Why You Shouldn’t Be Giving Up on Federal Grants

Nonprofit leaders are facing a moment of reckoning: Is federal funding still worth it?

Delayed opportunities. Agency confusion. Shifting compliance rules. The politicization of DEI language. For many, walking away from federal grants feels like the safer route.

But Fielding Jezreel says hold on.

In this episode of A Modern Nonprofit Podcast, Fielding—Founder & President of Jezreel Consulting and one of the nonprofit sector’s top federal grant strategists—joins Tosha Anderson to make the case for why you shouldn’t give up on federal grants.

Because right now, funding isn’t just funding. It’s advocacy. It’s access. And it’s about staying visible in a system that’s changing fast.

Fielding shares what she’s seeing behind the scenes with her clients, including:

  • Agencies struggling to align executive orders with existing law
  • Application requirements changing—sometimes week to week
  • Entire divisions going quiet or disappearing (we’re looking at you, SBA)

Still, she encourages nonprofits to stay in the game. Because stepping back sends the wrong signal: maybe we didn’t need this money after all.

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Forecasting as a Nonprofit’s Financial Early Warning System

Many of the financial challenges that derail nonprofits—unexpected capital expenditures, seasonal fundraising gaps, timing mismatches—aren’t included in the original budget.

Forecasting gives nonprofit leaders a strategic advantage by allowing them to:

  • Model different financial scenarios
  • Spot risks before they become emergencies
  • Make informed decisions in real time

It doesn’t have to be complex. Start with your existing budget. Then, update projections monthly or quarterly. Replace budgeted numbers with actuals and monitor both net income and cash flow impact. The goal? Shift from reactive firefighting to proactive planning.

Podcast Intro Template

The key is knowing how to show up.

She urges organizations to ask not only are we eligible, but are we willing—to adapt language, challenge executive orders, or even fight back through the courts if necessary.

For those new to federal grants, Fielding advises patience. This is a time to learn, build capacity, and get your infrastructure tight. And if you’re applying? Bring your policies, legal support, and even your PR team—because compliance is on blast.

This isn’t about chasing dollars. It’s about staying in the room, and fighting for the communities we serve.

Contact Fielding 

Website: https://www.jezreelconsulting.com/

LinkedIn: https://www.linkedin.com/in/fieldingjezreel/

Apply to join the Fast Track Training and Federal Grants Accelerator (Beta pricing ends July 14)

Sign up to receive weekly federal grants tips from Fielding’s newsletter

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About The Charity CFO

We are an accounting partner that truly understands nonprofits. We know the missions that drive you, the obstacles that challenge you, and the dedication your job demands. We “get” nonprofits, because nonprofits are all that we do. If you need help with your accounting and bookkeeping, let’s talk.

Book a FREE consultation here!

Your Budget Isn’t Enough: The Forecasting Advantage for Nonprofits

Let’s be real: Budgets are static. Forecasts are strategic.

Most nonprofit leaders excel at building a budget—usually because it’s required by the board or bylaws. But what happens when reality deviates from the plan? In this episode of A Modern Nonprofit Podcast, Tosha Anderson sits down with CPA and nonprofit finance expert David Steffens to explore why forecasting is the critical tool for organizations seeking financial clarity and long-term sustainability.

Why Budgeting Alone Doesn’t Cut It for Nonprofits

Budgets are essential. They reflect your intentions, priorities, and strategic vision. But there’s a problem: the moment your budget is approved, it’s already outdated.

A budget shows where you wanted to go. A forecast shows where you actually are—and where you’re headed. As David Steffens explains, “A forecast is your GPS. It keeps you out of trouble.”

That means forecasting helps you:

  • React to cash flow changes
  • Adjust for revenue shortfalls or windfalls
  • Respond to unexpected program shifts or delays

Forecasting as a Nonprofit’s Financial Early Warning System

Many of the financial challenges that derail nonprofits—unexpected capital expenditures, seasonal fundraising gaps, timing mismatches—aren’t included in the original budget.

Forecasting gives nonprofit leaders a strategic advantage by allowing them to:

  • Model different financial scenarios
  • Spot risks before they become emergencies
  • Make informed decisions in real time

It doesn’t have to be complex. Start with your existing budget. Then, update projections monthly or quarterly. Replace budgeted numbers with actuals and monitor both net income and cash flow impact. The goal? Shift from reactive firefighting to proactive planning.

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Budgeting Mistakes Nonprofits Make (And How to Fix Them)

David and Tosha also break down common budgeting missteps they see again and again in nonprofit organizations:

1. Skipping Cross-Team Input

Budgets built in silos—especially without input from the development team—often miss the mark. Revenue targets must be aligned with fundraising capacity.

2. Plugging Numbers to “Make It Work”

Trying to force a break-even budget by padding numbers leads to unrealistic expectations. It’s better to face deficits honestly and plan accordingly.

3. Ignoring Seasonality

Revenue and expenses rarely follow a straight line. Forecasting helps you account for timing differences that could otherwise trigger cash flow crunches.

4. Overlooking One-Time Cash Events

Loan repayments, capital purchases, or delayed grants can all strain cash unexpectedly if not forecasted.

The fix: Build your budget with your team—not for them. Collaborate, test assumptions, and revisit the plan often.

How Forecasting Leads to Smarter Nonprofit Decisions

When you forecast regularly, you can confidently answer questions like:

  • Can we afford to hire that new program manager next quarter?
  • How big is our real fundraising gap?
  • Will we need to tap reserves—and when?
  • If revenue dips, what programs or expenses are at risk?

These aren’t just financial questions. They’re strategic decisions—and forecasting empowers you to make them with confidence.

Budgeting Is the Starting Point. Forecasting Is the Strategy.

If your nonprofit is still budgeting once a year and crossing its fingers, it’s time to level up.

Forecasting isn’t just good financial hygiene—it’s a strategic necessity. It transforms your leadership conversations, increases board confidence, and helps ensure your mission remains funded and focused.

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What is Financial Forecasting and Why Does it Matter to Nonprofits?

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T

About The Charity CFO

We are an accounting partner that truly understands nonprofits. We know the missions that drive you, the obstacles that challenge you, and the dedication your job demands. We “get” nonprofits, because nonprofits are all that we do. If you need help with your accounting and bookkeeping, let’s talk.

Book a FREE consultation here!

Why Strategic Planning Fails Nonprofits — And What To Do Instead

Strategic planning. If that phrase makes your eyes glaze over—or your blood pressure spike—you’re not alone. Nonprofit leaders know they should have a plan. But what that plan looks like? That’s often where the confusion sets in.

In this episode of A Modern Nonprofit Podcast, Tosha Anderson sits down with Steve Strang, Practice Director at Spectrum Nonprofit Services, to demystify strategic planning and help nonprofit leaders stop spinning their wheels.

Steve makes one thing crystal clear: Strategic planning isn’t just a document. It’s a process. One that must adapt to your organization’s current reality—people, finances, and all.

“Our planning process helps you identify the impact you’re trying to have, and your method to get there,” -Steve Strang 

But that method? It’s not one-size-fits-all.

In fact, the “classic” five-year strategic plan might be doing more harm than good. Especially in today’s volatile environment, Steve recommends looking 12–18 months ahead—max. The key isn’t how long the plan is. It’s how often it gets reviewed, challenged, and adapted.

And that starts with asking better questions. One of Steve’s favorites? 

“How much impact can we afford right now?”

Why Strategic Planning Fails Nonprofits — And What To Do Instead

This echoes what we covered in our recent blog on Strategic Planning vs. Scenario Planning, where we broke down why static plans often fall apart—and how scenario planning can help you respond to real-time challenges with more confidence.

Whether you’re eyeing growth or simply trying to stabilize, strategic planning needs to start with reality, not wishful thinking. That means bringing in financial data, team feedback, and external factors like labor markets and policy changes. Without that, you’re building a strategy in a vacuum.

Boards, CEOs, staff—everyone has a seat at the table. But not all at once. Steve recommends a small, cross-functional task force (ideally under 10 people) to drive the process. And if that team can’t access basic performance data? That’s your red flag that systems—and people—aren’t in place to support strategy.

In the end, the best plan is one you’ll actually use. Not a report that gathers dust, but a tool that guides your team week by week, quarter by quarter.

Because strategic planning isn’t a retreat. It’s how you lead—intentionally, adaptively, and with eyes wide open.

Connect with Steve

Practice Director at Spectrum Nonprofit Services

Website: https://spectrumnonprofit.com/
LinkedIn: https://www.linkedin.com/in/stevenstrang/

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Strategic Planning vs Scenario Planning

The Difference between a Bookkeeper, an Accountant, and a CFO

About The Charity CFO

We are an accounting partner that truly understands nonprofits. We know the missions that drive you, the obstacles that challenge you, and the dedication your job demands. We “get” nonprofits, because nonprofits are all that we do. If you need help with your accounting and bookkeeping, let’s talk.

Book a FREE consultation here!

Cleaning Up the Skeletons in Your Financial Closet

Is this you? “I don’t know if my nonprofit’s accounting systems are bad… and I probably won’t know for sure until something bad happens.”

99% of nonprofit founders we work with don’t have a background in finance. If you struggle with feeling confident that your books are in order… and don’t know how to tell if they’re in order or not, this episode is for you.

This week on A Modern Nonprofit Podcast we discuss common red flags you can check today to verify your organization’s financial health.

In this episode, Isabel Sippo joins me to talk about the most common reasons why your nonprofit’s finances might be a mess, and ways to clean them up.

Isabel is the Onboarding Specialist at The Charity CFO. She focuses on helping new clients feel more confident about their financial records by re-engineering financial systems and minimizing opportunities for errors.

In this episode, you’ll discover…

  • Key questions to ask if your books are out-of-date (5:50)
  • 3 common issues that lead to messy, inconsistent books (10:56)
  • The Big Red Flag you need to check for and how to fix it (15:28)
  • How to get started so you minimize opportunities for errors (31:29)

Thanks for listening and be sure to subscribe for new episodes every week!

For more nonprofit accounting resources check out www.thecharitycfo.com.

🎧 Click here to listen to the Podcast on AnchorFM or Apple Podcasts

👇 Or scroll below to read the full transcript of our conversation

A Modern Nonprofit Podcast
Data Privacy Strategies for Modern Nonprofits


3/2/2022

Tosha Anderson:

Hey everyone. Welcome back to another episode of a modern nonprofit podcast. My name’s Tasha Anderson. I’m your host today? I brought along a special friend of mine, Isabel, not only, uh, do I consider you Isabel, a friend, but also a colleague of many, many years. And now more recently, one of my fellow coworkers, she actually works at the charity CFO now, and I’m super excited to have this conversation and I thought it was really cool to have you Isabel on because we have very similar, um, backgrounds, um, almost identical backgrounds, frankly. So Isabel you started your career. Um, actually even prior to public accounting, working on a couple different finance, finance, accounting, depart working for some pretty large organizations, um, both on the for-profit side, I think, and on the nonprofit side, but then you did a stint in public accounting and that’s where all of us accountants get a crash course and all things, accounting, um, across industries and myriad of problems that we come in contact with.

Tosha Anderson:

And that’s actually where I met. You used to audit nonprofit organizations back in the day, similar to me, but while I was the CFO of a nonprofit, you were my auditor. And when I left that organization, you actually took my spot. So really interesting stories. So you and I have both seen so many different nonprofits and we’ve both seen how quickly things it out of control, and we’ve both been responsible for cleaning up those messes. And now that you’re with the charity CFO, you are an onboarding specialist and your only job really is to help the newest clients in fixing their messes. And by messes, we mean, the books are just wrong. Um, they don’t know how to get them, right. Um, it could be just a failure to have any consistent processes, right? So how do I get this going and how do I get buy in from my team and how do I get it done consistently? Um, so that we can ensure we get through audits and then just kind of balancing all of those things together. So it Isabel, thanks for humoring me and coming on today and having conversations about your experience with messy accounting and how to get it fixed. Um, so again, thank you for, for taking time out of your busy schedule and chatting with me today about this.

Isabel Sippo:

Well thank you for having me and yeah, you’re absolutely right. I got to follow a lot of your footsteps. Um, some of your direct footsteps, which you left a great, uh, path for me. And then of course, as things evolve and companies change and get bigger and stuff, things change and yeah. Uh, you just have to learn to adapt.

Tosha Anderson:

Yeah. That’s one thing for certain in the nonprofit world and you and I both worked for an organization that was growing very quickly because they went through a merger, but even without that, right, uh, different funding opportunities come up and those get compounded onto the existing accounting needs. It’s already there. And then of course, funders change their mind or the accounting rules have changed over the last few years for nonprofits. So there’s always something that requires some sort of re-engineering. And that I think is where a lot of organizations really struggle. A couple things actually, number one, that we’ve alluded to transition in leadership. So transitioning from one account to the other, whether it’s an outsource person, it’s a senior level person or even a bookkeeper. And frankly, I think the transition, the bookkeepers are even, um, more susceptible to error and where things get really, really messy for our clients.

Tosha Anderson:

So that’s, that’s a common issue. And then also you have issues of size and complexity challenges, um, where you might have a person doing your accounting in place, but things have changed for one reason or another. And all of a sudden now that is beyond their skillset and we keep limping along and limping along, limping along, and then we keep adding more and more people because we think it’s a, uh, a band length issue. It’s a capacity issue. You, and really oftentimes it’s an understanding of the compliance needs issue, um, and a skillset, frankly, rather than, rather than a… a number of bodies issue. And so we’ve seen that happen a lot of times with organizations and before they know it fast forward, something happens. Um, it triggers in which they realize, wow, our accounting is not on track. And that’s what we’re gonna talk a little bit about today.

Tosha Anderson:

And I just wanna validate everybody. Um, I would say 99% of the people that I talk to that lead organizations, they do not come from a business background. They do not come from a finance background and their fear is always what they say to me. I don’t know what, I don’t know. I don’t know if my accounting is bad. I don’t know if my financial reports are inaccurate. I have some framework in which I might look at it and know, uh, that doesn’t seem totally right, but it’s not until something happens. And that’s something that happens is usually an auditor comes in, whether it’s your funder, whether it’s your financial statement, auditor, maybe it’s the tax return gets filed in correctly, or your board is just savvy enough to say, Hey, what’s going on here? And then you end up peeling, you know, the curtains a little bit and you realize, oh my gosh, this is an absolute disaster.

Tosha Anderson:

So we’re gonna talk about that. And for all of you that might suspect this may be happening. We’re gonna give you some tips on how to identify when that’s actually happening. So let’s just dive in Isabel with the first day. You look at a lot of accounting files all the time as part of your work here, certainly in your work, when you were a controller, a nonprofit organization, isn’t even prior to that, when you were an auditor, you’ve looked at a lot of accounting files. You’ve seen a lot of financial reports. What is the first few red flags that you see or that you go to when reviewing files, um, and those red flags or those points of referenced that helps you understand, okay, what is good or bad about this county system? What immediately speaks out to you? Like, Hey, we’ve got problems.

Isabel Sippo:

So I think, uh, the first place you always wanna look at is where they are in reconciling. Like, have they reconciled anything recently? Has it been years? If so, then you already know that you’re going into, um, get your, have to get your hands a little dirty to dig in and see, first of all, why they’re so behind and second of all, uh, what they need in order to be successful in reconciling. And then, um, the first place I always reconcile is if they’ve been audited, like let’s try and compare to the audited statements. Yeah. Why are they off? Why are they different? Usually it’s very simple. Um, after that, you just wanna go a little more in depth of looking at their outstanding accounts receivable. Why do we have outstanding accounts receivable? Are we billing timely? Are we expecting the money to come in? You know, where are we having hiccups in the road? Um, is there a cash flow issue? You could also determine that by looking at their accounts payable, like, why aren’t we paying bills? Are we nervous that we won’t have enough money in the bank? And, um, there are just a lot of different areas like that. You kind of want, uh, things clean. So how current they are is, uh, will help you determine if it’s a red flag or not. And comparing things to the audit is always the first step that I take.

Tosha Anderson:

Absolutely. And to reconcile that word is used, I think so regularly in the accounting world that it trips people up that are not accountants. So when I think of reconciling I’m with Isabel, I, I, first thing I do when somebody shares a file with me, when they’re like, oh, I wanna really share how far behind we are. Maybe a couple months. Like, just, why don’t you go ahead and send me your file. Uh, and the first thing I do is I look at the bank accounts, right? This is about like the cash. When is the last time they refiled their checking account, right? And if it’s been six months, eight months, 10 months, never, I’ve seen that before. Never. Um, then that tells you that what they’re, what that’s telling you is that what has hit the bank account, which is substantially almost everything that’s gonna show up in your accounting reports has never been actually double checked.

Tosha Anderson:

You’ve no one’s ever actually double checked that what’s hit. The bank account is actually been entered into the accounting system. And the opposite could happen are things that were hitting the bank account were omitted for in the accounting system. And then there’s also cases where things were put into the accounting system that never actually had the bank go and there could be duplicates and there could be omissions and there could be all sorts of things. And then the second type of reconciliation that we talk about, we talk about the balance sheet reconciliation. So basically you run a balance sheet report and essentially everything on that report should have, um, kind of an outside spreadsheet. You might be able to do it within the accounting system, but most accountants have an Excel spreadsheet. Now, Ismail, and I will say in practice, most accountants might only reconcile that once a year in practice.

Tosha Anderson:

Um, that’s not totally uncommon, but I would say best practice. What we like to do here is we do that every single month. So those are things of it Isabel’s referencing too. Are you when’s the last time somebody’s actually checked prepaids and here’s a here’s in my mind, a, a pretty sure sign that things are messy. Um, I look at when’s the last time the bank accounts have been reconciled and, and you should be able to find that in any accounting system, um, assuming that you’re not using like Excel, obviously Excel, wouldn’t be able to tell you that, but a QuickBooks or, you know, anything else that you’re using. The same thing I do is run the balance sheet report. And if you see any negative numbers on that balance sheet report, ask a lot of questions. If your accounts receivable is negative, if your accounts payable is negative, if there’s anything negative on there other than like accumulated depreciation, um, that’s a sure sign that something might be off and to Isabel coin.

Tosha Anderson:

The next thing I look at, you’re absolutely right. I look at accounts receivable. Um, and does that seem reasonable? You should know, as a leader of an organization, you generally owes me money and how frequently do people pay. So if you’re seeing, you know, funder, a, their balance is 120 days late, but, you know, fund a pays every single month, like clockwork, that’s a sure sign that things are off accounts payable, same way. If you’re noticing all of these positive and negative numbers on that report. And you’re showing that a lot of payments are over 90 days late, but you know, you have enough money and you’ve paid those bills. That’s another sure sign that things are off. So those are some pretty big red flags for me and Isabel when we inherit our clients. Um, and the good news is if you all have records like this, you are not alone.

Tosha Anderson:

You are not alone. Um, more often than not, this is common. Um, and unfortunately this happens, especially when you turn a over your accountants. And that is something that we see oftentimes in the nonprofit world, they’ll have a part-time person they’ll stick around, you know, for several months, a couple years, maybe then they change to another person and then they have to get up to speed. Um, and one thing about the county world as well, I don’t think people realize is much like any profession. There’s not always a black or white, right or wrong way of doing things is open to interpretation. And every accountant is going to have a different interpretation doesn’t necessarily mean it’s wrong. It’s just when you add all of these interpretations together, uh, you’re not in sync, you’re not in harmony. The, in the data of, within your accounting system could, um, not have a whole lot of it integrity. Right. So kinda keep that in mind. Okay. So now that we’ve looked at some of these accounting files and we’ve started seeing that doesn’t look right, what are some of the common issues you find when you take on some of our newest clients and look at their files? Like, what are the main things that are just wrong?

Isabel Sippo:

I, I think ultimately where all the issues stem from is the timeliness. So, um, many non-profit organizations, their finance department is always spread thin and helping every other department that they can, and then their finances always fall in the back burner. So, um, timeliness is usually the key of where all the issues are stemming from, like, why are the bank reconciliation not done on time? Why don’t have a finance report? Um, then when it does come to a deadline, they are scrambling to get things done. And there’s room for error there’s room for them not having the complete support time. I, you know, saved in the accounting system, saved in their files to reconcile to, and when people fall behind, they just keep falling behind. Yeah. And you have months of accounting work that doesn’t have any backup. Um, I feel like that’s where everything stems from.

Isabel Sippo:

There’s also the inconsistency of how things are recorded. So if people are picking things up and putting things down and then trying to fix it throughout the whole year, but they don’t have that standard. Like every month we’re gonna reconcile, you know, prepay aids and every month we’re gonna reconcile a bank. Um, it’s just hard to pick up and figure out where people left off, uh, during their cleanup also. Yeah. Some of the things that kind of piggybacking on what you said before is we have some bookkeepers that, um, you know, they were taught to do something one way and they never adapted, they have done the same journal entry every month for years, and it could be prepaids and we don’t have those expenses anymore, but we’re still allocating these random expenses and it’s, uh, they just don’t know when they should be adapting and when they should have changed and how they should look deeper into it, because they were told, this is how you do it. And sometimes They just need to have a process in reconciling and like looking at the back data to make sure that, uh, what they’re doing is actually what should be done

Tosha Anderson:

Well in, you said something that I think really, for me, boils down to the difference of doing accounting and bookkeeping. And what I tell people bookkeeping is getting the information into the accounting system. Accounting is to be able to look at those reports and know if that information was entered wrong, or the numbers are wrong and also understanding how to fix it. Right? Those are two totally different skill sets, um, is well, and I think so, oftentimes we see non-profits, they will hire bookkeepers that oftentimes have, uh, some sort of shared role. They do other things within the organization and you’re right. They just keep plugging along. This is the way we’ve always done it, da, da, but they don’t have somebody in house that can look at it and say, that is actually wrong. And here’s a pro tip. Um, and maybe I’ll get some hate mail from accountants out there later on.

Tosha Anderson:

But the funny thing is running the financial reports in a modern accounting system does not take any time hardly at all. It’s all of the work that goes into your financial reports, even being ready to be, um, paired, right? It’s all those reconciliations we’re talking about. So if your accountant is not giving you financial reports, they are 100% not getting, um, those reconciliations done. Otherwise they can hit print and the reports spit out mostly. Um, now a few messages from accountants out there that say, well, I have to do all these manual reports in most cases. And in essentially in almost every case for our clients, it’s all of the reconciliations that take a little bit of time, which is why it’s so important to be doing those on a monthly basis. Because if you do them on a monthly basis, then you’re only looking at if this is off, we’re only looking at 30 days or, you know, a month’s worth of activity.

Tosha Anderson:

If you’re not doing those. And you finally, as Isabel said, you get behind, you get behind, you get behind and then like, shoot. Now I have to go back and reconcile three months worth. Well, yeah, that’s why you can’t get the reports out because you’re taking that much more time to go through 90 days worth of activity and figure out where do things go wrong as opposed to just 30 days. So if you’re not getting your reports, it’s likely because you’re not getting the reconciliations done. And if the reconciliations aren’t being done, that likely means that there’s some disputes between what your accounting system says is in the system and what, um, your bank account says and what the accounting rules say should be in the system. So there’s a disconnect there. So that should be a pretty red flag, a pretty big red flag.

Tosha Anderson:

If you’re not getting ongoing financial reports, that means something within your accounting function has gone off the rails. And that usually means that those reconciliations aren’t getting done, or the information’s not getting into the accounting system. We just onboarded a client, um, a few months ago. And this is a pretty large organization. I mean, I think there are budgets about 6 million a year for many of you out there hearing we, well, you know, I’m a small organization and I have all these problems that I’m alone because I don’t have more money. And if I had more money, I can hire accounting teams. We are here to debunk that myth, um, that larger organizations don’t have these problems, Isabel and I work with and talk with very large organizations, uh, you know, upwards of 10 million or more a year that have had this same problems that we’re describing.

Tosha Anderson:

So you are not alone. That’s the good news. Um, the bad news is we still gotta fix the problems at some point. So even really large organizations have this issue. And if you know that once those financial reports stop rolling in things have gone off the rails. And so if it’s a matter of, well, I just haven’t had time to, you know, get things done. Um, that’s a pretty big issue because when you fall behind, it’s gonna take a lot more time to get things up to speed. Okay. So those are some of the common issues that we find. Um, when starting to look at accounting files, we kind of alluded to it. AR is really off cap payables, really off cash balance could be really off. Um, we might have determined, um, some of the other things that I find kind of looking at AR and AP at the same time.

Tosha Anderson:

Um, once you get all that information to the system, you might notice, oh, shoot, I forgot to build this funder pretty big problem. Um, so we wanna make sure that cash never ends. And without seeing those reports on a monthly basis, you don’t see is revenue hitting every single funder as it should on the property. And lost statement are the statement of activities. If it’s not, that might mean that cash is not gonna continue flowing into the organization. So you need to be. And I pro tip too, just because it shows up on the financial report does not mean your accountant actually submitted the billing to the funder. That’s a whole separate process. Um, we’ve had that mistake happen for our clients. Okay.

Isabel Sippo:

And we’ve had situations where they just have to plug in an estimate because they’re waiting from the funder to come back with them with like a new temp, something. And then, you know, by the time it comes out,

Tosha Anderson:

They’re behind.

Isabel Sippo:

But we still have that number that was accrued on our statement.

Tosha Anderson:

Yeah. I would say for me, common issues could include easy fixes, um, payments like bills, payments might have been entered twice. Deposits might have been entered twice. Those are easy things cuz we didn’t actually deposit the check twice. We didn’t actually pay ’em better twice. It’s just duplication. So those are kind of easier issues, more call common issues that some of those balance sheet accounts prepaids accrued expenses. Those sort of things were never booked accordingly. Um, depreciation expense. Those are pretty easy. You can just go and tweak those. So those are kind of like more common issue, more serious issues. I would say that we often find that billing has not been submitted to the funder and, and or collected, um, on a timely basis. So that in impacts your cashflow other issues where we’ve seen, um, where we’ve identified that payroll taxes were not being remitted to the IRS.

Tosha Anderson:

Right? And so they’re finding that they have fallen behind on remitting. Now this should be done by your payroll company automatically, but for whatever reason, some organizations decide to try to do yourself pro tip strongly advised not to do that. But anyway, some do. And then you realize really big things like your IRA or your 401k deferrals were not remitted. Your taxes weren’t remitted, right? If you are not checking, what’s hitting the bank account versus what’s supposed to be hitting the bank account. That’s where you fall into issues with the IRS potentially department of labor. So those are bigger issues that are aren’t as common, but they still happen often enough that it makes my list. Um, but those are the kind of things that you look at. All right. So now that we’ve invoked all of the fear, um, into everyone Isabel and that these are the things you should, um, kind of be looking at. These are kind of the worst case scenarios. What is some advice you’d offer up to leaders of nonprofits to so that they can check and make sure that their accountants are doing a quality job. They’re doing the things that they need to be doing to keep the wheels turning within the organization. What advice might you give?

Isabel Sippo:

Um, the first advice I would give is to kind of get involved with the auditors. Don’t get involved in the like nitty gritty, all the paperwork and stuff, but at the end of the audit, when they’re going over adjusting journal entries and like all the changes that they had to make, make your executive team or your CEO part of that so that they can see like, Hey, these adjustments that they did, are we capable of doing it internally? Like why are they doing this? Get an understanding of, um, where the auditors are seeing changes should be made and see if we can, like you can update your department on how to right. Uh, do those processes. Um, another thing I would definitely say to leadership is with the time issue, um, if your finance department isn’t getting things to you timely, why not? I have worked in a non profit.

Isabel Sippo:

Tasha has worked in a non-for-profit there have been days where I was the only person after hours and then a toilet’s running and they’re like, oh my gosh, what do do we call, um, you know, rocks thrown through breaking windows. And we have to take inventory quickly on if any technology was stolen, getting an alarm that goes off that, you know, there’s a suspicious person in the lobby. That’s not making people feel safe. They encounter all this stuff. And then a lot of the times since finance is part of admin and um, so someone’s not answering fault phones. The first department they go to is, Hey finance, can you answer phones and direct phones? And the team takes on more than they can chew. Most of the time, a lot falls on finance. I know that doesn’t sound like the number one place where it happens, but all these little things add up and then don’t get done.

Isabel Sippo:

So I would suggest like leaders talk to your finance department, why aren’t things getting done? What have you done? That’s outside of your job description? You know what your job description is and, um, figure out a plan on how to prioritize their job. I always recommend to, um, cuz I have clients that are like, well this happened or I found out my bookkeeper was helping with plugging in donations and stuff. Right? I always say, Hey, tell your staff. If someone asks me to do something, you have to talk to my supervisor and get my supervisor’s permission for me to, uh, take this thing. That’s not typically my task. Of course everyone wants their department to be a team player. So nobody wants to not help out. But, um, that I feel like tends to be one of the biggest issues with the timeliness that, you know, finance is helping with grants, finances, helping with reports or funders or, you know, new rules was because of the pandemic that came out with payroll. Now everyone’s wondering to know like how these things change and uh, just have to provide support to the finance team to make sure that they can actually do their finance jobs and try to keep them on their narrow path.

Tosha Anderson:

Yes, yes. And I, I wanna do a whole nother episode on our podcast about this, but you bring up a really good point. One of the things that so you and I both obviously worked within a nonprofit and there was nothing exceptionally unusual about this organization and by way of being pulled in so many different directions, right? It happens all the time. This is not a judgment on, on this one particular organization. I’ve seen it time after time, after time, after time and every single person that I have worked with that have chosen to leave nonprofit organizations and anybody listening that works for an organization. I know you can, um, validate this and I know you can re relate to it that you’re pulled in so many different directions that you find that your primary responsibility, which, which in this particular case that we’re talking about is accounting and finance becomes a very small percentage of what you’re actually doing.

Tosha Anderson:

And I believe so strongly in this, that I was, you know, my background is accounting and finance and I was spending so little of my time doing that and being put in roles that I don’t have any experience and I don’t have any, um, specific skills in necessarily. And then you end up finding yourself in a place where you’re kind of just surviving in all of these different, you’re not thriving in any particular area. You’re not excelling in any particular area. And if you, you have a high performer, that’s in that role. And they feel like day after day after day after day, that they’re only surviving. This is where the burnout comes into play. And I feel so strongly about this, that whenever I actually left that organization, I was there for four years and, and I started this firm and I thought we’re only gonna do the thing that we’re best at. We’re gonna do accounting and finance for nonprofits. We only work with nonprofit. We only do accounting work. We don’t pretend to be HR experts. We’re not it experts. We’re not facility managers. We’re not, you know, we’re none of these things I’m not gonna, I’m not your program compliance person. I’m none of these things. I not make any

Isabel Sippo:

Client database or

Tosha Anderson:

Yes, yes. All of these things. And within our organization, I’ve realized, um, as a leader, you know, that I, this is a little bit off the rails from accounting and finance, but I really tried to figure out what is every single person on my team. And we have, um, over 30 team members now, what is their primary job, their primary job. We have to have a few Swiss army knives, right? For all of the things that you were describing, Isabel, you know, this happens and this happens, we do have a couple Swiss army knives, but as we keep growing, I keep, you know, identifying, okay, how can we pair this person’s responsibilities down? How can we pair this person’s responsibilities down so that they really have a primary job. And so to your point, Isabel, if your accountant has 10 other jobs, and then you’re wondering why, um, we can’t get the finance in order why we can’t get the accounting in order.

Tosha Anderson:

Oftentimes it’s because that primary job of them having accounting and financial management is often a very, very, very secondary role. I used to joke. I came in from seven to 9:00 AM to work on the accounting, which I’m a CPA, you know, that’s what they hired me for, you know, accounting background. And I spent the whole working day putting fires out for everything, but accounting and finance, frankly. Um, and then not unusual at all. And so I’m with you as well. If there’s things going on, it’s usually there are two, two different options in my mind. Um, it’s, they’re way above their head. They’re way they’re in way above their head from a technical accounting standpoint. And they just don’t know how to do the work. Or number two, they’re distracted with all these ancillary like responsibility is that they don’t have time to do the work.

Tosha Anderson:

Right. And so oftentimes what we’ll see is we’ll keep adding. We meaning the nonprofit organizations, we’ll just keep adding on more and more and more people within the accounting function. But the person that really understands the accounting and the process and all those things, they still don’t have the time or the responsibilities to, um, I should say they don’t have the time, the capacity to focus on those responsibilities to actually delegate those things, to, to train those things. So I think what was wise for this particular organization, when, when I had left, they started hiring more formalized positions. Okay, we’re gonna hire an HR function to do the HR stuff that we used to have the account do. We’re gonna hire, you know, a database person to work on the program database. We’re gonna hire maybe billion people to focus on. I’m making things up now.

Tosha Anderson:

Right. Um, but really kinda start carving out more of those responsibilities that aren’t really accounting in finance, uh, so that you’re accounting and finance people can really focus on just that. So anyway, that’s a little soapbox I can go on. And again, I wanna do a whole different episode on that, but back to, you know, really the meat potatoes of why we’re here now that we’ve identified the something’s going wrong in the accounting department. Um, whatever we figure it out, let’s say it’s, it’s one of those issues that I mentioned, which is more often than not the case is the, uh, the accounts are weighing over their head, they’re weighing over their head. Um, so oftentimes I know Isabel, you’ve seen this where you’ve inherited a set of books from somebody that might have had a banking background. They might have had a financial type background.

Tosha Anderson:

Uh, and I think us non-accountants, uh, well, if you understand finance and it’s it’s finance and accounting and how different can it be? And the reality is there’s two different types of accountants in my mind. Um, probably more than that, but there’s the day to day routine, very tedious, very reliable, get the information to the accounting system kind of person. Then there’s more like creative high level strategy, fix the world problems kind of person. Right? And oftentimes what I see as an organization will either hire 80% of the work is in the, get the, get the information to the system and get it done accurately and timely, right? That’s probably 80% of the work. So a non-profit will hire that 80% person. There’s a skillset gap between where we are at and where we want go is that 20% problem solving strategic leader type of person is not really within that wheelhouse or they’ll hire the 20% person. This is strategy person, but they have no idea how to actually do the day to day accounting, or they don’t have any desire to do the day to day accounting. Right. And they get burned out and then they end up leaving in a couple years, and then you’re by to the same situation you’re looking to higher again. So there’s

Isabel Sippo:

Philosopher with their head in the clouds. Like they have these grand plans, but like we need to get down in the nitty gritty and get it done. Yeah.

Tosha Anderson:

To get the work done. Yeah. Yeah. So then these organizations, right. Find themselves, you know, they either let go of the 80% person because they’re not quite what they need. Um, or the 20% person either gets, let go or ends up leaving because they’re falling further and further behind. Um, or the person just burn out the work, doesn’t be their soul. And by the way, they got an offer making more money, doing something else who knows, right. These sort of things. So then you’re left to, okay, now we’ve figured out we have this huge accounting problem. Um, it’s messy and we need to clean it up. And I have no idea where to start. I’m pretending to be a leader. You can tell I’ve had this conversation so many times, Tasha, I am not an accountant. I’m a program person. I’ve been in the program side for 17 years.

Tosha Anderson:

I stepped into this position as an interim CEO. We’ve changed CFOs two times in the last three years. I don’t know what the accounting should look like. I don’t know what condition the accounting is. And frankly, I don’t even know how to effectively interview an accountant to make sure I hire a person that does know how to do it. I don’t even know where to go from here, but all I know is my funders haven’t been billed in several months, we’re running outta cash. I have to turn the ship the right way. And I don’t know where to go. This is a true story. And so that’s where a lot of leaders struggle with. How do I even write the ship? Um, so I wanna talk a little bit about the cleanup, just how you, when, like what steps you should initially take and maybe what skills you should look at, or, you know, just some bumper bowling. I call it like some parameters, some boundaries for which, you know, that things are moving in the right direction. So let’s talk about that as about a little bit, where do you typically like to start? Or where would you advise someone to start when they’re dealing with, we know the accounting files an absolute disaster and this whole accounting function is a disaster we need to move forward.

Isabel Sippo:

Um, I always say pick a point in time. It’s very easy when, uh, you have had an audit because you can start from the last audit that you’ve had, the auditors have done their work, they’ve done some due diligence. Like you have already financials that were presented out publicly. Um, it’s easy for them. You choose that last financial audit that you’ve had and you make sure that you reconcile, uh, the books to that. And then you have a starting point. Um, a lot of times nonprofits, uh, and you know, audit firms, aren’t bad guys. They want you to also succeed as well. So they will provide all these journal entry is that they just assume that they have to do every month. Um, so your books have never actually caught up internally. Uh, if you haven’t had an audit, that’s fine. Pick a point in time, do not pick 10 years ago.

Isabel Sippo:

You don’t need to be reconciling 10 years documentation start with last year, pick a date, re I, uh, and start reconciling from that point on, um, not only, uh, with tackling the accounts, they, they should be reconciling and cleaning things up and writing things off. It’s also a time for them to review the chart of accounts, their project codes, their T codes and stuff. If a lot of, I feel like a lot of nonprofits, a lot of account, you know, accounting systems in general, sometimes I think more is more and it’s not really like clean it up. Let’s hide things that have not been active in years. Let’s try to minimize any opportunities for errors, um, the value it, what you have. And then just, if things can be consolidated, we don’t need, you know, like supplies for the office and office supplies is a different, different account, you know, uh, try to make things as concise as possible, um, remove things that need to be removed because not only is it easier for you to do your day to day job, but then it’s easier and cleaner for board members, administration, donors, to be able to look at documentation and get a better understanding of what’s really going on.

Tosha Anderson:

Yeah. And I would add too, what we do for one of my favorite things that, that we do for, for our clients, when we go through onboarding, um, by onboarding, it usually includes cleanup, meaning, uh, we do a really intensive review, um, kind of an interview it’s usually takes an hour and a half, two hours. And we go through every single element of, of your accounting, more specifically, focusing on how money’s coming in and how money’s going out, right. The flow of funds. And we talk about those processes and we go down like, okay, let’s talk about all the different revenue sources. Let’s talk about all the different expense, you know, sources. How does expenses go out? Whether it’s through bill pays, um, through checks or credit cards or ACHs or whatever. Right. And then we talk about other things that are on the balance sheet.

Tosha Anderson:

So again, run that balance sheet report. If you don’t have a balance sheet report, pull out your last audit, pull out your last tax return, whichever and go through each one of those accounts. Okay. So if we have investments, do we know what makes up those investments? Do we know if there’s any strings tied to the investments? Like, ask all the questions. Okay. Prepaid expenses. Do we know what to have? That is, oh, that’s when we moved into our new office space and that’s a deposit. Okay, cool. To start understanding, like, what do these numbers stand for? And then take it a step further, especially on the billing on the money coming in and money going out. Do you understand what the processes are for every single one of those sources? Right. Um, and if you don’t, again, judgment zone, uh, you can blame the accountant, blame the transition and accountant or whatever, and have that conversation with your funders.

Tosha Anderson:

Hey, do you have a training guide? Do you have a funding manual? Um, I, you know, I can’t get, get passwords, like get passwords. So that’s always something that we talk about during our onboarding before we even completely dive in is just to make sure that business continues to operate and we will continue to populate the accounting database, but we understand the processes again, making sure money comes in, money goes out payroll, you know, how your employees are gonna get paid, any other key vendors that need to get paid, those sort of things. So definitely understanding what the process is. And then you can start getting that information into the accounting system as well. And then with Isabel. I love that. Go back to a point in time, which you believe very reasonably, that those numbers were accurate. If it was an audit that you have to assume is a hundred percent accurate because the auditors gave an opinion that it was accurate.

Tosha Anderson:

So you don’t wanna argue with that cuz you paid for that audit opinion. Now, if you don’t have an audit, go back to you, the last tax return that was prepared, um, for which, um, you know, somebody preferably hopefully, um, some sort of CPA has reviewed your files, felt confident enough in the numbers that they’d be willing to swap their name across the bottom of that tax return. So start with those numbers and then we call that kind of rolling forward. So as Isabel was saying, say your last tax return for was for December, 2020. Okay. Now you know that you have a whole year’s worth of activity. So then you’re gonna get all that information from your da your bank. Um, and then you’re gonna get that into your account sort, start categorizing it. And then you’re gonna start going through again, that process documentation of the institutional know, gathering of, do I know what all these sources of revenue are?

Tosha Anderson:

Do I know what all these expenses are, start populating that. And then what we do is go month by month and reconcile the bank statements, we’ve at least accounted for everything that hit the bank account, everything that hit the bank account. Now the categorization might need to be updated. That’s shown into office supplies instead of profession development or whatever. We know that all the money that came in and all the money that went out within the bank account ended up in our accounting system. So that’s usually where we start with things too. Um, okay. So coming up, running up out of time, Isabel, I wanna wrap this up. Any other advice that you might offer leaders of organizations inside or outside of the accounting function, right? Um, maybe how they can handle their accounting and financial management better. Um, I know we talked a little bit more about just having open and honest conversation with your finance folks about all the things that they’re dealing with, but anything else beyond that, that you might wanna share?

Isabel Sippo:

Yeah, I think, um, a great place to start, trying to make an improvement is to, uh, meet with your team regularly, meet with them first week, create a checklist. Was everyone responsible for have the checklist as detailed as possible. If you know that payroll can be in by the third of the month, make sure that’s the deadline. This also allows for, when you do meet with them monthly, you can talk to your team of specifically, Hey, you haven’t met these deadlines yet. Why not? And I don’t like to go talk to people, very judgmental, making assumption, you know, approach it positively. There’s positively logical reasons why. Yeah. Um, there’s been a delay and if there, it also allows you opportunity of if they are falling behind how you can approach them to say, what can I do to help you in order for us to meet our deadlines?

Isabel Sippo:

Um, yeah, be a little proactive. Uh, not only making checklists, you know, don’t reinvent the wheel, let’s work on trying to make templates. I feel like, especially from personal experience, you know, you create a uniform way to build all these different funders and stuff, try to create a template that’s kind of universal. Um, sometimes it, you kind of like lose your footing because suddenly all these funders want different information, uh, that you need to, uh, supply to them. So in those moments, take a few extra minutes and see if there’s an easier way that you could take add more into the monthly reporting that you’re doing so that you can kind of make it consistent across the board instead of constantly making a different, unique, um, process for every single step. Whenever for the most part, you could try to keep things as consistent as possible. Absolutely. Um, and in order to kind of improve timeliness, you know, create templates, create recurring entries, um, like I said, Uh, formatting of running reports that have all the information that you need. And then also evaluating like if development is needing certain kind of reports a certain way, is there a way for us to also build that kind of template in our system? Just so you’re, department’s not spending an hour manipulating data that you have every single time they need something. Yeah. Let’s try to think how we can use things, uh, more than once, uh, moving forward.

Tosha Anderson:

Love that. Speaking of that was gonna be my advice a little bit on the month end reports. I remember when I used to work at a nonprofit organization every single month, I would actually print the reports and I would sit down with the CEO and I would walk through every report every single month. And it was a good exercise, um, because I was then forced to be prepared to present the key findings and takeaways. And it forced her to sit down with me and understand and ask, follow up questions. And I will say now that I’m a leader of an organization, I really struggle with doing all of the things that I need to do to effectively manage the company. Um, there’s just so many things and so many people to be accountable for. So what I have found that works best for me is having systems of accountability for myself.

Tosha Anderson:

So I assign all these tasks to my team members that really sound like maybe I’m keeping, um, them accountable. It’s really a process that helps me keep myself accountable. So if I know that I’m asking for a report for each one of my team members so that we can go over it, I, in a meeting, they think they’re being accountable and oh, well I have to show Tasha what I’m doing every month. No, actually it’s so that when I sit down on that report or sit down at that meeting, I have all these reports and I’m forced to then sit down and walk through them. And then I ask all the appropriate questions. And because we have this recurring meeting set up every single month, I know that I’m gonna have to force myself to be prepared for that meeting. And I’m gonna look at these things.

Tosha Anderson:

So as, or this business has continued to grow and grow and grow and grow. Um, and I’m, you know, running around like, you know, uh, just a, a maniac, right? Um, and it’s not unique to nonprofits. It’s unique to any sort of entrepreneur leader of any business that you’re pulled in a million different directions. So have that system of accountability, I’ve talked to so many leaders of organizations that say they wish they understood their finances more. And I think the easiest way to get an understanding is set that recurring meeting with your accountant, have that person actually print that report. Don’t email it to you and expect you to review it on your own time. Is that gonna happen? At least initially when you develop the, have it’s sitting down actually with a paper, um, report if necessary, um, and pour over those numbers, understand those numbers, um, and ask questions, uh, and not just look at it from compared to last year, maybe compared to last month, why did cash go down this past month?

Tosha Anderson:

Oh, well, because this funder was late paying us or whatever. Um, so sit down and ask those questions. That would be our advice to you. But anyway, Isabel, we are running out of time. So I wanna say thank you again for joining us and having this conversation. I know it’s painful for a lot of people to even think about or talk about their skeletons and their financial closet, but, uh, we’re here to help if you all need any assistance or help go to our website, thecharitycfo.com, Isabel, and I will be happy to chat with you, about what that might look like for us to help you, or at least offer some, pointers in the right direction on how to handle that. So stay tuned for the next episode. Thanks again. Bye everyone.

The Ideal Nonprofit Accounting Tech Stack

Implementing technology into your nonprofit accounting process can help solve a variety of issues—from tracking receipts to properly recording donations. In most cases, technology helps improve the efficiency and accuracy of nonprofit accounting.

You’ll need to use the right technology systems to get these benefits. Known as a tech stack, building a comprehensive system from multiple tools is essential to successful technology use. Keep reading to learn more about building a tech stack for your organization and some of the programs we recommend for it.

tech stack

Accounting Can Be a Challenge for Nonprofit Organizations

One of the biggest challenges for nonprofits to overcome is accounting. Nonprofits are subject to a lot of legal and financial scrutiny. Your nonprofit accounting setup needs to be able to meet tax and legal regulation and reporting requirements so you stay in compliance and retain the public’s trust.

Some of the most common accounting challenges for nonprofits include:

  • Accurate everyday bookkeeping, from recording donations to paying invoices
  • Preparing accurate and consistent financial reports
  • Filing tax returns
  • Managing payroll
  • Organizing accounting and financial information into usable data

Nonprofits can leverage technology to help solve these problems. A good technology solution addresses each of your nonprofit accounting concerns. With the right tech in place, your organization can more accurately record and report your financial information and save your team a lot of time over paper accounting systems.

Integrate Accounting Tech to Build the Perfect Stack

As we mentioned before, a tech stack is a multi-solution technology system that works as a whole to solve your technology needs. Generally, tech stacks use several software programs or tech tools to meet technology needs that one platform can’t.

The key to a good stack is that your individual solutions work together seamlessly. In a well-organization stack, your programs work together to record and organize data across platforms.

Does it seem daunting to set that up?

The good news is most modern tech programs are designed to work with other common solutions through integrations. For example, your revenue recording software might integrate with your donation collection software so that when someone makes a donation it’s automatically recorded in your system.

tech stack

Elements of a Strong Nonprofit Accounting Tech Stack

How do you build a strong nonprofit accounting tech stack? The key is knowing what programs offer your organization the most benefit and work well together.

At The Charity CFO, we’ve found four tech tools that have worked for several of our clients to improve their accounting systems. An example of a strong nonprofit accounting tech stack includes:

  • QuickBooks Online
  • Dext
  • Bill
  • Fathom

It’s important to remember that this exact setup—while great for many nonprofits—may not be the best fit for your organization. Be sure to work with a trusted nonprofit accounting and technology team to help you find the right tech stack solution for your organization’s needs.

tech stack

QuickBooks Online

In our experience, most small- to mid-sized nonprofits benefit from using QuickBooks Online. QuickBooks provides an easy-to-use bookkeeping solution that puts all of your financial data in one place. Even better, the program is scalable to meet the needs of a growing or evolving organization.

We often recommend QuickBooks Online over nonprofit-specific accounting software for three reasons, it’s:

  • Cloud-based
  • Well-known
  • Features almost endless integrations

As a cloud-based solution, QuickBooks Online doesn’t require you to hire an expansive IT team or physically house expensive hardware. All of your financial data lives securely in the cloud, which also means you can access it from anywhere with a secure connection.

QuickBooks is also one of the most well-known accounting platforms and might even be the most widely used. You’d be hard-pressed to find an accountant or bookkeeper who doesn’t have experience with the platform. Working with a well-known system makes it easier for your accounting team to do their job without learning a complicated new system.

Most important to a tech stack, however, is QuickBooks Online’s ability to integrate with nearly any software or tech system you might need. By building your stack around this platform, you almost guarantee that any other system you use will seamlessly feed data to your bookkeeping database.

Dext

One of the most difficult aspects of nonprofit accounting is accurately recording transactions. Dext is a software that helps solve this problem. The program essentially creates an online storage bin to organize your receipts, bills, and deposits where your accountant can easily access them.

A great feature of Dext is the ability to use a mobile app to capture receipt and document data. Employees simply open the Dext app and snap a picture of a physical receipt or document. The app then prompts you to code the receipt so it can accurately record it in the system.

Dext integrates fully with QuickBooks Online, so when a receipt is uploaded to the Dext system, it’s also recorded in your bookkeeping software.

Bill

Bill (formerly Bill.com) is a tech solution for the accounts payable and accounts receivable cycle. The Bill platform works by uploading digital copies of vendor or contractor bills and sending them to the appropriate parties for approval.

You can even set up specific rules in the system that enforce your organization’s approval policies. For example, your nonprofit requires all bills over $500 to go to a specific individual for approval. If a bill comes through the system over that amount, the individual in charge of approval is notified and the bill won’t be approved until they give the all-clear.

This system of only paying approved bills is huge in helping reduce common mistakes caught in nonprofit audits

Fathom

Our final recommendation for many nonprofit tech stacks is Fathom, a reporting system that enhances the limited reports of QuickBooks Online. Although QuickBooks Online does a lot of things really well, its reporting options aren’t the best solution for many organizations that need more customization in their reports. Fathom eliminates these limitations.

Fathom pulls data from QuickBooks and generates monthly financial reports and dashboards. Organizations can use Fathom to customize their reports for various stakeholders in the organization.

tech stack

The Charity CFO is Your Partner in Building a Strong Tech Stack

Adding technology to the accounting system can help free up your time and improve your accuracy, but you must do it correctly. Your tech tools need to work with one another through integrations or you run the risk of a disorganized tech stack. Using platforms that work well together, such as QuickBooks Online and Bill, reduces the risk of inaccuracies across platforms.

The Charity CFO team specializes in helping nonprofit organizations improve their accounting systems. As nonprofit accountants, we know the struggles nonprofits often face in their accounting setup. We can help you streamline your accounting systems for accuracy and efficiency.

Contact us today to see how we can build a tech stack that gives you more time to focus on your mission.

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Comparing Your Nonprofit Budget to Actual

Do you know the financial health of your nonprofit organization? Knowing where your finances stand is essential to effective nonprofit management. One of the best ways to get a quick read on your organization’s financial health is to compare your nonprofit budget to actual performance.

A budget to actual analysis helps you look at your estimated revenue and expense versus what your organization actually saw. Let’s take a closer look at the importance of budget to actual analysis and go over some tips for performing a budget to actual review.

nonprofit budget

The Importance of Nonprofit Budget to Actual Reporting

Nonprofit budget to actual reporting is the process of comparing your organization’s budget to the actual revenue and expenses over a given time. It’s an essential part of nonprofit financial management for a few reasons.

First, reviewing your nonprofit budget compared to actual performance helps you maintain financial transparency and accountability. By knowing where budgeted funds actually end up, you reduce the chance of fraud or inaccuracies in your financial statements. This helps improve donor confidence in your organization. Accurate data also helps you stay in compliance with legal regulations and tax laws, such as annual IRS filings.

In addition, budget to actual reporting can help improve strategic decision-making and financial performance evaluation. Budget to actual reporting lets you spot trends and identify issues in your finances so you can make data-driven decisions.

What to Look for in a Nonprofit Budget to Actual Analysis

There are a few different metrics to keep on your radar as you complete a budget to actual analysis, including:

  • Variances: Budget variances are the difference between your organization’s budget and its actual finances, generally by category. For example, you budget $2,000 per month for payroll, but your actual costs are $2,500. You have a negative variance of $500 in the payroll category.
  • Revenue sources: Recording revenue is an essential part of running a nonprofit. Your budget to actual analysis helps you identify regular sources of revenue–as well as any areas where you could improve revenue streams.
  • Expenses: Your nonprofit expenses are one of the most straightforward areas of a budget to actual analysis. However, looking at budgeted versus actual expenses can provide helpful insights into where your organization’s money is going.
  • Cash flow: Monitoring your budgeted and actual cash flow can help you spot and fix cash flow issues proactively.
  • Budget assumptions: Budget to actual reporting helps you accurately create budget assumptions using real data from your current–and past–finances. Regularly reviewing budget to actual reports can make it easier to form accurate and effective budget assumptions for the future.
  • Financial ratios: Financial ratios are financial calculations that help you monitor your organization’s financial state. They can help you identify which areas of your organization are most financially successful, or where you may need to trim the budget.
  • Budgeting process: Comparing your budget to actual data is an important step in improving your budgeting process. The closer your budget to actual reports gets, the more effective your budget becomes.

Tips for Making Adjustments if Your Nonprofit Budget to Actual Is Off

Even the most financially savvy nonprofit leaders can have variances in their budget to actual reports. If you find your budget to actual is off, you may need to reevaluate your budgeting process to create more accurate budgets going forward.

A budget to actual report makes it easy to identify where you may need to work on your budgeting. Being proactive and strategic with budget adjustments will help your organization improve the usefulness of a budget.

Follow these five tips to help get your budget to actual back on track:

  • Identify the root cause: This involves looking through your estimated and actual expenses and revenue to find where the variations occurred–and why they happened in the first place.
  • Prioritize areas for correction: Make a list of the areas or categories of your budget to actual report that is the most impactful for your organization and plan to focus on fixing those areas first.
  • Adjust spending priorities: It’s not always possible to completely cut expenses, but you may be able to reallocate funds between expense categories to better align your budget and actual data.
  • Explore ways to generate more revenue: If your actual expenses are higher than your budget allows, it may be time to consider new revenue streams, such as additional fundraising or applying for grant money.
  • Continue monitoring process: Regularly reviewing your budget and comparing it with your actual expense and revenue data is the key to improving your budget and reducing variances. Additionally, regular reviews can help promote accountability and transparency, building trust with your donors and your board of directors.

nonprofit budget

Leverage Your Nonprofit Budget to Actual for Success

Effective budgeting and monitoring of actual financial performance are essential for the long-term sustainability of your nonprofit. Reviewing your budget to actual data gives you a chance to spot trends and identify problems in your organization’s financial health. This information then helps you proactively address issues and make strategic adjustments to improve your financial standing.

If you’re unsure of where to start comparing budget to actual performance, consider working with a trusted nonprofit accounting firm like The Charity CFO. Our dedicated team of nonprofit accountants can help you review your budget to actual reporting. We’ll help you identify trends and create solutions so your nonprofit can run smoother and more effectively.

Contact us today to learn more about budget to actual analysis.

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How to Fix Your Nonprofit Accounting

Your nonprofit accounting system might not be the most exciting part of your organization, but it’s one of the most important aspects. An effective accounting system helps you stay in compliance with tax and legal regulations–helping you maintain your exempt status.

However, effective accounting isn’t just about following rules. An effective nonprofit accounting system also helps your organization stay transparent, manage funds wisely, and build trust with donors and the public.

If your organization’s accounting has gotten a little off track, there are things you can do to fix it. Keep reading to learn more.

nonprofit accounting

Take a Close Look at Your Current Accounting Practices

You can’t know what needs fixing in your accounting system until you dive in and examine your current practices. Before you start trying to fix things, consider doing a full review of your accounting system. Taking a close look at your current system helps you identify problem areas in your financial recording methods.

Your analysis should show you where your accounting system is working for your organization and any gaps or areas of concern. For example, you may find that your system is great at recording nonprofit revenue, but lacks an efficient process for categorizing various revenue streams.

Consider making a list of the challenges or issues you find in your accounting system. This list will help you better define how these inaccuracies or incomplete records are affecting your overall accounting strategy.

Get Your Financial Policies and Procedures in Order

Does your organization have written financial policies and procedures in place? Do all of your employees and volunteers know what to do when faced with common financial tasks?

If not, one of the first steps to fixing your nonprofit accounting is setting up these policies.

Having documented financial policies for your nonprofit organization is essential and helps with:

  • Compliance: Documented procedures help your organization maintain accurate records and stay on top of compliance regulations.
  • Accountability: A defined accounting policy makes it easy for anyone in the organization to know what’s going on with funds–which helps build donor and board member trust.
  • Operational Efficiency: Having set financial guidelines makes it easy to track and record financial transactions, improving the overall efficiency of your nonprofit.

To fix your accounting system, you’ll need to create a standardized set of policies and procedures for transactions and reporting. As you create your policies, make sure everything aligns with legal and regulatory requirements.

Focus on Budgeting and Financial Planning

Like standardized financial policies, budgeting is an important aspect of your nonprofit accounting system. Your budget helps you plan out expenses and revenue in advance so you have a better idea of the financial health of your organization. It’s also an important tool for transparency within your nonprofit. A budget shows stakeholders like the board of directors or donors how you’re using funds to advance your mission.

You’ll need to develop a realistic budget for your organization based on real nonprofit needs and goals. The easiest way to create an accurate budget is to use budget tracking based on historical financial data. You’ll use past revenue and expenses to estimate future funding and expense needs.

You should expect your budget to have minor variances from month to month. Try to review your budget every couple of months and make adjustments as needed to meet current financial needs.

Track and Report Donations and Grants

Properly recording and reporting nonprofit revenue should be a top priority in your new accounting system. If you don’t have them in place already, you’ll need to establish protocols for recording donations and grants. Your system should take into account any donor restrictions so you stay in compliance with donor or grant requirements.

You’ll also need to create a reporting system for donations and grants. Generally, organizations that receive funds are expected to report on the use and impact of the funds. Not only does reporting on fund use help you stay in compliance with donor wishes or legal requirements, it’s simply a great way to maintain transparency in your organization and with the public.

Monitor Cash Flow and Financial Health

An organization’s cash flow is often a good indicator of financial health. Regular review of your cash flow statements can help you spot financial problems before they grow into major issues. As you fix your accounting setup, you’ll want to start analyzing financial ratios for liquidity and sustainability. If you find your nonprofit is regularly over budget, it’s probably time to address expenses and revenue.

There are a few strategies to improve your cash flow management, including:

  • Reducing expenses, from cutting back on staff to delaying new programs or services
  • Looking for additional revenue streams, such as new donors or applying for grants
  • Adjusting timelines for accounts receivable invoices
  • Offering new payment options for donations or service fees, such as automatic payments or online payments

nonprofit accounting

Seeking Professional Assistance

Cleaning up a messy accounting system is often a tedious and overwhelming task. Not to mention, most nonprofit leaders have plenty of other things on their plates. Working with a professional accounting firm specializing in nonprofit accounting is a great way to fix your accounting system and save time.

Nonprofit accounting firms have specialized knowledge related to financial management for nonprofits. They know how to navigate the complicated legal landscape surrounding nonprofit accounting, so you can be sure your financial records comply with governing regulations. In addition, a nonprofit accounting team provides financial guidance tailored to your organization to help you use your funds more effectively and efficiently.

The Charity CFO is a nonprofit accounting firm that can help you clean up your current accounting issues and establish a strong accounting system going forward. Our team of nonprofit accounting specialists understands the needs and challenges of nonprofits.

Need help fixing your accounting issues? Contact us today to get started.

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Can Nonprofits Use QuickBooks?

QuickBooks is a popular accounting software used by businesses and individuals nationwide. As a nonprofit leader, you’ve probably heard of QuickBooks or may have even used it before. And you might be wondering if you can use QuickBooks for your nonprofit accounting.

The answer is yes, QuickBooks Online can be configured for nonprofit use. Let’s dive into the benefits of using QuickBooks Online for your nonprofit and explore how to get the most out of the program.

QuickBooks

Specific Accounting Needs of Nonprofit Organizations

Before you can choose an accounting software–QuickBooks or otherwise–it’s important to understand the unique needs of nonprofit organizations. For-profit businesses often don’t have to follow the strict accounting rules of an exempt organization.

In addition, nonprofit groups are generally under more scrutiny from government agencies, donors, board members, and the general public when it comes to financial matters.

You’ll need to keep these things in mind when choosing accounting software and an accounting setup. Specifically, nonprofit leaders should consider these factors when looking for software:

  • Requirements for fund accounting
  • Staying in compliance with reporting and filing

Fund Accounting Requirements

Fund accounting is an accounting system used by nonprofits that focuses on transparency and accountability rather than profits. Nonprofits use fund accounting to properly record and allocate funds based on where they come from and what they’re meant for.

Generally, this includes having specific funds or categories where nonprofit revenue is allocated. For example, a food bank has a category for donations restricted to purchasing food for the bank. The money in this category, therefore, is only used to purchase more food for patrons.

Fund accounting differs from traditional accounting methods in that it’s designed for accountability and compliance. When you look at a nonprofit’s books, fund accounting helps ensure you can see exactly where donations, grants, and other funds are going.

Compliance and Reporting

In addition to fund accounting for accountability, nonprofits are expected to follow strict tax and reporting rules to stay in compliance. This includes documenting the source of funds like donations, grants, or other revenue streams. Nonprofits also need to record expense receipts.

A nonprofit’s accounting software must help it accurately record these transactions. Missing records, sloppy categories, or inaccuracies in reporting could endanger an organization’s nonprofit or exempt status. Maintaining accurate records helps you stay in compliance with federal and state tax department regulations and follow donation rules. Additionally, accurate records can help improve public and donor trust in your organization. 

Advantages of Using QuickBooks Online for Nonprofit Accounting

Nonprofits can use QuickBooks for their accounting needs and can configure the software to fit their unique accounting situation. There are 5 main advantages of using QuickBooks for nonprofit accounting:

  • QuickBooks can be configured and customized to meet nonprofit needs.
  • It’s well-established with few bugs, so you get great speed and reliability.
  • QuickBooks is cloud-based and can be used by anyone, anywhere.
  • Most accountants have worked with QuickBooks before and know the program.
  • You can integrate QuickBooks with a ton of different software and tools for a truly customized experience.

Adapting QuickBooks for Nonprofit Use

One of the biggest benefits of using QuickBooks for nonprofits is customization. QuickBooks allows you to tailor its features to fit your organization’s needs.

Features like class tracking and fund accounting can help you accurately record revenue and expenses. Additionally, you can configure your setup to focus not on sales tracking, but on donations or grant funds tracking. Then, you can use QuickBooks’ reporting system to create streamlined and visually appealing reports that can be presented to board members, donors, and other organization stakeholders.

Speed and Reliability

As one of the most popular accounting tools worldwide, QuickBooks has a reputation for providing speed and reliability of service. Unlike newer nonprofit accounting tools, which may be plagued by bugs or errors, QuickBooks is a tried and true solution.

Having reliable accounting software is essential to maintaining accurate financial records, and QuickBooks makes it easy to stay on top of transactions, invoices, and more.

Cloud-Based Accounting Solution

Having a cloud-based accounting system is almost required in today’s modern nonprofit landscape, but many accounting programs don’t offer virtual access. Luckily, QuickBooks Online lets your team connect and work with financial data from anywhere with secure internet access.

Whether you have a remote team or one that travels regularly, using a cloud-based solution like QuickBooks Online helps your accounting team stay connected and in the loop.

Well-Known Software for Accountants

Almost anyone who works in the accounting or bookkeeping industry has used QuickBooks. Using a widely-known program like QuickBooks can make managing your accounting easier, especially if you regularly work with other organizations.

For example, you need to hire an additional team member for your accounting team. More than likely, they’ll already know how to use QuickBooks, saving you time and money on training. Likewise, if you partner with another organization or business, you may have to work with their accounting team to settle accounts or share financial data. By using QuickBooks, you’re increasing the chance of efficient and effective communication between accounting teams.

Software Integrations

QuickBooks offers almost endless integrations that make it easy for your accounting software to “talk” to your management system. This seamless flow of data reduces the work you have to do and makes your organization more efficient.

Common integrations you can use with QuickBooks Online for your nonprofit include:

  • Dext: A tracking tool for receipts and deposits
  • Bill: Accounts receivable and accounts payable management
  • Fathom: Extensive reporting system for customized financial reports

Dext

Dext is an easy-to-use mobile app and software that lets your employees or volunteers scan and store receipts, bills, invoices, and other important financial documents. Users simply snap a picture of the receipt in the Dext app (and properly code it) and the app automatically records the transaction.

Dext works with QuickBooks to sync any uploads from the app into QuickBooks Online, making it easy for your accounting team to access any receipts or documents through the QuickBooks platform.

Bill

Formerly Bill.com, Bill is a financial software that helps you manage your accounts receivable and accounts payable. The platform syncs perfectly with QuickBooks and eliminates the need to manually enter bills or payables into the QuickBooks system.

One of the best features of Bill is the ability to limit who can approve payments. For example, you can create a rule that certain categories of invoices must be approved by a specific person before they can be paid out.

Fathom

The main downside many nonprofits have with QuickBooks Online is the slightly limited reporting features. While the standard reports from QuickBooks may not meet the needs of all nonprofits, Fathom bridges the gap.

Fathom integrates with QuickBooks to pull financial data and create customized financial reports and dashboards. Using Fathom with QuickBooks gives you the ability to create nearly any type of customized report you might need–whether you’re presenting to the Board of Directors, a public meeting, or your employees.

What to Know Before Using QuickBooks for Your Nonprofit

The features and customization of QuickBooks make it a great accounting software for many businesses and organizations.  However, there are a number of things to consider before you start using QuickBooks, including:

  • Standard reporting limitations: You may need to adjust the standard reporting features within QuickBooks to meet your organization’s needs.
    • Accuracy in class tracking: You’ll need an accurate chart of accounts and class tracking to maintain accuracy in recording.
  • Managing multiple funds: QuickBooks requires you to manage multiple funds and restricted grants within the system.
  • Using integrations for extra features: QuickBooks lacks some specialized features designed for nonprofit accounting, but luckily there are many integrations you can use to customize the program to your needs.

QuickBooks

Searching for a Nonprofit Accounting System?

Using technology to help you record and manage your organization’s financials can help you save time and run a more efficient nonprofit. QuickBooks offers a range of customized settings and features that could make it a great solution for your organization.

The Charity CFO team can help you compare your accounting software options and customize QuickBooks Online to fit the needs of your organization. Our team has extensive experience working with nonprofits and accounting software. We’re able to analyze your organization and make expert recommendations based on your organization’s financial setup

Reach out to us for support in setting up your QuickBooks accounting setup today!

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Grant Writing Do’s and Don’ts

Grants can be an important source of funding for nonprofit organizations. While individual donors are important for fundraising, grants often let you access more funds in one application than collecting multiple donations.

Grant writing can feel intimidating, especially if you’re just starting with seeking funding. The process is an art that takes practice to perfect it. However, learning grant writing skills can help your organization secure new funding sources and earn more grants.

This article goes over the most important do’s and don’ts of grant writing.

grant writing

The Do’s of Grant Writing

As you dive into the skill of grant writing, you’ll find there are some unspoken rules to follow. Let’s go over the things you should do when applying for a grant.

Research Thoroughly

Much of great grant writing happens before you even start an application for funding. The research phase of grant writing is one of the most important. If you apply for grants that don’t align with your mission, you’re unlikely to secure funds.

However, if you take the time to thoroughly research grant providers or grant-making agencies with requirements that your organization can meet, you increase your chance of success. 

Our tip: Try to seek out grants that come from agencies with similar missions to your organization and look for specific grants that align with your nonprofit goals.

Follow the Grant Guidelines

Each grant has specific guidelines and requirements. Many grants, for example, restrict how funds can be used. You’ll need to find grants that fit your goals and follow the application (and grant funding) requirements as closely as possible.

You can help your proposal stand out by addressing each area, guideline, and requirement of the grant in your application. Addressing each area of the grant helps you cover all aspects of the grant and reduces your chances of missing a requirement.

Tell a Compelling Story

At its most basic, a grant application and proposal is simply a chance for you to tell your organization’s story. The more compelling your narrative, the more likely you are to catch the application reviewer’s attention and set yourself apart from other applications.

Your story should clearly communicate the need for your project, its impact, and how it aligns with the grantor’s priorities or mission. Specific examples and hard data or stats are especially helpful in creating a compelling story.

Be Specific and Concise

Your grant proposal should be a story, but it also needs to be concise. This means you need to avoid rambling and stick to specifics to keep your application engaging. Your proposal should be clear, easy to understand, and to the point.

To do this, you’ll need to provide details about your project, including its:

Use AI to Help with Grant Writing

AI has so many applications, one being grant writing. You can ask AI to rewrite content that has specific requirements. For example, ask AI to “take this 2000-word description and make it 500 words”. It’s as simple as that! 

You can also use it to generate ideas, give you a solid outline, and help you structure your proposal.

For more info on this, we suggest you check out this podcast

Demonstrate Sustainability

When grant writing, you should show how the project will last beyond the grant period. Tell your grantors how the funds from the grant will go beyond a single project to drive your mission for the long term.

There are a few ways to show the sustainability of your nonprofit and the programs or projects you want to fund with a grant, including highlighting:

  • Existing partnerships
  • Community support for your organization and the project
  • Plans for future funding that supports the long-term success of the project

The Don’ts of Grant Writing

Just as there are things you should do when grant writing, there are some things to avoid when filling out a grant proposal.

Submit a Generic Proposal

Don’t take a one-size-fits-all approach to grant writing, unless you never want to win a grant. Submitting a generic grant proposal is one of the easiest ways to ensure your application is discarded as soon as it’s reviewed.

Instead, you should tailor each grant application to the specific grant for which you’re applying.

Overpromise or Exaggerate

Be honest and realistic about what your project will achieve with grant funds. You don’t want to exaggerate the reach of your organization or the potential success of your project. Additionally, don’t make unrealistic claims about how you’ll use the funds or the impact they’ll have on your mission.

Being open, honest, and transparent in your grant application can go a long way in securing funding.

Ignore the Review Process

Before submitting your proposal, be sure to understand the review process and timeline. Additionally, make sure you’re aware of the deadline for the grant application. It won’t help your organization to spend weeks preparing a grant application, only to miss the application deadline.

Once you submit your proposal, be aware of the timeline for the grant funding. You may want to follow up with the grantor as needed to better understand your application’s status.

Neglect Proofreading

Sloppy grammar or spelling can hurt even the best of grant applications. Take the time to check for errors in spelling, grammar, and content before submitting your proposal. A well-written grant reflects well on your organization and aids in creating a compelling narrative for your proposal.

Miss Out on Feedback Opportunities

Even a rejected grant application can be beneficial to your nonprofit. Take any feedback you get from your proposals and use it to improve your future applications. Like many things, grant writing is a skill that takes time to develop and hone. By ignoring feedback opportunities, you’re missing out on the chance to improve your skills.

Underestimate the Work

Managing a grant can require a lot of work. Some require rigorous reporting and time that needs to be spent in areas you don’t have the manpower for. Be clear on the requirements before applying for and accepting the grant so you can uphold your end of the deal. 

Similarly, be cautious of taking funding that may trigger unintended consequences. For example, if you accept a grant that’s only $10k per year, but it requires you to have an audit that we didn’t have – which is typically $20k a year or more – you’re now in the hole. 

Again, grant writers must understand the terms of accepting grants before accepting them.

grant writing

Master Grant Writing to Better Support Your Nonprofit

Grant funding is an essential revenue source for successful nonprofits. The funds you get from grants can help you fund services, increase programs, and free up resources for other aspects of your organization. Mastering grant writing will make it easier to secure grants.

Once you have the funding you need from grants, you also need to manage the money. Most grants have strict requirements for how to use – and track – the funds. The Charity CFO offers grant management services to help you stay on top of tracking and allocating your grant fund while staying in compliance with grant requirements.

Contact us to learn more about grant fund management.

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Nonprofit Leadership: Using Data for Better Decision-Making

How does your nonprofit make strategic decisions? Are you relying on intuition or guesswork? A better way to make decisions is using data. Leveraging data for strategic decision-making has many benefits–from improving your efficiency to increasing the success rate of campaigns or strategies.

Additionally, leaders can use data to tell the story of their organizations, giving you a better overall picture of the state of your nonprofit.

Learn more about using data for decision-making in your nonprofit in this complete guide.

nonprofit leadership

What Does Nonprofit Data Look Like?

Like for-profit businesses, nonprofits can use a variety of data sources to make informed decisions for their organization.

Let’s look at what types of data nonprofits can use for decision-making and the challenges that go with data usage.

Types of Data for Nonprofits

The types of data a nonprofit might use for decision-making can vary between organizations. Most nonprofits will use at least one of three types of data:

  • Financial data: Financial data includes any data relating to the finances of the organization, such as revenue or expense data.
  • Program-based data: Program-based data helps organizations create insights into the effectiveness of their programming or services.
  • Donor and stakeholder data: Donor and stakeholder data can refer to informational data, such as names and addresses of donors, as well as more in-depth data, such as donation amounts or communication preferences

Challenges of Nonprofit Data Collection

One of the biggest reasons nonprofits avoid using data to make decisions is the challenges of collecting and storing data. Common challenges a nonprofit might face when collecting data include:

  • Limited resources: Purchasing software or digging through data insights can strain resources, and many nonprofit organizations worry they don’t have the money or time to use data.
  • Data quality issues: Data-driven decisions are only as good as the data they come from, so nonprofits must ensure their data is clean and high quality.

Leveraging Data in Nonprofit Leadership

How can you use data effectively as a nonprofit leader? There are many ways to put data to use effectively in your organization. Check out these tips for leveraging data as a nonprofit leader.

Cultivating a Data-Driven Culture in the Organization

First things first when implementing a data strategy at your organization: you need to set the tone from the top. Creating a data-driven culture throughout your organization will help bring staff and volunteers on board with using data.

You can set this data-positive tone by fostering a mindset of learning when using data. As you implement your data strategy, show the benefits of using data and how it will help staff and volunteers. For example, collecting a certain type of data might make it easier for staff to do their jobs.

Investing in Data Technology

Data technology, such as data management software, makes implementing and benefiting from a data strategy easier than ever. You’ll need to carefully consider your options–and the costs–before implementing your strategy. Consider working with knowledgeable data and financial teams, such as The Charity CFO, to help create your data plan.

Once you have a data technology and a data governance plan in place, make sure to invest in staff and volunteer training on the programs and policies. Well-trained staff will be much more likely to embrace a data strategy than those without the knowledge or skills to use the data tools available to them.

Aligning Data with Organizational Goals and Mission

Your data strategy should go hand-in-hand with your mission and nonprofit goals. As you explore data strategies, be sure to pinpoint specific key performance indicators (KPIs) that relate to your goals and data metrics. In addition to identifying KPIs, you’ll need to establish benchmarks for success.

After choosing KPIs and their benchmarks, you can start incorporating data insights into strategic planning.

Using Data for Program Evaluations

Data can be a great tool to evaluate the effectiveness of your nonprofit programs or services. You can use data to help track the outcomes of your programs, such as participant numbers or revenue.

In turn, tracking these outcomes helps you make data-informed adjustments to your programs and services.

Improving Fundraiser Efforts Through Donor Analytics

Data can help you track, predict, and better understand donor behavior. For example, you run two ads for your fundraising event on social media. Using data insights from the ads, you can determine which was more effective for increasing ticket sales or donations.

Donor insights and analytics give you a better idea of how to effectively reach out to donors. You can use donor data to create communication and cultivation strategies that are more likely to hit the mark with donors.

Improving Financial Management

Improving your organization’s financial management is one of the biggest benefits of starting a data strategy. You can use data in almost all aspects of financial management. For example, historical financial data can help you with budgeting or creating financial forecasts for your organization.

Additionally, analyzing financial data helps you identify cost-saving opportunities as well as chances for increasing your revenue streams.

nonprofit leadership

Improve Decision-Making

Leveraging data for decision-making can change your organization for the better. Data-driven strategic decisions help your organization operate more efficiently, effectively manage risks, and create a bigger presence in your community.

Learning how to collect, store, and use data properly, however, can be a daunting task, especially when you’ve got other things to do to keep your organization running. That’s where The Charity CFO comes in. Our experienced team of financial and accounting professionals specializes in nonprofits. We use our specialized knowledge to help you find the right data management strategy and technology solutions to create a culture of data within your organization.

Contact us today to use data to drive decisions.

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Budget Tracking for Nonprofits

 

Budget tracking is the process of monitoring your nonprofit’s income and expenses to ensure they stay within your planned budget. Effective budget tracking is essential to financial transparency, efficient resource allocation, and strategic planning for your nonprofit.

Tracking your budget helps with overall budget management, which contributes to your financial stability and the success of your nonprofit mission. 

Keep reading to learn more about budget tracking and how it can help your organization improve financial efficiency and effectiveness.

budget tracking

Budgets are Essential for Nonprofit Organizations

While they can be overwhelming to create, having a budget is a necessity for any organization. Think of your nonprofit budget as the financial roadmap for your organization. With a budget in place, you can easily align your finances with the mission of your organization to achieve goals. 

Not only will you need a budget for operations and internal decision making, you will also need a budget for grant applications and when asking for gifts from the general public.

As you get started with the budget making process, here are a few things to keep in mind: 

  1. Include a detailed look at all revenue sources. Start with the certain revenue streams and work your way to the less certain (we’ll cover this in more depth later). 
  2. Include programs, fundraising, and administrative costs
  3. Budget by program (if applicable)
  4. Budget for a surplus to finance expansion in future years 

Without a budget in place, you’re left scrambling to ensure you have the funds to cover expenses, such as paying employees or funding nonprofit programs.

But your budget shouldn’t be a “set it and forget it” plan. You also need to track your expenses and income to make sure you’re sticking to your carefully-planned budget. The role of budget tracking is to ensure resources are allocated correctly, especially to key initiatives that are essential for organizational success.

A budget and tracking system also help with transparency and accountability at all levels of your organization. It’s easy to audit a nonprofit budget to check for potential errors and reduce the possibility of fraud.

Creating a Comprehensive Nonprofit Budget – Start with the Details

There are two common ways to budget; starting high-level and moving granularly or starting granularly and moving high-level. At The Charity CFO, we like to do the latter because we feel it leaves you with a more realistic budget base. From there, we move on to reviewing the prior year’s activity.

Review Prior Year Activity

To review your prior year’s activity, you’ll use a “Profit and Loss Detail” report or something similar. This is found in your accounting system and you’ll want to run a report based on the current year. It’s the best way to review current-year expenditures for what you might be spending next year, in fact, you can consider it as a template for your budget. 

Discuss Upcoming Expenses, Revenues, and Adjustments 

Go line by line with the Profit and Loss Detail. Start with expenses and figure out what investments you need to be making in the coming year to achieve your goals and objectives. Try not to think about where the money is coming from, just think of the ideal scenario about who you want to hire, the investments you want to make, and the cost of the space you’re using. 

Start with the largest expense and map it out in detail. (Example: The largest expense is typically payroll. Consider exactly what you want to pay each employee.) Then move to the next largest. Continue this process until you’ve reviewed every expense. We advise you to be a little generous in these categories. It’s better to expect more expenses than to underestimate.

Move On To Revenues

Start by recording what you expect to fundraise in the coming year. We like to start with any revenue that is most certain and then work our way to the least certain. For example, if you receive an annual grant from the government, that’s a fairly “certain” revenue. Budget these first. 

Then move on to your less certain revenue streams, like fundraising event income, because these are tougher to estimate. Our tip: budget conservatively for these.

Budget for a Surplus 

Once you’ve gone through all of your revenue and expenses, you’ll need to see if you are in a surplus or a deficit for the coming year. Your goal is to be in a surplus so that you can financially expand in the future. 

Keep in mind that you won’t be able to budget in a massive surplus; your funders won’t let you get away with that. However, a modest surplus will allow you to build up your reserves so that you can fund your next growth plan. This will look different for every organization. 

For a more detailed explanation of creating a budget, check out this video

budget tracking

Leverage Budget Tracking for a More Successful Nonprofit

Your nonprofit’s budget only works if you know you’re sticking to it. Implementing a budget tracking system helps you monitor your budget so you can stay on target to meet financial goals.

Make creating an effective budget tracking strategy a priority as you set your upcoming budgets. Taking the time to set up your tracking correctly will aid in the long-term financial success of your organization.

Not sure where to start with creating your budget tracking system? Working with a nonprofit accountant like The Charity CFO takes the challenge off of your plate. As financial professionals specializing in nonprofit financial success, our team can help you create and implement an effective budget tracking strategy no matter the size or revenue of your organization.

Contact us today to get started building your budget tracking system.

 

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Why You May Need an Audit – and What You Should Get Instead

Does the idea of a financial audit on your nonprofit leave you feeling nervous? For many nonprofits, a full financial audit can help ensure the accuracy of their financial recordkeeping. However, it can also feel invasive and overwhelming. Just the word itself can sound scary.

Luckily, not all financial situations require an audit. A reduced scope of attestation (or reduced scope of work) could be a better option for your organization. In this article, we’ll look at when you might need an audit and why an attestation service might make more sense.

Audit

Reasons Your Nonprofit May Need an Audit

Regulatory Compliance

One of the most common reasons for a nonprofit audit is to comply with state or federal regulations. Each state has a different threshold for nonprofits incorporated and registered within their states. In some cases, a state may have no requirement for an audit. In other cases, a state may require an audit for budgets as small as a few hundred thousand dollars per year. Here is a great resource to see if/when your nonprofit will need an audit. 

Grant Requirements

Some grant programs require an audit before awarding funds. Both government and private grants could require an audit, so it’s important to understand the funding requirements when applying.

Stakeholder Trust and Confidence

Regular independent financial audits of your organization can help keep your financial statements transparent. In turn, this helps maintain stakeholder trust in your organization.

Internal Governance and Oversight

Inaccurate records are one of the most common problems found in a nonprofit audit. Auditing your financial records regularly helps cut down on potential issues by catching inaccuracies before they become a problem.

Fraud Prevention and Detection

No one wants to consider fraud in their organization, but it could happen to anyone. Regular audits can help catch fraud–and potentially prevent fraud in the first place–by verifying transactions.

Is There an Alternative? Can a Reduced Scope of Attestation?

An audit is a deep dive into the financials of a business or organization. A reduced scope of work, on the other hand, works sort of like a slimmed-down version of an audit. There are two ways this is typically handled, and in some cases, they serve as an alternative to an audit: 

  • Review of Financial Statements:
    • This provides a limited level of assurance on the financial statements.
    • Your accountant will follow the necessary steps to obtain a reasonable basis for showing limited assurance.
    • This is a great choice when stakeholders require some level of assurance but don’t need the depth of a full audit.
  • Compilation of Financial Statements:
  • A compilation collects financial data and presents it in the form of financial statements without expressing any assurance on the accuracy of the information.
  • It is the most basic level of service and is used when there is no need for an independent third party to verify the information and internal management or stakeholders already have a good understanding of the organization’s financial activities.

Can a Reduced Scope of Work Replace an Audit?

If your board or organization shies away from an audit, you might be wondering if you can replace an audit with a reduced scope of attestation (or reduced scope of work). After all, wouldn’t it be easier to hire an outside accountant to simply look over a few areas of the books rather than digging through every financial record?

Whether you can replace an audit with a reduced scope of work depends on your organization’s needs and several factors, including:

  • How much detail and accuracy you need from the examination
  • The requirements of stakeholders or regulatory bodies
  • Budget and time constraints
  • Objective of the audit or inspection

1. Level of Assurance

An audit is a comprehensive examination of an organization’s financial statements and relevant financial information. Audits provide the highest level of assurance for your organization. If you need the utmost assurance of accuracy throughout your financials, an audit is likely the better choice.

Attestation provides a limited level of assurance for your organization. As a reduced attestation focuses on specific areas of your financials, you won’t get the comprehensive look offered by an audit. However, this hyper-focused approach might be the right option if you’re concerned about only a section of your records.

2. Regulatory and Stakeholder Requirements

When choosing between a full audit or reduced attestation, one thing to consider is your regulatory requirements. Many regulatory bodies may require one or the other specifically to stay in compliance.

Likewise, your board of directors or other stakeholders may require a full audit. In situations where it isn’t required, however, a reduced scope of work can be a cost-saving alternative.

3. Cost and Resource Considerations

In general, audits are more resource-intensive and expensive than a reduced scope of work. As a comprehensive look at your financials, they require more time and resources to complete, leading to a higher cost.

A reduced scope of work might be a good alternative if your organization lacks the financial, administrative, or time resources for a full audit.

4. Specific Objectives

Audits provide a broad and thorough examination of an organization’s financial health and operations. While this can be helpful if you need to see the overall health of your finances, you may not need all the information it provides.

Reduced scopes of work can be suitable if your organization has specific areas of concern within your financials. For example, you may want to verify the accuracy of donations for the last quarter.

Audit

The Charity CFO Can Give You Peace of Mind

A reduced scope of work can’t completely replace an audit. In some cases, your organization may need one to secure funding, stay in regulatory compliance, or maintain accurate records.

However, an attestation service can be a great alternative for many organizational functions, including:

  • Analyzing specific financial areas for fraud or inaccuracies
  • Cost savings for regular financial checkups
  • Meeting grant, financing, or regulatory requirements that don’t require a full audit

In fact, attestation could help you avoid the fear of an audit–especially when presenting financial needs to your board or other stakeholders.

Do you need an audit or attestation? In some cases, simply having an outside firm handling your financial management can provide the peace of mind your organization needs. Get in touch with The Charity CFO to see how we can help maintain accurate records for your nonprofit today.

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When You Should Consider Merging a Nonprofit

You might think of big businesses and billion-dollar takeovers when you hear the term “merger,” but for-profit corporations aren’t the only organizations that can benefit from mergers. Many nonprofits use mergers to strengthen their organizations. Ultimately, nonprofit mergers can help an organization better fulfill its mission.

Are you considering merging with another nonprofit? Let’s take a look at why an organization might want to merge with another to help you understand if it’s a good idea for your nonprofit.

merging

Reasons a Nonprofit Merger Would Be Beneficial

Ongoing Financial Struggles or Instability

Organizations that have regular financial struggles or face ongoing financial instability can’t meet the goals of their mission. A struggling nonprofit might have to close its doors if it can’t find the money to operate.

A merger, then, could be a good solution to ongoing financial struggles. There are two ways a merger might help alleviate your financial issues:

  1. Being absorbed by a larger organization.
  2. Merging with a similarly-sized organization with a similar mission.

Joining the ranks of a larger nonprofit could generally give you access to more funds and resources you might not have in a smaller organization. Being part of a larger nonprofit could be the stability your organization needs to meet goals and help your community.

But you may not want to be absorbed by a larger nonprofit. In this case, you might want to consider merging your organization with another of the same size that shares your mission or goals. In some cases, your two smaller organizations may be able to overcome financial struggles simply by being a larger–and more recognizable–force in the community.

There’s a Lack of Sustainable Funding and Resources

Does your organization struggle to attract repeat donors or find other sustainable sources of funding?

If you’re a small organization, it could be your size. Some donors shy away from a smaller operation because they’re unsure of the impact the organization could make. By joining forces with another organization through a merger, you produce a larger overall nonprofit. A larger organization might have more appeal for donors, which could give you access to more fundraising opportunities.

In addition, your larger organization will likely have more resources available, including:

  • More staff
  • More volunteers
  • Access to a wider donor network
  • Shared organizational resources
  • Additional funding sources

Your larger organization might be able to reach new donors, create a diverse fundraising network, and secure long-term funding better than a small organization. It could also help make long-term nonprofit financial forecasting easier for your accounting team.

Operational Costs are Breaking the Bank

Nonprofit organizations have a wide range of costs they need to operate. For example, most nonprofits have expenses such as:

  • Leasing commercial office space
  • Electricity, internet, and other utilities
  • Training staff and volunteers
  • Advertising and marketing
  • Fundraising events or campaigns

These operational costs can quickly add up and could cause financial issues for your organization.

An easy solution could be to merge with a sister organization or one with similar goals and missions. As individual organizations, both have to pay for office space and utilities. By merging, the organizations could share many operational costs.

Overlapping Programs, Services, and Missions

Two nonprofit organizations that operate in the same space might be competing for resources. This leads both nonprofits to suffer. Even more, this could harm the impact on your community or those who benefit from your mission.

A merger between two nonprofits with the same goals, missions, and services removes competition. Donors won’t have to decide between donating to one organization or the other, which can help the merged organization have a bigger financial impact than the two nonprofits had alone. Likewise, nonprofits serving the same mission might reduce operation costs and improve efficiency by removing redundancies in the community.

Greater Capacity for Impact

A strategic merger between nonprofits could help advance your mission. As a larger organization with more efficient financial and administrative operations, you’ll have a greater capacity to impact your community.

Where two separate organizations may be able to make small impacts, combining forces could give you the financial backing you need to be a greater force for good.

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Weigh Your Options Before Merging a Nonprofit

There are obvious benefits to merging nonprofits, but is it right for your organization? There are many things to consider before merging with another organization. You’ll need to go through a careful due diligence process to ensure you’re making the right choice for your nonprofit. This includes carefully analyzing:

  • Financial audits
  • Legal reviews
  • Comprehensive analysis of benefits versus risks

Additionally, it’s important that you–as a nonprofit leader–involve the organization’s stakeholders in the decision-making process. Your board of directors, nonprofit staff, and donors (especially major or repeat donors) should all have a say in the merger decision if you want to have a successful potential merger.

One of the biggest things to think about when considering a merger is your organization’s financial and tax status. It’s important to partner with a trusted accountant so you’re sure you understand the financial implications of a merger, such as The Charity CFO. We leverage our experience as nonprofit accountants and financial experts to help nonprofits consider their financial options–including potential mergers.

If you’re considering a merger for your nonprofit, schedule a call with The Charity CFO for financial help and advice today.

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What is Financial Forecasting and Why Does it Matter to Nonprofits?

Financial forecasting is a term you’ll hear thrown around in the business world quite often—but in the world of nonprofits, it can be difficult (and even downright impossible) to plan your organization’s finances with any degree of certainty. After all, you can’t possibly predict:

  • Who’s going to donate to your organization
  • How much they’re going to donate
  • Even when donations are going to happen

Still, even as a nonprofit, having some sense of what your finances may look like in the future is crucial to your long-term success. The best way to do this is through financial forecasting.

With a better understanding of what financial forecasting for nonprofits entails and how to use financial forecasts to your organization’s advantage, you can work more confidently toward long-term success and sustainability.

What Is a Financial Forecast for Nonprofits?

Specifically, a financial forecast, sometimes called a projection, is an estimation of an organization’s projected financial conditions based on past and current finances. Financial forecasts can then be used by nonprofit organizations for:

  • Budgeting
  • Strategic planning
  • Fundraising
  • Grant applications
  • Even cash flow management

While not always 100% accurate (especially in the unpredictable realm of nonprofits), a financial forecast can be extremely useful when it comes to informing decision-making and mitigating risks.

What is the Difference Between a Forecast and a Budget?

Let’s break down the difference between a fiscal budget and a financial forecast in a nonprofit setting. Think of a fiscal budget like your organization’s financial game plan for the year. It’s set before the year kicks off and includes all the money you expect to come in (like donations) and go out (like program expenses). It’s your guide for how you plan to spend and receive funds, kind of like a financial blueprint for the year’s activities.

Now, a financial forecast is more like checking the financial temperature throughout the year. It’s not set in stone like your budget. Instead, it changes based on what’s actually happening in your organization. Say you get a surprise donation, or an event costs more than planned – your forecast helps you adjust your expectations and plans on the go. It’s a real-time snapshot that helps you stay flexible and make smart money moves as the year unfolds.

Key Components of Financial Forecasts

So, what are some of the key components of a financial forecast for a nonprofit organization? While no two nonprofits will be exactly alike, most should include the following in a comprehensive financial forecast:

  • Revenue projections
  • Expense projections
  • Cash flow analysis

In addition to these key components, there are some basic documents and records that you’ll need to create a financial forecast for your nonprofit. This will include all of your organization’s financial statements, such as:

  • Income statements
  • Balance sheets
  • Cash flow statements
  • Annual budget
  • Any projected fundraising goals (we like our clients to have a gift table that includes specific gifts and when they hope to receive them based on historical knowledge).

Using Financial Forecasts for Nonprofits

There are many ways in which a financial forecast can be used by nonprofits and their leaders to make smarter and better-informed decisions for the long-term success of the organization. 

Let’s take a closer look at some of these areas:

Budgeting

For many nonprofits, financial forecasts serve as a reliable foundation for creating budgets that can help organizations make better use of their funds and other resources. By projecting revenues and expenses, nonprofits can develop realistic budgets that align more closely with their goals and priorities.

Strategic Planning

Nonprofits can also use financial forecasts to gain insights into the future financial health and sustainability of the organization. These projections can then be used to identify potential risks and opportunities, allowing leaders to make strategic decisions regarding things like:

  • Program expansion
  • Fundraising initiatives
  • Resource allocation

Fundraising and Grant Applications

It’s no secret that nonprofit organizations rely heavily on grants and other forms of fundraising in order to keep working toward their respective missions. When applying for a grant or seeking other fundraising options, it is not uncommon for nonprofits to be required to submit a financial forecast in order to even be considered.

Understandably, donors and granting agencies want to see a clear roadmap of an organization’s financial stability and responsible resource management before making a donation. In this sense, accurate financial forecasts can actually help to boost an organization’s credibility while increasing the chances of securing funding.

Cash Flow Management

Being able to accurately forecast cash flow is crucial for many nonprofits, yet doing so can be a real challenge when you can’t always predict when donations and funds are going to come in.

Fortunately, financial forecasting can be extremely useful in more accurately predicting cash flow in a nonprofit. By projecting when and how much cash will be coming in and going out, organizations can more readily anticipate potential shortfalls, manage liquidity, and make informed decisions about everything from investments and expenses to cash reserves.

Need Help with Financial Forecasting for Nonprofits?

When it comes to making more informed and confident decisions for the future of your nonprofit, being able to rely on a financial forecast can be extremely useful. At the same time, financial forecasting isn’t always easy—especially for nonprofit leaders who have other important obligations to focus on.

This is where it can be especially useful to work with an experienced team of accountants and other financial professionals who offer nonprofit accounting and bookkeeping services, including financial forecasting. 

At The Charity CFO, we’ve been trusted by hundreds of nonprofits to assist with everything from basic bookkeeping to financial forecasting and everything in between. Our philosophy is that when you don’t have to worry about the books, you can focus more readily on what matters most: pursuing your nonprofit’s mission.

Interested in learning more about our nonprofit accounting services? Get in touch with our team today. We’d love to learn more about your organization and help you determine which services may be best for your needs.

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Why You Shouldn’t Start a Nonprofit

If you dream of devoting more time to a cause you believe in and taking it to the next level, you might ponder starting a nonprofit. The prospect of serving your community is certainly a calling worth pursuing, and nonprofits serve an essential role in their clients’ lives. This is particularly true in domains where it doesn’t make sense for the government or private sector to provide aid.

However, starting a nonprofit has completely different considerations in comparison to starting your own business. There are completely different laws, norms, and obligations that frequently take well-meaning founders by surprise. Nonprofit founders can easily find themselves facing emotional and financial burnout. 

For the following five reasons, you should reconsider starting a nonprofit.

5 Reasons Why You Shouldn’t Start a Nonprofit

1. There is a TON of Competition for Funding

While you may receive moral support from your loved ones, professional colleagues, and community, it’s going to be far more difficult to get financial support. 

Nonprofits fiercely compete for funding, similar to businesses seeking traditional sources of capital. Even if your cause is worthy and your budding nonprofit strives to fill a gap that other nonprofits cannot, you’re essentially competing for the same donor pool as massive, well-established organizations.

This donor pool consists of individuals, corporate giving programs, private foundations, and government grants. While it isn’t impossible to secure funding through one or more of these routes, it’s certainly difficult. When you don’t have a track record or proof of what your nonprofit has accomplished, the competition for grants and donor funds is a lot stiffer.

2. You’re Underestimating the Time and Resources Needed to Start a Nonprofit

According to the Bureau of Labor Statistics, the vast majority of nonprofit employment is in just four industries: 

  • Healthcare
  • Social assistance
  • Hospitals
  • Educational services

Only 7% of nonprofit employment belongs to other sectors like religious organizations, the arts, historical societies, and other such institutions. What does this spell for the nonprofit you wish to start?

While most people may think of large organizations like United Way and the American Cancer Society, the lion’s share of nonprofits is actually quite small. Statista claims that nearly one million nonprofits have less than $50,000 per year in annual revenue. $50,000 is barely enough for your annual pay without considering operating expenses, let alone having the ability to hire employees.

Volunteers can help occasionally, but starting a nonprofit requires bootstrapping for longer than you might expect. It takes significant time and effort. To compare it to starting a small business, that also carries significant bureaucracy but it’s also easier to become operational virtually overnight. Nonprofits need to incorporate, create by-laws, obtain tax-exempt status, find the right people for the board, and fundraise, which is a challenging endeavor on its own.

3. Nonprofits Require Extensive Legal and Accounting Compliance

Nonprofits are subject to several layers of federal and state laws and financial reporting standards. Properly recording revenue, maintaining proof that your organization is eligible for tax-exempt status, and meeting operational transparency guidelines that are both mandated and simply expected by the public all create major financial and legal challenges. You also need to find legal and accounting professionals who specialize in nonprofits, as the financial and tax considerations are completely different than what you encounter in the private sector.

4. Nonprofits Face Unique Staffing Challenges

Small nonprofits have great difficulty attracting and retaining staff, as the Bureau of Labor Statistics has demonstrated. There are several reasons for this, but a major one is that tenuous funding makes it difficult to pay people. 

  • If you have a government grant through the end of the year, the program could get defunded next year or the funds go to another nonprofit. 
  • Individual donors are facing record inflation that leaves them with less disposable income to donate to causes they care about. 
  • Private trusts and foundations are less likely to provide significant funding to a new and unproven nonprofit.

Because of these problems, nonprofits have incredibly limited staffing and relatively high turnover. Employees suffer burnout because they have to take on the roles of multiple people and eventually leave for higher pay at larger nonprofits, if not the government or private industry.

5. Many Nonprofits Fail

Because it’s so hard to get consistent funding and thus provide quality services to the public, most new nonprofits will fail. The lack of financial resources, limited organizational capacity, and management styles that don’t translate from the private sector frequently lead to the downfall of promising nonprofits. Founders, employees, and volunteers burn out and move on.

In order to succeed in the nonprofit world, it requires:

  • Fundraising skills
  • Proper communications
  • Management skills tailored to nonprofits
  • Ability to develop and maintain programs

Think it Through Before Starting a Nonprofit

Starting a nonprofit is a huge decision and one that needs to be carefully considered. Think about it from every angle and decide if it’s the right call to start your own nonprofit, or if there are other ways that you can better support causes you care about.

But if you’re ready to take the plunge and learn more about the backend and financial requirements for starting a nonprofit, reach out to our team at The Charity CFO.

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Stuck in a Staffing Crisis? 3 Reasons Your Recruiting Might Not Be Working

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Imagine this: your nonprofit is busier than ever with fundraising events and field work to help make your community a better place. So busy, in fact, it’s time to hire a few new employees. But despite your job postings, you’re not recruiting as many candidates as you hoped.

If this sounds like your organization, it might be time to analyze why your recruiting efforts aren’t paying off. Hiring new employees–and retaining your existing ones–is a challenge for nonprofits and for-profit businesses alike. In this article, we’ll look at three reasons you’re not recruiting the talent you need and how to fix it.

Staffing

3 Reasons Your Nonprofit is Failing to Recruit

Noncompetitive Compensation and Benefits

It’s no secret that most nonprofits have limited budgets for employee payroll. A constrained compensation budget might be the main reason you’re not attracting talent to your organization.

Many people who work in the nonprofit sector join an organization because they have a passion for the cause. While passionate employees are essential for driving your mission forward, passion can’t pay their bills.

In addition, most workers place high value on jobs with comprehensive benefits in addition to reasonable wages. A good health insurance plan and paid time off are requirements for a lot of great employees.

Compensation and benefits that are significantly below industry standards can deter employees from joining your organization. Likewise, if an employee’s salary cannot keep up with the cost of living in your area, they will likely look for a different job.

Solution: Review Your Compensation Package

There’s really only one solution to fixing low wages: adjusting wages and benefits packages to meet industry and local cost of living standards. You’ll need to assess and adjust your payroll budget to stay competitive in the job market.

While you can’t make money appear out of nowhere, your nonprofit accountant can likely help you determine how to make compensation more competitive. They’ll go over comparable salaries from other organizations and review your budget. Working together, you should be able to find a solution that compensates employees fairly without wrecking your budget.

Lack of Visibility and Brand Recognition

Marketing and branding your nonprofit isn’t just great for bringing in new volunteers or raising funds. Brand recognition is a huge part of attracting great employees to fill open roles.

For example, a person follows a nonprofit closely on social media. They enjoy the mission and support the work the organization does in the community. When a new job comes up within the organization, the job seeker already knows it’s at an organization they respect.

Job seekers tend to avoid applying for jobs with companies or organizations they don’t know. Skipping unknown organizations helps job seekers avoid scams. In addition, a lack of employee reviews can put job seekers off and have them scroll past your job ads.

Solution: Build a Strong Employer Brand

If you’re having problems even getting applicants, you may need to take a look at your marketing. Effective marketing efforts should include a strong online presence, such as a website and active social media pages. You also want to be sure your organization has a compelling mission narrative and recognition within your community or industry sector.

Some ideas for marketing and recruitment campaigns include:

  • Social media campaigns highlighting the work of your organization
  • A portion of your website dedicated to your mission, values, and how you achieve your nonprofit goals
  • Encouraging volunteers and employees to leave positive reviews on job boards like Glassdoor or Indeed
  • Attending in-person recruiting events like job fairs to increase visibility

Unclear Career Development and Advancement

Like any sector, nonprofit employees seek opportunities for career advancement, growth, and professional development. Nonprofits that fail to communicate career paths or advancement opportunities will likely deter candidates from applying or joining the organization.

Without a clear advancement path, job seekers may worry that the job is a dead-end role or has limited advancement opportunities. Worse, some job seekers may assume the organization is intentionally hiding career paths.

Qualified, ambitious candidates are much more likely to apply and take a job with an organization that will invest in their growth and offer paths for advancement.

Solution: Communicate Clear Career Paths

This is one of the easiest recruiting issues to solve–you simply need to be transparent and clear about a role’s future opportunities. Additionally, you should highlight professional development opportunities for employees. Even if a role doesn’t have a direct advancement path, cross-training and professional development resources can help prepare employees for new roles within the organization.

You should also highlight the success stories of employees in your organization. Maybe a volunteer or intern came to work for you full-time and now works as a manager. Or, you might have someone who started in one department and used the provided resources to move into a more impactful role.

Staffing

Dig Deep to Find the Root of Your Staffing Struggles

The three reasons above are only some of the issues you might have when recruiting employees. There are plenty of other potential problems that could be hurting your recruitment efforts.

To find the root of your recruitment problems, dig deep and engage current employees, potential candidates, and volunteers to find out:

  • Why interviewees went a different route
  • What employees like and dislike about working for the organization
  • Whether volunteers or community members would consider working at the organization–and why or why not

In addition to asking others, it’s important to self-evaluate your hiring process. With a little introspection, you might find something that’s deterring candidates. Then, you can create a solution to the problem and start attracting the talent you need.

If you find your recruiting efforts hindered by financial issues, reach out to The Charity CFO today.

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Discovering The Tax Implications of Nonprofits Owning For-Profit Businesses

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Does your nonprofit have ownership of a for-profit entity? Whether your organization owns a for-profit company outright or has limited ownership, a for-profit subsidiary can have serious tax implications for your nonprofit.

Let’s work through some of the most pressing tax implications you might face as a nonprofit with ownership in a for-profit company.

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Tax Implications of Nonprofits Owning For-Profit Businesses

Unrelated Business Income Tax (UBIT)

Recognized nonprofits generally receive tax-exempt status from the federal government. Tax-exempt status makes it easier for your organization to retain nonprofit revenue and meet the goals of your mission.

However, your nonprofit may engage in revenue-generating activities that don’t relate to the purpose of your organization. The money that comes from these activities is known as unrelated business income because it’s earned from activities that are unrelated to your exempt mission.

The IRS can potentially charge your organization federal income taxes on your unrelated earnings. Known as unrelated business income tax (UBIT), you may face this tax liability if your nonprofit regularly carries on a trade or business that doesn’t substantially relate to your exempt mission or purpose.

UBIT Exclusions and Exceptions

Not all unrelated business income is subject to federal income tax. The IRS provides UBIT exceptions and exclusions to account for situations where a nonprofit uses for-profit activities to advance its exempt purpose.

Common nonprofit income that could be excluded from UBIT includes:

  • Dividends and Other Investment Income
  • Interest Earnings
  • Royalties
  • Certain Rental Income
  • Gains or Losses from the Disposition of Property

Additionally, income generated using a majority volunteer labor force may qualify for an exception. For example, hosting a fundraising auction operated by volunteers may not require UBIT payment.

Tax On Excess Business Holdings

The IRS uses taxes on excess business holdings to limit how much ownership a nonprofit can have in a for-profit company without paying federal taxes. Taxing excess business holdings helps reduce conflicts of interest and limits the power a tax-exempt entity has over a business.

Excess business holdings are shares or interests a nonprofit holds in a for-profit company that exceeds the IRS’s limits. Generally, any ownership share over 20% of voting stock in a company is considered an excess business holding. Nonprofits with excess holdings may face an excise tax on the value of shares over the limit.

Joint Ventures and Tax Implications

Many nonprofits partner with for-profit entities to help advance their mission with the financial backing of their partner. For example, a mental health organization might create a joint venture with a for-profit healthcare system to establish mental health facilities in underserved areas.

Depending on the nature of the joint venture, nonprofits could jeopardize their tax-exempt status if they don’t follow certain limitations, including:

  • The joint venture must seek to further the nonprofit’s charitable purpose.
  • Any benefits to the for-profit entity must be insubstantial compared to the public benefit of the partnership.
  • The nonprofit must have control over the charitable activities of the venture.

You may want to work with a nonprofit financial advisor or accountant to set up a joint venture with a for-profit entity. Your advisor can help you avoid pitfalls that could affect your tax-exempt status.

Impact on Charitable Contributions

Donors to nonprofits often receive tax benefits for their charitable giving. In most cases, a donor may be able to deduct certain charitable donations from their taxes. Many donors use nonprofit donations to lower their taxable income for the year.

Giving money to a nonprofit with for-profit business ownership could limit the donor’s ability to deduct donations, however. If your nonprofit engages in for-profit activities, you’ll need to communicate with donors to let them know. Proper communication helps donors understand the tax implications of their gifts and improves your organization’s transparency.

Maintaining Separate Accounting

Any nonprofit with for-profit ownership needs to maintain separate accounting for each area of business. This includes keeping separate financial statements, revenue records, and bank accounts.

Separating business activity is essential for maintaining accurate records of income, expenses, and activities associated with each business. Properly-recorded books can help reduce your chance of noncompliance in a nonprofit audit.

State Tax Considerations

The tax implications we’ve already covered mostly relate to federal tax-exempt status.

However, state tax agencies may also have rules for nonprofits that operate for-profit businesses. You’ll need to check your state’s tax laws and regulations to see how they might affect your organization.

Seek Professional Guidance for More on the Tax Implications of Nonprofits Owning For-Profit Businesses

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Few parts of nonprofit accounting are as complicated as a nonprofit owning a for-profit business. Your organization may be liable for certain taxes on excess business holdings or income from unrelated business activities. In some cases, operating a for-profit entity could put your nonprofit at risk of losing its tax-exempt status.

Nonprofit leaders like you don’t have to navigate tricky tax implications on your own. Working with a trusted nonprofit tax advisor, like The Charity CFO, gives you the resources to avoid unwanted tax implications.

Our team of dedicated nonprofit accountants and financial advisors is ready to put our specialized knowledge to work for your organization. Reach out to us today to get started!

Employee Benefits to Offer as a Small Nonprofit

Employee benefits packages play a big role in attracting and retaining top talent. According to Forbes, 10% of workers say they’d take a pay cut to get access to better benefits.

As a small nonprofit, it can be difficult to determine what benefits mean the most to your employees, especially if you’re working within a strict budget. This nonprofit employee benefits guide goes through the most common types of benefits and how you can add them to your benefits offerings.

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What to Consider Before Offering Employee Benefits

Just like volunteer management, nonprofit employee management should seek to show employees they’re valued and important to the organization. However, small nonprofits may not have access to the same resources as for-profit businesses or large nonprofits. You’ll need to carefully consider your options when building an employee benefits package.

Some things to consider when creating your small nonprofit benefits include:

  • Budget constraints: How much can you afford to spend on benefits?
  • Staff needs and employee preferences: What do your employees need or want from their benefits?
  • Legal compliance: Does a benefit offering meet legal requirements or standards?
  • Missions alignment: Are you offering benefits that stay true to the mission of your organization?
  • Competitive analysis: What are similar organizations offering their employees?
  • Long-term stability of programs: Can your organization sustain a benefit offering for years to come?

Common Benefits Employees Love

Health Insurance

Health insurance is perhaps one of the most important employee benefits you can offer. While organizations with fewer than 50 full-time employees aren’t required to offer health insurance, it’s still a great tool for employee retention. For many employees, a good health plan is almost as important as financial compensation.

Group health insurance plans are one of the most common ways to provide insurance for employees. A group plan offers lower insurance rates to members (in this case, your employees) because the insurance company spreads risk among the group. With a group health plan, you’ll work with an insurance company or healthcare provider to purchase a health plan and then offer employees the chance to join the plan.

Another great way to provide health coverage for employees is through a Health Savings Account (HSA). An HSA is a specialized savings account that allows people with high deductible health plans to save money for health costs. The money in an HSA grows tax-free when used for qualified health expenses, such as doctor visits or prescription drug purchases.

Many employers offer a group health plan and an HSA for employees. If within your budget, you could also contribute to employee HSAs as an added benefit.

Retirement Plans

Like health insurance, a good retirement plan is a major incentive for employees. Two great retirement plan options for small nonprofits include:

  • 401(k)
  • SIMPLE IRA

Both types of plans allow employees to save for retirement by contributing a portion of their paycheck to the plan.

A 401(k) is generally a more complex retirement plan option, but it gives you more flexibility as an employer. For example, employers can set the vesting schedule of employer contributions. By spreading the vesting period out over several years, you can encourage employee retention. Additionally, 401(k) employee contribution limits are higher than SIMPLE IRA limits, which could be beneficial for employees. Employers are not required to contribute to 401(k)s, but offering a contribution match can encourage plan participation.

SIMPLE IRAs, on the other hand, require employer contributions, and all contributions vest immediately. Being vested immediately could lead to employee turnover if other aspects of the job aren’t meeting employee expectations. However, a SIMPLE IRA is a straightforward approach to retirement plans. They generally have lower fees than 401(k) plans and offer more investment options.

Flexible Working Hours or Location

After the COVID pandemic, many employees realized the benefits of working from home or working flexible hours. If your organization can offer these options, it could be a great way to attract and retain great employees.

Some ways to offer flexible working conditions include:

  • Work from home and fully remote roles
  • Hybrid work schedules
  • Flexible scheduling for employees to set their own hours

Not all organizations can offer remote work. An animal shelter, for example, needs on-site employees to care for animals.

However, you can still add flexible working options or incentives as perks of the job. For example, a 4-day work week gives employees a longer weekend while still providing necessary staff.

Offer Paid Time Off (PTO)

Employees with little to no time off will quickly get burnt out–no matter how much they love your mission. Providing ample PTO is essential to helping employees stay motivated and excited to work.

There are many ways to give employees the time they need to reset and rest, such as:

  • Earned vacation days
  • Sick leave or a designated number of sick days
  • Holidays, including paid holidays

Your budget will likely be one of the biggest factors when creating an employee PTO plan. However, you should still aim to give your employees plenty of options for paid time off, even if you’re working with a small budget. Consider giving employees days off that schools are regularly closed. This can really be a stand-out for working parents when considering which employer to go work for. An employee who has the time they need to take care of themselves or their family will be more efficient and effective at work.

Wellness Programs

Wellness and fitness programs have become a popular employee benefit in recent years. Wellness programs generally include options like:

  • Gym membership reimbursement
  • Wellness challenges and support, such as a monthly steps goal challenge
  • Fitness classes
  • On-site workout rooms
  • Immunization clinics or medical screenings

In addition to physical health programs, consider offering mental health support for employees. For example, you could offer access to a stress management program or weekly meditation sessions.

Family-Friendly Policies

Family-friendly work policies are an excellent way to encourage employee retention and create satisfied employees. Familial leave policies, such as maternity and paternity leave, paid bereavement for loss of a pregnancy, and allowing new parents to step away from work and focus on their new child.

Additionally, you can improve work-life balance through flexible working conditions. For instance, allowing parents to shift their working hours to accommodate dropping kids off and picking them up from school.

Before you consider whether a paid parental leave is an option, consider all of the costs. We advise our clients to ask themselves:

  • Would allowing a team member take a paid leave actually cost the organization any additional money? This could be through paying a temporary employee or loss of revenue that the team member in question would be earning through contracts or other earned revenue options. 
  • How many employees would actually be at risk for utilizing this benefit each year? And, how does this compare to the cost of offering and paying for a portion of a short-term disability plan? In many cases, short-term disability is even more expensive.
  • Would a paid parental leave help with recruiting and retention of highly sought after talent? 

We have seen that many clients realize that the cost of offering these policies are not as much as they would have thought.

Transportation Benefits

Organizations in urban areas can offer transportation benefits for employees, such as transit or parking passes. You might also want to encourage the use of public transportation or employee carpools using incentives for employees who do so.

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Remember to Weigh Your Benefits Options

A good employee benefits program can motivate employees and attract top talent. Once you have a benefits plan in place, it’s important to also share it with employees and new hires so they can start taking advantage of it.

If you’re wondering how to maximize employee benefits while staying on budget, contact The Charity CFO today.

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How to Properly Record Revenue for Nonprofits

While the nature of a nonprofit means you’re focusing more on your mission than making money, bringing in revenue is still essential.

This can lead to unique accounting and recordkeeping challenges that for-profit businesses don’t have to face—especially related to revenue classification. Accurate revenue recognition, classification, and records are some of the most important aspects of nonprofit accounting.

Not only does it help with transparency in your organization, but properly recording revenue keeps you in compliance with nonprofit regulations.

Let’s take a look at common revenue streams and how to record revenue for a nonprofit.

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Nonprofit Revenue Streams

To be able to properly record nonprofit revenue, you first have to understand what types of revenue streams a nonprofit might have. Many nonprofit organizations receive a variety of funding from many different sources—from membership fees to annual fundraisers. This revenue helps run your programs, pay staff, build operating reserves, and cover administrative costs.

The most common types of revenue for nonprofits include:

  • Donations and Contributions: These are monetary contributions made to your organization, often from individuals.
  • Grants and Sponsorships: Grants are typically monetary donations that come from other organizations and often have restrictions on their use, such as a government grant. Sponsorships are donations from an organization or business in exchange for promotion, such as displaying a banner at a fundraising event.
  • Program Service Fees: Many nonprofits charge fees for the services they provide, such as a ticket fee for a nonprofit theater.
  • In-Kind Contributions: In-kind contributions are non-monetary donations to your organization and might include food donations to a food bank.

There are further breakdowns within your revenue streams, most notably restricted versus unrestricted funds.

Restricted funds are donations that must be used in a specific way or for a certain purpose. Unrestricted funds are just the opposite—this money can be used for any purpose the nonprofit sees fit.

Accrual vs. Cash Basis Accounting for Nonprofits

There are two main types of accounting for nonprofits: the accrual method and the cash basis method.

  • Accrual Method: The accrual method records revenues as they are earned or pledged. Likewise, expenses are recorded when they are incurred.
  • Cash Basis: The cash method of accounting records revenue when it’s received and expenses when they are paid.

In essence, the accrual method focuses on recording revenues and expenses when you learn of them. The cash basis method, on the other hand, focuses on recording revenues and expenses when money changes hands.

Which method is best?

That depends on your organization’s size and complexity. Generally, most small nonprofits can use the cash basis method as it may be simpler. A larger nonprofit (or one with a lot of complicated transactions) may need to use the accrual method.

Recording Revenue for Nonprofits

Donations and Contributions

When recording donations for your nonprofit, technology is your best friend. There are plenty of software and tech options that make it easy to properly record nonprofit donations.

Why use technology to track donations? Because donations are generally an organization’s most common revenue transactions and may have restricted and unrestricted funds coming in equally.

You can also use a donor acknowledgment system to help track donations and make donors feel appreciated.

For example, you might set up a donation portal on your website. When someone donates, they receive an email thanking them for their contribution immediately.

As donations can come from many sources, it’s very important to separate restricted and unrestricted funds when recording to help you keep up with donation rules.

Grant and Sponsorship Revenue

While grants and sponsorships have similarities, you must keep each type of fund separate. Like restricted and unrestricted funds, keeping grant and sponsorship money can save you headaches at tax time (and when communicating with donors).

Sponsorships are often one-time donations in the form of advertisements or promotions for the sponsoring business. For example, a local restaurant sponsors your annual fundraising gala. In return, you display posters around the event thanking the restaurant.

Grants, on the other hand, usually involve a much lengthier application and approval process. You’ll need to make sure you record grant revenue based on the conditions outlined in the grant agreement.

In addition, grant-funded programs often have their own set of rules and requirements for recording. Proper record-keeping for grant revenue is important to stay in compliance with rules for grant funding.

For a deeper dive into revenue accounting for grants, check out this article by the FASB which clarifies how grants fit into the new standard.  

Program Service Fees and Earned Income

Just because a nonprofit isn’t aiming to turn a profit doesn’t mean they can’t charge for their services. Many nonprofits charge service fees or program fees to help cover the cost of running the organization.

For instance, an animal shelter charges an adoption fee to adopt a pet. These adoption fees help pay for animal care, veterinary services, and shelter employee wages.

Any program service fees and other earned income your organization brings in should be recorded separately from donations and contributions. Differentiating between program service fees and constrictions helps maintain clean records and can lower your risk of compliance issues if your nonprofit is audited.

Recognizing In-Kind Contributions

In-kind donations can pose a range of accounting challenges for nonprofits. The most important aspect of recording in-kind donations is proper valuation.

Establishing an in-kind donation valuation and recording process will help you avoid mistakes when receiving non-monetary donations.

A strong in-kind donation recording system will help you stay in compliance with accounting standards for in-kind contributions.

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Need Help Recording Revenue? Reach Out to the Charity CFO!

Understanding your nonprofit’s revenue stream and knowing how to record it is essential to staying in compliance with nonprofit rules and regulations. Properly recording your revenue is also a big factor in building trust with the public, as it shows transparency.

Feeling a little overwhelmed about your revenue streams and other accounting processes? The Charity CFO provides expert tax and accounting services for nonprofits. Our team has decades of collective experience working with nonprofits. We put our knowledge to work to help address and resolve the unique accounting challenges nonprofits face.

Let us help your nonprofit get financially organized through proper revenue recordkeeping. Contact us today for a free consultation.

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Volunteer Management: What Every Nonprofit Needs to Know

Volunteering is an essential piece of any nonprofit. Some nonprofits can’t function without the help of their volunteers.

But how can nonprofit leaders ensure their volunteers are effective while creating a space that encourages volunteers to return?

The key lies in a strong, well-run volunteer management program. This guide will walk you through volunteer management best practices so your organization can optimize volunteer contributions, retain volunteers, and create a lasting impact for your cause.

Follow These Steps for Effective Volunteer Management

Set Clear Volunteer Rules

You don’t want to treat your volunteers as employees. They’re donating their time to you, after all. However, it’s also not a good idea to overlook the importance of setting clear expectations for volunteers.

This starts by creating volunteer positions that detail how and where people can help your organization. Think of creating something like a job listing, which details what is needed, how a volunteer is expected to help, and the time commitment to do so.

You don’t need to overthink it, simply make sure your volunteer expectations answer these questions:

  • What is the specific task?
  • Is this a one-time or recurring role?
  • How often is the volunteer needed? Daily? Weekly? Monthly?
  • What skills do volunteers need for the task?
  • Where does the volunteer need to work from? Can this task be done remotely?
  • How does this task impact the organization?

That last question, in particular, is important. Volunteers are giving their time freely, so they want to know how they’re helping your cause and making a difference.

Develop a Volunteer Recruitment and Screening

Some volunteers will seek out your organization and ask about volunteer opportunities, but the majority won’t. That’s why it’s important to have a volunteer recruitment strategy. Volunteer recruitment strategies work like your nonprofit marketing strategy: it walks volunteers through a pipeline from awareness to onboarding.

Volunteer recruitment strategies can include:

  • Detailing the skills, experience, and passion necessary for various volunteer roles.
  • Providing a wide range of ways to get involved: from one-time projects to ongoing help.
  • Recruiting in person at local events, such as a community picnic or your own fundraising events.
  • Encouraging existing volunteers to refer friends.
  • Reducing the effort it takes to sign up for volunteer opportunities.

Once you have interested volunteers, you also need to screen them. Screening volunteers might seem counterintuitive, especially if you need all the help you can get.

However, screening your volunteers helps cut down on turnover by ensuring that each volunteer is the right fit for your organization. It can also help you identify potential conflicts of interest.

If your nonprofit works with children or other at-risk individuals, the screening process is even more vital. You may want to use background checks to ensure the safety of those you serve.

Provide Proper Training

Volunteer training programs can improve the effectiveness of your volunteers while also making them feel welcomed into your organization. Establishing a training program also makes it easier to onboarding new volunteers.

A strong volunteer training program should explain your organization, including its mission and values. This sets the tone for volunteers on what is expected while helping your organization.

Volunteers should also be trained on the specifics of their role. If you run an animal shelter, for example, you want your volunteer kennel cleaners to know the step-by-step process to safely clean and sanitize kennels and cages.

The most important part of your volunteer training? Clear and effective communication. Volunteer training should give volunteers the tools and resources they need to effectively complete their tasks.

Provide Recognition and Appreciation

Your volunteers are donating their time to your organization. It’s essential to show your appreciation for their time and efforts. Volunteers who feel needed, recognized, and appreciated tend to return.

A few ways to recognize and show your appreciation to volunteers include:

  • Sending personalized thank-yous highlighting how the volunteer’s work impacted the organization.
  • With their permission, shout out individual volunteers in newsletters, on your website, and across your social media platforms.
  • Give out free swag like t-shirts, hats, pens, and more.
  • Throw a volunteer appreciation event, such as a holiday party or family picnic.

Encourage Volunteer Feedback

Getting feedback from past and present volunteers can help you see the effectiveness of your volunteer program. An easy way to do this is through volunteer response surveys.

Send your survey to volunteers and encourage them to fill it out. You may need to offer a small incentive, such as a gift card for a local coffee shop, to increase participation.

In your survey, be sure to ask volunteers what they feel is–and isn’t–working within the volunteer program. Additionally, try to make completing the survey simple by using mostly multiple-choice questions. Give volunteers a chance to speak their minds by ending the survey with an open-ended format question.

Volunteer feedback isn’t just important for improving your volunteer program. It can also provide valuable insights into your organization as a whole, especially from an outsider’s perspective.

Focus on Volunteer Retention

A volunteer who keeps coming back to your organization requires fewer resources for training, onboarding, and recruitment. You want to build a group of volunteers who keep coming back.

The key to volunteer retention is making volunteers feel appreciated, letting them see their impacts, and creating a fun volunteer experience. Some ways to help retain volunteers include:

  • Providing meaningful work
  • Offering opportunities for advancement and growth in the organization
  • Making sure volunteers feel valued through incentive programs

Improve Volunteer Management for a Stronger Organization

As you set your nonprofit goals, don’t forget the importance of volunteers. You can reach your volunteer recruitment, retention, and project goals by creating and following an effective volunteer management program.

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Should Your Nonprofit Have Debt?

If you’re like most nonprofit leaders, you probably have questions — and possibly mixed feelings — about nonprofit debt. That’s because you’ve also probably received mixed messages about nonprofits and debt.

Nonprofits aren’t often encouraged to take on debt. But while studies show that Charity Navigator gives higher ratings to organizations with lower liability-to-asset ratios, studies indicate that holding no debt isn’t optimal, either.

When the right type of debt is taken on methodically, thoughtfully, and for the right reasons, it can be a useful tool that helps a nonprofit gain financial flexibility. The key lies in ensuring debt is carefully managed, and aligned with the organization’s mission and financial capacity.

Here’s what you need to know about nonprofit debt.

Reason for Nonprofit Debt

Let’s start with the basics, a.k.a. the why behind nonprofit debt. As a general rule, the purpose of any debt must be centered on furthering the mission.

Perhaps this means taking on debt in order to grow programs and services. The money could be used to hire staff, expand a service area, or launch new initiatives. Maybe your organization needs to fund a capital campaign, cover operating expenses, or make payroll in the event of donation or grant shortfalls.

Whatever the reason, the decision to take on debt should only be made if it advances the organization’s goals.

Types of Debt for Nonprofits

There are a variety of different types of debts, each with advantages and disadvantages. While this isn’t an all-inclusive list, let’s look at a few common types of debt.

Long-Term Loans

Long-term loans usually have a term of one year or more. They may be used to finance capital projects, to purchase real estate, make building improvements, or to expand services.

A long-term loan provides improved financial flexibility, with the ability to make payments over a longer period of time. That means monthly payments may be lower. In some cases, an organization may have to provide collateral to obtain a long-term loan.

This type of loan is typically a term note payable over a period of time with fixed payments.

Lines of Credit

A nonprofit line of credit offers access to funds on an as-needed basis. Credit lines can be useful to cover short-term budget shortfalls or unexpected expenses. 

Most lines of credit would require collateral and likely a guarantee from someone at the nonprofit (typically the founder or a board member). Given that these are short-term advances, it is imperative that a nonprofit has a plan to replay the line of credit. 

Pro Tip: we strongly advise against giving any sort of personal guaranty for a line of credit. 

Program-Related Investments

Program-related investments, also known as PRIs, are loans made by grantors, such as foundations. When used to further a specific purpose of the foundation, this type of debt incurs some tax benefits on the lender.

While PRIs must be paid back, they generally offer below-market interest rates.

Mortgages

A mortgage loan might be a reasonable type of debt for a nonprofit that owns property. A mortgage can be used to purchase or renovate a property.

A mortgage loan may offer low-interest rates over the long term.

Each type of debt offers pros and cons. Be sure to speak with a trusted accountant before taking on any debt.

What To Do Before Taking On Nonprofit Debt

Carefully consider your options before taking on debt. Identifying your organization’s needs, financial capacity, and risk tolerance level will help you decide which type of debt, if any, would be a good choice for your nonprofit.

Consider Other Financing Options First

Before taking on debt, look at other funding sources. Explore other options for bringing in revenue, such as fundraising campaigns, grants, and government funding.

Measure the Organization’s Financial Capacity

Take stock of your nonprofit’s financial capacity so you can make fully informed decisions about debt. It’s imperative to assess your financial situation to ensure that you’ll be able to repay the debt. Take revenue, expenses, assets, and liabilities into account.

Board Approval

Taking on debt isn’t a decision you want to make unilaterally. Discuss debt options and alternatives with the board. Don’t make any moves without the board’s full knowledge, buy-in, and approval.

Risk Management

Financial decisions often come with risks as well as rewards. Develop a plan to mitigate the risks associated with taking on debt. Consider developing a contingency plan if unexpected financial problems arise.

Budget for Repayments

In most cases, nonprofits do not consider debt repayments in their financial budgets each year as most budgets include simply revenues and expenses to be received or incurred during that year. If your organization does not have an existing reserve balance that can help repay debt payments, consider how much cash you need for both ongoing operating expenses and debt repayments when figuring out your fundraising targets. Simply put, add up your expenses plus your debt repayments plus your cash outlay for capital payments to come to a total fundraising goal for the year.

Thinking of Taking on Nonprofit Debt?

Debt can help nonprofits be more financially agile — but only if it’s managed correctly and taken on for the right reasons. Debt should always be in mission alignment and further organizational goals.

Before taking on debt:

  • Compare the pros and cons of different types of debt, such as long-term loans, credit lines, PRIs, and mortgages
  • Assess your organization’s financial capacity and risk tolerance
  • Explore other funding avenues such as grants
  • Get board approval
  • Develop a risk management and contingency plan
  • Include cash needed for debt repayment into your financial budget

Nonprofit debt can offer rewards, but it’s not risk-free. It’s a complex decision… and that’s where The Charity CFO comes in.

Our team will help you navigate this complex financial issue, so you can determine if (and which type of) debt is the right choice for your organization’s unique needs. Contact us today to learn more.

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Clocking in and Out: Nonprofit Payroll Issues

Clocking in and out each day is a fact of life for tens of millions of workers around the country. But it’s often not the case at many charities and nonprofits, which can gauge an employee’s value by their impact, not just their hours spent in the office. 

Still, there are some situations where more precisely recording when (or where) you’re working can be beneficial to the organization. 

Let’s take a closer look at how and when it’s best used.

Common Nonprofit Payroll Issues

Nonprofit Payroll issues can present a wide variety of problems, several of which can potentially be helped by implementing a clocking-in and out procedure. 

These include both under- and overstaffing. For the former, tracking time on the job can be helpful to ensure enough people are contributing and preventing overworked employees. For the latter, a time clock can provide firm data that will help reduce unnecessary labor costs. Both of these are vital to operating in the most efficient way possible, allowing the most funding and effort to go toward the nonprofit’s mission.

In other cases, it may not be up to your organization. Grant-funded programs often require employees to track their time to ensure money is being used appropriately. The minor inconvenience of clocking in and time tracking can be far outweighed by the financial benefits these programs offer, making it a no-brainer decision.

Unfortunately, time-related payroll issues aren’t the only ones confronting many organizations. One of the most significant is simple employee turnover. High turnover usually leads to higher administrative costs for onboarding and other training needs. It’s among the reasons why it’s so critical to find the right-sized staff and keep good employees for the long term.

Situations When Payroll Issues Make Clocking In and Out Necessary

There are a variety of circumstances where clocking in and out could become necessary for the sustainable growth of the organization.

1. Compliance with Labor Laws and Overtime Management

Like any other employer, nonprofit organizations are subject to labor laws and regulations. With accurate time-tracking, it’s easier to stay compliant with these laws. 

This especially applies when managing overtime. There is a lot of work to be done at nonprofits and many times hourly workers are required to work overtime. When clocking in and out is required, it helps manage these hours and ensure the employees are being compensated correctly. 

When determining which employees should be paid for overtime, a nonprofit should consider exempt vs. non-exempt employees and adhere to the classification of employee issues from their respective states and the Department of Labor. 

You can find more guidance on whether employees are eligible for overtime pay by visiting the Department of Labor’s website and consulting with your employment law attorney. 

Please note penalties for misclassification of employees and failing to pay them overtime are significant and nonprofits are not exempt from fines simply because they didn’t know.

2. Data Analysis, Budgeting, and Resource Allocation

Budgeting and resource allocation are essential for nonprofit organizations. To get these things right, data analysis has to be done correctly. Time-tracking data can be used for:

  • Evaluating workforce productivity
  • Making informed decisions about staffing and scheduling
  • Gauging labor costs

3. Grant Funding and Compliance 

As mentioned previously, many grant-funded programs often require employees to track their time to ensure money is being used appropriately. If labor costs are part of the grant agreement, time-tracking will most likely be required. 

If this is the case and time isn’t properly tracked, it could lead to revocation of the funds. 

4. Accountability

Time tracking holds employees accountable for their work hours. While you don’t want them to feel like they are under a microscope, you can provide the valuable reasons listed above to reiterate the importance. 

This also will give them a good idea of how and where they spend the most time, which can improve their overall productivity. 

Quick Tip: Use Time-Tracking Software to Optimize Efficiency

A time-tracking software will enhance efficiency, transparency, and compliance for your organization. Here are a few pointers for successfully adopting a time-tracking software: 

  1. Define your objectives for the software and make them clear to the team and stakeholders. 
  2. Provide training, set processes, and create clear policies for time-tracking using the software. 
  3. Follow through, evaluate, and adjust the software when necessary. 
  4. If possible, integrate the time-tracking software with your payroll system to streamline the process and reduce the risk of errors. 
  5. Require all employees to log their time, regardless of whether or not they are hourly or salaried employees. By doing so, you can collect better data on your entire staff.

Search for Guidance on Managing Payroll Issues

What many new nonprofit leaders might expect to be a mundane administrative task can often become a serious headache for organizations. Nonprofit payroll issues can have dramatic and negative impacts on the organization as a whole, robbing leaders of attention and time in addition to contributing to waste. 

Time-tracking, in some cases, can be the best solution for mitigating these issues and improving efficiency throughout the organization. 

However, if you run into a nonprofit payroll issue that time-tracking can’t fix, getting help from experienced professionals like those here at The Charity CFO is a far easier, faster, and less stressful way to reach a better result. 

We can help spot potential issues, present solutions, and advise your organization on the best ways to implement them. Contact us today to get advise on how to make your accounting and payroll solutions easier. We work with numerous payroll platforms and are happy to look at yours to see if there is a simpler way to get better results.

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Using AI to Maximize Impact for Nonprofits

Brace yourselves, Nonprofit Leaders! Artificial intelligence is advancing incredibly quickly. We promise it’s not as scary as it sounds, and it’s already changing the game in every industry, including nonprofits.

Fortunately, savvy nonprofit leaders will be able to harness the power of AI to maximize their impact on the causes that matter to them.

Understanding AI in Nonprofits

First things first, let’s demystify Artificial intelligence (AI for short). Imagine a computer program that “thinks” and “learns” in ways similar to a human brain. This allows AI to:

  • Help solve complex problems
  • Tackle complicated projects
  • Adapt as needed based on conditions and inputs 

It’s been in development for decades, but recent advances have made the technology more impressive and accessible to the average person. 

AI is everywhere, making our lives easier, from writing formal emails to debugging computer code to helping select recipes for a user’s meal plan. More importantly, it’s a superpower for nonprofits. It helps streamline processes and automates tasks that can make employees more efficient. 

While some nonprofit leaders may be skeptical about AI or wary about whether it’s truly accessible to their organization, there’s no need for concern. AI is increasingly integrated into modern tech, and even standalone models or programs are affordable to just about any organization.

Key Benefits of AI for Nonprofits

The benefits of AI can be as varied as your imagination. Let’s take a closer look at a few of the most important.

Enhanced Data Analysis and Decision Making

Tired of number crunching? AI can do the heavy lifting making the task far easier and faster.

The programs can automatically flag valuable insights from large data sets that may have otherwise gone unnoticed. This can be a game-changer for nonprofits making data-driven decisions, improving program effectiveness, and making the most of your limited resources.

Personalization and Donor Engagement

Artificial intelligence can also provide a better user experience for critical funders and other partners who work with your nonprofit. 

AI is one of the easiest ways to create personalized donor experiences and targeted communication, vital pieces of cultivating and retaining donors. 

Ever wanted a personal assistant, AI chatbots might be your solution. They can assist with communication, engagement, and support for donors freeing up your team’s valuable time.

In many cases, these bots can take care of most of the needs of those reaching out, reducing the time that human staff needs to spend on it.

Fundraising and Resource Optimization

The power of AI can also be used to optimize your fundraising campaigns. Through predictive modeling and other tech, you can let AI do the detective work in your fundraising campaigns to find your potential donors.

AI-powered automation can also be used to streamline administrative tasks and other menial but necessary functions. Reduce costs, optimize resources, and make your team happier.

Impact Measurement and Evaluation

There’s no need to wait for the end of the month or the quarter for your financial team to total up the numbers. 

AI can provide real-time assessment of your organization and evaluate the performance of financial or program goals. It can even support important program development by constantly analyzing and providing guidance on better-adapting operations to your needs. It’s like having a constant advisor at your side.

Overcoming Challenges in Adopting AI

Like any new technology or system, there are also some potential hiccups for organizations new to using AI. Make sure to keep these possible concerns in mind.

Budgetary Constraints and Resource Allocation

Money matters. Every nonprofit works hard to make the most of limited funding, and there’s no denying AI services can add another cost. 

It’s vital to explore the most cost-effective solutions for your needs. In some cases, other options include grant opportunities or collaborating with tech-focused organizations, like TechSoup.

Data Privacy and Ethical Considerations

In a world full of sensitive personal data, it’s natural for donors and others to be concerned about their data privacy. Leaders will need to take steps to address these concerns while still leveraging AI to its fullest extent. 

Organizations also need to ensure AI is being used ethically and transparently, particularly when it comes to critical decision-making processes.

Training and Skill Development

Using artificial intelligence can represent a significant shift for many nonprofits, one that may unsettle longtime employees used to more traditional operations. 

Success requires creating an AI-friendly organizational culture, both from leaders at the top and average employees and partners. This can require investing in staff training or other upskilling programs to help them thrive in an AI-enhanced work environment, which is like making an investment in your organization’s future.

Practical Tips for Implementing AI in Nonprofits

Convinced about Artificial intelligence but not sure where to start? Here are some practical tips. 

  • Start with pilot projects that allow AI to be introduced gradually to various tasks. This will allow you and your staff to test it and gauge its effectiveness. 
  • It’s also vital to partner with AI experts and other tech-savvy specialists and consultants. Their experience can help unlock otherwise missed opportunities and smooth overall implementation by integrating the services into your existing systems and processes. 
  • Finally, every organization should set and monitor clear metrics for AI, including defining what success looks like. Leaders should meet regularly to discuss the high and low points of the process to make adjustments for the future.

Maximize Your Organization’s Impact with AI

Artificial intelligence has the potential to completely transform the behind-the-scenes work of nonprofits, allowing employees to spend more time on things that matter and save time and money on things that don’t. And there’s no denying that artificial intelligence can amplify the nonprofit world’s ability to create positive change for people and causes of all kinds. 

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The 5 BIG Myths of Nonprofit Accounting

In this episode, A Modern Nonprofit Podcast host Tosha Anderson comes to you directly, to talk about the 5 biggest myths she’s encountered time and again while working with nonprofits.

Don’t be misinformed, join Tosha as she reveals the truth behind concepts that tie nonprofit founders, board members, and bookkeepers in knots.

For more nonprofit accounting resources check out www.thecharitycfo.com

Here’s a preview on YouTube:

To watch the full episode, click on the Spotify player above or search it wherever you get your podcasts.

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