. You need to know that first because every company and specialty trade is not made equal. I may want my company to be a $5 million construction company. The guy next to me may want to be a $50 million construction company. Margins got to be different to support that vision or that goal.

You need to identify first where you want to go, set some margins to help us get there, and make sure our estimates are yielding the margins to cover the operating costs and still yield a margin that we need to grow the company. It is also coupled with how many projects of that size with those margins I need every month, every six months of every year, or for the whole year to make sure that I cover operating costs and I meet the margins that I set out to meet to grow the company.

One of the challenges that some companies have, not in all cases, but in some economies, there is the need to win work to keep your guys busy so they don’t work for the competition. That need begins to affect the margins because I drop my prices to get a project. That is a reality in some circumstances. How do you counsel your clients when they are faced with an economic headwind outside of their control that they need to address and confront?

When we encounter those things, we have a range. We may say, “This is the margin we set out to get because when we get that margin, we feel great. We can go home and celebrate with the family and feel like we had a great deal.” You also have to have, “This is a margin I’m okay with because it is still going to cover operating costs and yield a profit. The profit may not be as high as I would like.” We can’t go into jobs. What we can’t do is we can’t go into jobs losing money or go into jobs, and we can’t cover operating costs because we want to keep the guys busy. We can’t do that. We have to up the number of bids we are submitting and go hard on the marketing side.

As you are working with your clients and they are consistently struggling with their estimates and the quality of their estimates, where are you seeing them fall down the most? Where are those mistakes being made that are hindering them from achieving those margins?

A lot of them don’t take the time to do a good takeoff. That is when you are contacting suppliers saying, “This is how much material costs,” or you are going out and getting a couple of bids if you are subbing your workout. Some people stick with this one company, this one guy, and don’t continue to shop their prices. That is the first mistake because if you don’t understand the cost of doing something, then right off the back, you have already eaten into your margins.

Let’s say you have won the work. The initial bid is one that you are satisfied with. That is within your range as far as the margins are concerned. You start building the work, and you are seeing that margin erosion happen. What are the top three causes? I know you’ve hit on one with the scheduling issues, but what are the other couple of causes that you see that cause margin erosion?

The other I see is not understanding your labor force and true labor burden rate. You need to know how much it costs to put this guy out on the field. You got to understand that.

Businesses need to know how much it costs to put people out on the field. They have to understand that. Click To Tweet

Let me supply one, and let’s see what you think about it. This often happens at the end of the job. At the beginning of the job, there is this big push. In the middle of the job, there is some momentum, and we are getting stuff done. Let’s say in the last month or a couple of weeks of the job, all of a sudden, another job starts. I take my A-crew off of here. I put them on the other job. All of a sudden, I got my B players on this last job. Either I don’t have a punch list, or the punch list is long. I’m not able to finish things up, and it drags. Does that sound familiar?

That sounds familiar. I put that in the seat of good processes, in places like onboarding processes and closeout processes to the project. I’m having those things written out or somehow template out on your side, your project management system, because those things should be automatic, and you shouldn’t have to recreate them every time you start a new job. Processes are important for construction companies. They need to be something that is written out. Most of these guys don’t have it written out.

I like to go back to the labor rate. There is one way that construction companies miss profit opportunities. They do it when they allow highly paid workers to do tasks that fall below how much they are being paid. I can give you multiple examples. Let’s say you have a skilled operator who should be operating a piece of equipment, but because of issues with scheduling or ordering the work, he or she is doing the equivalent of sweeping floors. I’m paying $100 to $200 an hour for this guy or gal. They are doing a $20 to $40 an-hour task. Is that something you see in your interactions with construction companies?

It is common because a lot of times, especially with smaller companies, the owners are doing those things. The owner is the highest-paid person on staff. A lot of times, they don’t even account for their own salaries inside of their estimates because some owners are doing project management and admin work, and they haven’t factored that in. Those things are not even inside the estimate. The customer is not even paying for it. That is another issue.

You got to have the right person doing the right tasks to maintain those profit margins.

You must have that. Otherwise, you are overpaying for everything.

You were talking about the vision of a company. Let’s say my vision is maybe I am a $10 million contractor, but I’m going to seek to grow in the next 3 to 5 years from $10 million to $50 million and maybe even beyond that. I know plenty of clients who have that trajectory or desire. When is the right time to apply for a loan or a line of credit to manage that growth curve?

1) You have to make sure you have a great pipeline of work. 2) You got the processes down. You know how to start and close a job out well. You are profitable already. You are not getting a loan or a line of credit to become profitable. You are already profitable. That is what the banks want to see. That is what these lenders want to hear. They want to see your profit and loss balance sheet. They want to see healthy numbers.

COGE Timothy Wingate Jr. | Financially Strong Construction Business
Financially Strong Construction Business: You are not getting a loan or a line of credit to become profitable. You are already profitable. That is what the banks want to see and lenders want to hear. They want to see your profit and loss balance sheet. They want to see healthy numbers.

 

Many times, I have come across contractors who say, “I want a loan or a line of credit.” They are not even in a position to get a loan or a line of credit. Their personal credit is not great. Their business numbers don’t look great. I’m sorry to be the bearer of bad news here. You are not ready now. We got to get you profitable. There are some other things broken inside of your business that we need to fix.

Let’s assume someone is profitable. They qualify for the line of credit. What are some of the key mistakes that contractors make when they are utilizing a line of credit that bite them in the butt and contribute to that overall profit fade in a company?

One thing is going out to purchase equipment, hoping, with that purchase, it is going to get you more work. That is one problem. You need to know the work is already there. If we signed a $1 million contract that requires us to go out and buy this truck, that makes sense. It was like, “Let’s buy the truck because we have the contract.” Let’s not get the truck in hopes that we are going to get the contract. That is one problem.

Another problem is I haven’t gotten this pay app approved yet, but I need to pay my guys on Friday. We are going to draw down on the line, and we don’t even know the money is coming. That is a huge problem. We need to have a different conversation. We need to be working on getting that pay app approved. We may have to have a tough conversation with our staff if we haven’t established a savings account. That is why a big thing of mine is to come into a construction company and say, “We need to establish a savings account. We need to have money in there.” These guys will have the account, but it has a zero balance.

As you begin to talk about this, the phrase that popped into my head is accounts receivable. Why is it that construction companies struggle to keep up with their accounts receivable?

They are busy out there in the field. When they get home, they are tired. Some forget, and some feel they are busy. They may not have even realized, but they need help. These guys are macho men. I haven’t come across any women. I hope I didn’t offend any women out there, but these guys have a hard time asking for help and admitting, “I need help in this area.”

That is a big thing because there is a big problem when you say you don’t have enough time to issue an invoice. That should be a big red flag. I’m sitting on $100,000 plus of accounts receivables that I haven’t even sent out yet. That is where things bottleneck because you are still paying your guys. You now run into that problem where you were like, “I need this pay app approved. I have been having the guys work. I have been paying them, and I have been killing my cash. I feel forced to draw down from that line.”

I hope you are enjoying the conversation with Timothy. I know that I am. We’ve reached the point in the show where I remind you about my book, Construction Genius. The great thing about this book is it’s no BS. In other words, when you read it, you’ll be able to relate with it right away because I talk about things that go on in the construction business every single day. We do straight talk in this book and straight advice to help you to be a better leader and to build a more successful company. This is what you do. You go to Amazon. You go and get yourself a copy. You get a copy for every one of the leaders in your organization.

You guys read the book together and get together on a monthly basis for half an hour to an hour and say, “We’ve read a couple of chapters here. What is the number one takeaway from the book, and what are we going to do to be better leaders as a result of it?” You make incremental changes over time and an investment of $20 for copy. You can have an exponential positive impact on your organization.

Go out to Amazon. Get the book. You can go to Audible if you like to listen to audio. One of my clients drives around Texas, listening to the book. It tremendously helps him not only to pass the time but improve his business. I know that it will do the same for you. Go and get the book wherever you get the book but particularly on Amazon. Let’s get back to my conversation with Timothy.

Let me ask you this. Let’s assume I have an accounts receivable, accounts payable clerk, or department in place. I’m still having issues getting cash in the door for the work that I have done. What advice would you give a construction company owner to tune up the accounts receivable department?

We should make sure that we have everything in place to get the pay app approved and everything contractually has been satisfied. You need to make sure that the follow-up is happening. We got to be on whoever the clerk is and make sure they are following up on what is needed, and these people need to get tired of hearing your voice or seeing your emails.

That persistence is essential. Construction is a unique animal. What makes a construction accountant different from a traditional accountant?

I talked about a lot of it already, but it is knowing the nuances of the construction industry. We taught debits and credits, expenses and income, accounts receivable, and accounts payable, but construction accountants are masters at cost accounting or very close. Cost accounting is a specialized type of accounting to make sure everything is being accounted for in a particular project.

Another thing that makes a construction accountant different is most of us are managerial accountants. We are looking at these reports to make management decisions. That is what you need in the construction company. You need someone to help you interpret the numbers so you can make decisions out on the field.

COGE Timothy Wingate Jr. | Financially Strong Construction Business
Financially Strong Construction Business: You need someone to help you interpret the numbers so you can make decisions out on the field.

 

What are the key 2 or 3 metrics that every construction company owner should be looking at every single week that indicate the health of his or her business?

We need to be looking at our work-in-progress report, making sure we are not underbilled. The other thing is we need to make sure that we are hitting our numbers far as how many bids we have submitted for the month or the week, making sure we are meeting that quota and looking at the closing rate. Are we closing 20% or 10%? What is that? Those are the top three for me.

Let’s talk about underbilling and overbilling. Describe your philosophy with regard to underbilling and overbilling that you like to communicate to your clients and you like to see in a healthy construction company.

In a healthy construction company, I like to see us a little bit overbilled. That is where we want. That lets me know that the profit and schedule are going great because we are completing things on time. That tells me another thing that the invoices are going out, and we are getting paid on time. That turnover ratio is great from how many days. It takes us to get paid. That is what I’m looking at.

If we are underbilled, we may have a ton of problems. We may have problems out in the field that we are not getting work done on time. We may have problems that we are not getting invoices out on time. We may be in a slump where the weather is killing us. We are stuck. We need to figure some things out. There are a lot of things that are happening when we see under billings. We want to see healthy overbilling. We want to be crazily overbilled because the customers get upset about that. We want to be right there.

If I’m slightly overbilled, that helps me with my cashflow. What are some key concepts in addition to that slight overbilling that a construction company owner needs to understand to make sure their cashflow is as healthy as possible?

You need to have great projections as to how many jobs you need to have closed by a certain time. You need to understand where that needs to be and how many jobs are in the pipeline. You need to understand how much labor is going to be required to fulfill those obligations. That way, you can quickly identify that we may need to hire some more men. We may need to move some things around. You need to have a good touch on where we are as it relates to contracts, projects, what is coming down the pipe, what we already have, and how is the labor force strained now. Is it not? Do we need more men? It’s those types of things.

When we are thinking about construction accounting, we are often thinking about the inner guts of the business. A lot of what you have described, Timothy, is stuff at the front end of the business, the top end of the funnel, the amount of work I’m bidding, and the hit rate I’m getting. That has a tremendous impact on the internal operations of the business. We don’t necessarily think of that primarily in our minds when we are thinking about the accounting of construction.

I hope that everybody finds it interesting that I am an accountant, but I’m talking so much about what is happening out in the field, scheduling, estimating, bids, and closing rates because that is what makes a construction accountant different from a traditional accountant. We have to be forward-thinking. We can’t be looking at things historically or waiting to close the month in out and tell you what happened. No, we need to be forward-thinking with you, planning and strategizing. That is where the managerial accounting skills come into play.

Another thing to be able to interpret the number of bids you have is telling you about how successful your business is and what moves you need to make.

I love that you have to have someone passionate about that because I came up in the construction industry. My dad has been in it since 1984. He has been licensed. I understand what it feels like from a child’s perspective to go through the ups and downs and see him, as an adult, go through the ups and downs. I have seen where the pitfalls were. I got some mentorship from him to understand that these are some of the common pain points of most construction companies. These are some of the things and emotions that we deal with it. It helped me understand who I’m working with a whole lot more by having him in my life.

What led you into the number side of the business coming from that background of general contracting?

I wasn’t built to work in the sun. I quickly learned after working summer after summer in the sun that being out in the field was not for me. I had a knack for numbers and strategy. I love understanding the inner workings of why something does what it does. That was always me. That is how I latched onto the accounting field. I took an unorthodox path to accounting. Once I landed, it was a perfect fit for me.

Because of your background, you understand what is going on in the field. You are familiar with the back office aspect of it. In construction, we all know that our money is made in the field. The guys and gals in the field can be looking at the people in the back office and thinking, “They are always trying to get in my way or tell me what to do.” How can we bridge that communication gap between the field and the back office?

We have to leverage technology, which a lot of construction companies haven’t embraced yet. They are going to embrace it soon because you are going to be forced to use it at some point. When you are still working out of Excel spreadsheets or pen and paper, you are creating lag. That is where the problems start to occur because things are not getting to the back office in a timely manner.

A lot of companies haven’t embraced leveraging technology yet, but they’ll be forced to at some point. Click To Tweet

We don’t know what things are coming up missing. We don’t know where they are. We have to ask 1,000 questions about something that happened a few weeks ago because we found out about it. That is where the problem lies. When you have great technology that allows you to communicate and capture data in real-time, it makes everybody on the same playing field, seeing eye to eye with everything for the most part.

You have to be able to leverage technology in such a way that the field sees the benefit of it, from what I’m hearing from you.

They are going to see the benefit because we will have less questions about things that happened weeks or days ago and you can’t remember.

You would be comfortable going onto a job site, and you wouldn’t necessarily stick out like a sore thumb there. Do you ever see construction companies taking out the back office people who never get onto a job site and saying, “I want you to show you what’s going on every day so you get a feel for what the guys in the field are going through?”

I don’t see it much. It was two separate lives. If more of that happens, they will start to appreciate one another and also understand each other a lot better. A lot of the miscommunication has happened because both parties are not understood or being understood where they are treated fairly or their work is appreciated. They need to have a job shadowing day on both sides.

What would be the one thing you would tell back office people to help them appreciate the guys and gals in the field?

These guys are moving in a fast-paced environment. They are dealing with a lot of the social aspects of the business that we don’t necessarily deal with. Those are talking with the subs and customers. A bunch of stuff is being thrown at them all the time. Sometimes they have to make quick and efficient decisions. They are doing that at the drop of a dime. You got to be patient with them and understand they are doing the best that they can, but also help them bridge the gap a little bit better. Teach them to communicate with you what you need from them and be consistent.

Habits are hard to change. It is like with your children. You have to tell them 1,000 times. You never get tired of telling your children things over and over because you want them to be the best. You would keep telling them, “Pick this up. Do this differently.” That is what you need to do with these guys out in the field. Keep telling them over and over and be patient with them. They will eventually come around because they are not purposely trying to make your job hard. This is different. They need someone to hold their hand and help them.

The word to the back office, when they are thinking about the field, is patience. I like that. What is the word for the field when they think about the back office? They are thinking, “These guys don’t even know what reality is. Let me tell them what is up.” What is the word for the field to the office?

Appreciation.

Tell me about that.

These guys and girls are doing so much to get you paid, get you certified, and make sure that the state and local municipalities have what they need. You need to appreciate that because if they feel that appreciation from you, they will feel like they are being understood. You can get more out of them because they will be able to hear you.

Tell us more about your business, what you do, who you help, and all that good stuff.

Primarily, I’m working with guys who are doing commercial work, or they are either doing high-end residential work. Most of the guys have been in the business that I’m working with for ten-plus years. They are ready to change and grow. They are tired of doing things the old-school way. They want to tap into the new school.

You are not going to forget the old-school way of doing things out on the field, but you do have to adopt some of the new ways of doing things in the back office. That is where I come into play. I’m coming in with the full-service, accounting, bookkeeping, tax, and all those things so we can help you in full service. The thing that people love the most, and what I hear, is how we are able to integrate all of this technology. We are using Buildertrend, BillPay.com, Dex, and QuickBooks online. We are integrating all these things so they can talk and make everybody’s job easier.

You are not going to forget the old-school way of doing things out on the field, but you do have to adopt some of the new ways of doing things in the back office. Click To Tweet

Most of my guys are approving pay apps from their phones in the field. It was simple things like that, approving payroll and time cards from their phones. Those things make the job easy. We pay subs and direct deposit. We do not have to go to their office, have the sub drive to where we are, pick up a check, and somebody has to be there to give it to them. These subs finish the job, the pay app is approved, and direct deposit happens. They don’t have to take that time out of their day to come to our office to pick up a check or to wait for it to come in the mail. How many people have done that?

Once you wait to come in the mail, you have to deposit into the bank, and the bank is going to put a bank hold on it, depending on how big the check is. It delays a lot of stuff. Subs like working with you more because they get paid on time and they get paid faster. A lot of stuff like that is what we do and how we help constructions company to grow their companies and take it to the next level.

Last question here. What are the top 2 or 3 things that I, as a construction company owner, should be looking for when hiring a new construction company, outsourcing an accountant, or something like that? What are the top two or three things I should be looking for?

1) They should be interested in where you are trying to take your business. They should ask questions about that. 2) They should be recommending some project management systems for you to use. You should be working with a project management system. 3) Their communication should be superb. You should be able to reach them. You shouldn’t feel like I have to send them an email and hope they will respond within a week.

COGE Timothy Wingate Jr. | Financially Strong Construction Business
Financially Strong Construction Business: They should be interested in where you are trying to take your business. They should be recommending some project management system for you to use. Their communication should be superb.

 

That is terrific. Timothy, tell us where we can get in touch with you if someone wants to learn more about your business and get to know you a little bit more.

I’m on three major social media platforms, LinkedIn, Instagram, and Facebook. You also can go to my website, which is GPlusF.com. You can be redirected from ConstructionFinancialBlueprint.com. I have a YouTube page. You can see some videos there. You type in the search bar @GplusF. You will pull up my YouTube page. You will see some more videos and me talking about things that we offer and provide for our services. Those are the major ways to get in touch with me.

Timothy, people will be able to get in touch with you. I appreciate it. My understanding is you are in West Palm Beach, Florida.

I’m in sunny West Palm Beach, Florida.

 Let’s say I’m visiting West Palm Beach, Florida. Timothy, what is the one restaurant I got to hit?

The one restaurant you will have to hit is Lynora’s. This is an Italian restaurant, and their food is excellent.

What is the one thing I should order at Lynora’s in West Palm Beach?

You can’t go wrong with the bolognese. Whatever pasta you want to choose, their bolognese sauces are to die for. Their sangria is another thing. That is a killer if you are a wine drinker.

I went to the website. 2023, the best of the best in Palm Beach County, Lynora’s.

Tell me how it goes if you ever get in contact with me. I love to hear it.

Timothy, thanks for joining us. I appreciate your time and insights.

I love to be here. Thank you, Eric, for having me on. I enjoyed it.

Awesome.

Thank you for reading my interview with Timothy. I trust you have a number of takeaways that will help you to dial in the accounting side of your construction business and bridge some of those communication gaps between the back office and the field. Feel free to share this episode with other people who you think would benefit.

Another request before you bounce away, please give the show a rating or a review. An honest rating or review is appreciated. Anywhere between 1 and 5 stars, whatever you think we have earned. The reason why I like you to do that is because it helps the show to be seen across the interwebs. I know that this show has a tremendous positive impact on the industry. I want that to continue to happen. I want it to deepen. Your review can contribute to that. Please give us a review and a rating. Thank you for reading this episode. I will catch you on the next episode. 

 

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About Timothy Wingate Jr.

COGE Timothy Wingate Jr. | Financially Strong Construction BusinessTimothy Wingate Jr. is the founder and president of G+F Business & Financial Consulting. He is a licensed Enrolled Agent and construction accountant. In May 2016, he founded G+F, recognizing the need for specialized accounting and tax services for construction companies.

Many construction businesses struggle to bridge the communication gap between their work in the field and their back office. With first-hand knowledge of the construction industry and a deep understanding of taxes and finances, Timothy provides tools, advice and financial guidance to his clients so they better understand their finances and improve their cash flow.

Timothy is a QuickBooks Online Certified ProAdvisor and was a member of the Intuit Tax Council from 2019 to 2022. He earned a bachelor’s degree in business administration with a concentration in finance from the University of South Florida. He is also a member of the Construction Financial Management Association.

Timothy worked for many years with his father, a licensed general contractor since 1984, giving him plenty of first-hand knowledge of the construction industry.

Timothy lives in West Palm Beach, Florida, with his wife and three sons. There he also served as chief operating officer and chief financial officer for a long-standing nonprofit.