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Understanding the Job of a Nonprofit Operations Manager
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There are more than 1.54 million nonprofits globally. To ensure that a nonprofit runs efficiently, several people work behind the scenes to make things much easier, and one of those people is the operations manager.
The operations manager might be the secret weapon of the most successful nonprofits we know. By taking charge of getting things done, an operations manager helps executive directors focus their energy on the strategic big-picture that will move their mission forward.
If you’re looking to enter the world of nonprofit organizations with a background in operations management, you might be wondering how your skills can help you. Or, if you’re a nonprofit founder or an executive director, you might be wondering how an operations manager can help make your organization ruthlessly efficient and highly effective.
Read on now to find out what the job description of a nonprofit operations manager might look like.
What does an operations manager do?
A nonprofit operations manager, or director of operations for a nonprofit, is responsible for the day-to-day operations of the organization.
They oversee the administrative staff and make sure that the office runs smoothly. They also develop and implement operational procedures and systems and manage budgets and financial reports. In short, they ensure that the nonprofit runs like a well-oiled machine!
Now, if that sounds like they do a bit of everything, it’s because that’s true!
An operations manager, by definition, is a manager. They don’t necessarily need to be an expert at any one thing. Still, they need to be able to be proficient enough at many things to manage a highly productive team to get results for their organization.
Here’s how Krysta Grangeno described her day-to-day tasks in operations for a nonprofit organization:
Who reports to the operations manager?
And who do they report to?
It depends on the organization, but generally, any department is responsible for the day-to-day operations of the entity. That may include
- Finance Department
- Fundraising Department
- Program directors
- Human Resources
- Information Technology
- And more!
You can see that, depending on the size and structure of your organization, the ops manager will have to oversee a large number of departments.
In turn, your operations manager will either report to the Director of Operations, the Chief Operating Officer (COO), or directly to the CEO or Executive Director. They may also have some direct interaction with the Board of Directors, although the board isn’t technically their supervisor.
What are the job responsibilities of a nonprofit operations manager?
As mentioned above, their primary role is to supervise and organize the efforts of the departments under their responsibility. Here’s a breakdown of what duties a nonprofit operations manager will be expected to handle:
Ensure the Office Runs Smoothly
The administrative staff is responsible for keeping the office organized and running smoothly on a day-to-day basis. The operations manager will make sure that they have everything they need to do their job effectively and that they are meeting all deadlines.
An operations manager must be exceptionally well organized, as they’ll be responsible for creating systems and processes that ensure every department is meeting its expectations. Often, they’ll also need to be aware of all legal or reporting requirements that the organization may have in executing their programs.
Implement Budgets and Oversee Financial Strategy
The operations manager will be responsible for spearheading the budgeting process for the organization and ensuring that the accounting department delivers timely and accurate financial statements for the board of directors or other stakeholders. You’ll also need to be intimately familiar with these statements as well and review them proactively to identify potential issues before they become problems.
As the operations manager, part of your role is to ensure that the financial department runs effectively. This includes ensuring that checks and balances are in place and that employees in the financial department are adequately trained to do their jobs.
The operations manager must also be acutely in-tune with the organization’s budget. Because their role is so wide-reaching, they need to be aware of how shortfalls in one area (like fundraising) may impact the ability to execute in others (like executing programs or meeting payroll).
That doesn’t mean that the operations manager needs to be an accountant. Generally, they’ll oversee the accounting team or work as a liaison with an outsourced accounting firm. But ultimately, they are responsible for ensuring that the accounting work is done correctly and on time.
Supervise Human Resources
Ideally, the operations manager’s role in human resources is limited to supervision, but that’s not always the case. In some smaller nonprofits, HR may get put completely onto the ops manager’s plate, but we’d recommend against it.
Human resources is a specialized field that requires experience and specific knowledge. You need to comply with employment law, collect the correct information, withhold taxes appropriately, and onboard and train new employees.
A knowledgeable HR professional should establish the policies and procedures for the human resources department, but many nonprofits can’t afford a full-time HR coordinator. That’s why many nonprofits choose to outsource their HR to external firms as well.
Even if you’re working with an external firm, the operations manager will probably need to be involved in many day-to-day items related to HR—like searching for employees to hire, interviewing, training, counseling, and terminating employees.
Manage Technology Integration
Technology is a massive part of the work that nonprofits do. Almost every person in your organization depends on technology. And the networks and systems that keep those people aligned take organization, security, and maintenance.
Depending on your mission, you may even be dealing with highly sensitive personal information that you have a legal responsibility to protect, even in digital form. As the operations manager, you’ve got to make sure the appropriate technology systems and controls are implemented throughout the business.
Not utilizing the proper systems could mean the loss of crucial data needed in the future. Or it could mean a crumbling IT infrastructure that can’t support the business model being implemented.
Nonprofits often don’t need, or can’t afford, an internal IT department. And relying on someone’s husband or nephew to fix problems isn’t an acceptable solution. Instead, many organizations outsource their IT department to a service provider. In this case, it’s the operations manager’s job to liaison with the IT provider to ensure the office gets the support it requires.
Ensure Compliance and Organization
Records need to be kept in order within any business. There are several reasons for this, but compliance is an important one for many nonprofits.
Your organization needs to comply with accounting regulations, legal restrictions, employment rules, and other industry-specific regulations. And the operations manager is ultimately responsible for ensuring that the company is prepared to prove its compliance when audited.
Not only does record organization help when something needs to be located, but it also speeds up business efficiency. Instead of wasting time hunting for something, it will be easy to access the record database. All you’ve got to do is type in some information and locate the data needed.
How to evaluate performance and further development
Whether you’re building the leadership team to include an operations roles, or you’re currently in an operational leadership role — it’s important to regularly evaluate performance as well as work on developing to further improve your work.
If you’re evaluating your ideal candidate, after they’ve been in the position for a certain period (a year, for example), it’s important to compare their achievements to the job description. For self-evaluations, read resources (like this one) to find usable knowledge to help improve your performance.
Key areas to concentrate your efforts include:
- Purposeful communication: In operations, too much communication is nearly as problematic as not enough. What you say, how you say it, must be as useful as possible. That’s where developing purposeful communication tactics come in handy.
- Organizational processes: As someone who ensures compliance and handles intricate areas of a nonprofit, the ability to develop processes takes precedence over nearly every other aspect of your role.
- Continuing certifications: There are a number of nonprofit certificate programs available for leadership teams. Those instructing the programs often have robust experience in the sector. Taking these programs helps you find the additional knowledge to improve your performance.
A Note on Outsourcing Professional Services:
We’ve mentioned outsourcing a few times here, related explicitly to bookkeeping/accounting, human resources, and information technology. That’s because this is an emerging trend we see gaining steam in the industry.
Traditionally, many nonprofits had a scrappy, do-it-all mentality when it came to these areas. So, an operations manager or financial director frequently ended up having responsibility for everything— from making bank deposits and firing employees to troubleshooting network issues.
But this approach causes more problems than it solves. Having trained professionals handling complex tasks that are outside their area of expertise is hugely inefficient. And it’s just asking for mistakes.
Yet most organizations can’t afford a full-time accountant, HR coordinator, and IT professional. And that’s where the operations manager comes in.
When organizations outsource these 3 functions and have the operations manager work directly with each team, they can get the full professional support of each team without paying a full-time salary. Often, these teams are more talented and efficient than an internal team member would be.
We believe this is the operational business model of the future for successful mid-sized nonprofits in the $1M to $15M/year range. If you’d like to talk to us about outsourcing your bookkeeping and accounting to The Charity CFO, send us a message to set up a free consultation.
What Qualities Make a Good Operations Manager?
Let’s turn to Krysta again, to offer a first-hand perspective on what skills an operations manager needs:
What A Nonprofit Operations Manager Does: A Recap
A nonprofit operations manager has many responsibilities, but their primary role is to coordinate all the various departments to ensure that business runs smoothly.
The operations manager will oversee the finance department, human resources, information technology, programs, fundraising, and more. And they must grasp how each department impacts the other to ensure that the entire organization runs harmoniously.
By doing their job well and assuming responsibility, they free up each department to focus on what they do best, rather than overlapping tasks or getting tied up in work that’s unrelated to their department. They also help free up the directors to focus on strategy rather than the day-to-day minutiae of each department.
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6 Nonprofit Bookkeeping Tips to Save You Time & Money
If you manage a nonprofit, you know very well that every day there are a million and one things to be done. And, of those a million and one things, bookkeeping is not at the top of your favorite things to do list.
Good bookkeeping requires extreme accuracy and attention to detail. But it’s often seen as “busywork,” it rarely makes the priority list, and under-staffed nonprofit teams often fall behind. But you need accurate and timely bookkeeping to get the financial reports you need to run your programs, report to your grantmakers, and keep your operation on track.
But nonprofit bookkeeping doesn’t have to be so stressful.
Here are our six biggest nonprofit bookkeeping tips to help keep your organization’s books up-to-date without late-night sessions or stressful weekends at the office.
Top Nonprofit Bookkeeping Tips
1. Use A Simple Accounting Software
What’s our #1 nonprofit bookkeeping tip? If you are still using Excel spreadsheets or handwritten ledgers to track your finances, you need to stop asap. Outdated manual systems consume more of your time and make it easier for things to go missing.
Instead, use simple accounting software like Quickbooks Online.
Perfect for most small to mid-sized nonprofits, Quickbooks is easy to use, moves quickly from cash to accrual accounting, and almost every CPA or accountant is familiar with it. We specifically like to recommend Quickbooks Online, rather than nonprofit-specific software, for most small to mid-size nonprofits.
Quickbooks integrates with dozens of other financial software so you can automate many things (hello, easy payroll, and effortless expense reporting). And it’s accessible wherever and whenever you need it.
Plus, if you fall behind on your bookkeeping for a month or two, you can quickly download bank and credit card transactions with just a click, saving you hours or days of manual input.
If you’re scared about the learning curve, don’t be! If you taught yourself to do it by hand, learning how to use nonprofit accounting software will be a breeze. And tons of free tutorials and resources can help you quickly solve any problem.
“In fact, Quickbooks or the other software provider of your choosing should offer these types of trainings,” says Katie Gray, the Content Manager for the all-in-one nonprofit software provider Springly. “Product demos, help center articles, blog posts — all these resources teach you nonprofit accounting through the specific software you’re using.”
2. Scan Your Receipts and Invoices
Gone are the days of manually recording every receipt and invoice. Instead, dozens of convenient apps are out there to help you scan and upload receipts and invoices without touching your keyboard.
In most cases, you don’t even need a scanner to do it. For example, smartphone apps like Neat allow you to scan receipts using their app and the camera on your phone. Plus, they’ll help you organize and store your documents securely, so you never have to worry about a lost receipt.
Some receipt scanning options, like Wave, will offer free plan options. But you may need to pay a little for more users or storage. Still, the few dollars a month you’ll spend on the service can save you hours of payroll costs–so it’s worth the investment!
And if you’re using Quickbooks Online, they offer their receipt-scanning app that helps make your bookkeeping tasks easier than ever.
3. Go Paperless
You can do almost everything online today, and the more you do online, the better, as far as we’re concerned.
From online bank and credit card statements to digital invoices and receipts, it’s much harder to lose online documents than a piece of paper. Plus, it helps keep your offices clean and makes it easier to coordinate with outside contractors, like your accountant.
Opt for digital-only communication from your financial documents and invoices, where possible. Most businesses will offer you this option–even the IRS requires nonprofits to file their Form 990 online!
This is one bookkeeping tip that makes life feel less chaotic for everybody in your organization.
4. Use Plastic, not Paper
No, we’re not talking about shopping bags here.
It’s time to put the cash away and use your debit or credit cards instead.
Banks and credit card companies give you detailed digital spending statements, which helps when there’s confusion about a transaction. Of course, you’ll still need to keep (and scan!) your receipts, but at least the cards leave a paper trail.
Cash can go missing, and receipts get lost. So cards give you a better way to track your expenses and have a proof for your auditors at year-end.
An extra bonus to this nonprofit bookkeeping tip? Digital spending statements can automatically sync with software like Quickbooks to eliminate all manual transaction entries.
5. Keep A Simple Chart of Accounts
Most small nonprofits don’t need a complex chart of accounts. Yes, you must track your revenue and expenses properly to comply with fund accounting and functional expense reporting requirements. But you don’t need to overcomplicate things just for the sake of it.
A simple, straightforward chart of accounts will keep your financial statements clean and easy to read, which your board of directors and donors will undoubtedly appreciate.
If you’re looking for guidance, you can click here to download our free chart of accounts template.
6. Hire a Payroll Service
Payroll is one of the most challenging and time-consuming tasks a nonprofit accounting department must face, so it’s no surprise it appears in our nonprofit bookkeeping tips!
It may seem like a good idea to save money by handling payroll in-house but do so at your own risk.
Payroll requires complex calculations and particular tax and reporting requirements. As a result, it’s easy for anyone not experienced to get lost. And payroll-related mistakes could cost your organization money in back taxes and penalties without your awareness.
Remember, nonprofits do have to pay some taxes. Nonprofits do have to pay payroll taxes for their employees, as well as withhold taxes in accordance with the information they submit on their W-4.
Our advice? Don’t try to figure this out on your own. Deal with a professional payroll service instead. This is their business, so they make it easy for you to pay your employees AND stay compliant with federal, state, and local tax laws.
Bonus Nonprofit Bookkeeping Tip: Outsource Your Bookkeeping & Accounting
If you’d rather not deal with bookkeeping and accounting, or if you’re having difficulty finding and keeping skilled financial professionals, why not outsource your bookkeeping to an expert?
Many nonprofits hold themselves back by trying to work with volunteers, family members, or interns or by relying on their board treasurer to figure out their finances.
But professional bookkeeping might be the best investment you can make. The Charity CFO helps hundreds of nonprofits automate and optimize their accounting systems to go paper-free and get accurate monthly financial reports, like clockwork. No amount of nonprofit bookkeeping tips can do that.
Our team of nonprofit accountants and former nonprofit CFOs can help you eliminate the chaos to see your financial picture clearly. And for less than hiring an in-house accountant or keeping an expensive CPA on retainer.
If you’re wondering if outsourcing your finances could help your organization, reach out to us today for a free consultation. We’ll let you know how we can help you execute your mission.
How Do Nonprofits Make Money?
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Understanding Unrelated Business Income in Nonprofits
If you know only one thing about 501(c)(3) nonprofit organizations, you probably know that they don’t pay federal taxes on their income.
But what if I told you that’s not always true?
It’s true that due to their uniquely valuable societal contributions, such as charitable actions or educational priorities, nonprofits receive tax exemption for income from activities substantially related to their primary purpose.
However, as detailed in Publication 598 of the Internal Revenue Service, income not directly related to their declared charitable purpose is subject to federal taxation. This is called the unrelated business income tax, or UBIT.
So how do you know if your nonprofit organization has taxable unrelated business income?
We’ll review the core principles of unrelated business income tax (UBIT) rules below, along with examples of income subject to taxation, to help you understand what it is and whether or not it applies to your organization.
What is Unrelated Business Income Tax (UBIT)?
Both federal tax exemption and the eligibility to receive tax-deductible contributions help your nonprofit achieve its charitable goals. But while these benefits have a positive impact on society, they can pose a temptation for some organizations looking to take financial advantage for personal gain.
As a result, Congress implemented the UBIT in 1950 to eliminate the unfair advantage tax exemption gave to nonprofits competing against for-profit entities in the same sector. The tax limits the advantage of nonprofits to their specified charitable purpose and prevents them from exploiting their benefits in the commercial sector.
For example, the UBIT prevents an entity such as a church from using its exempt status to open a store purely for profit with no charitable purpose. This is true even if the church uses those funds to fund programs in the community.
It is not, however, prohibited for your exempt organization to earn unrelated business income. If you receive gross income from an unrelated business reaching $1,000 or more, you simply need to complete and submit IRS Form 990-T and pay the required taxes.
If your organization expects it will need to pay $500 or more in tax for the year, then you must pay a quarterly estimated tax. The Form 990-W helps determine the required amount of estimated tax to pay.
Form 990-T and Form 990-W are in addition to your organization’s annual information return (Form 990, Form 990-EZ, or Form 990-PF).
IRS UBIT Requirements
UBIT rules apply to most organizations that gain tax exemption from section 501(a) of the Internal Revenue Code (IRC). The three main criteria for your tax-exempt entity’s activity to be considered an unrelated business are as follows:
- Your activity is a trade or business that produces income via the selling of goods or services. Even if these activities occur under a greater umbrella of the organization’s tax-exempt purposes, they maintain their identity as unrelated trades or businesses as long as they generate gross incomes from distributing or producing goods or services.
- The activity is regularly carried on, meaning that the organization pursues them with frequency and continuity, similarly to the manner in which non-exempt organizations pursue comparable commercial activities.
- The activity is not substantially related to furthering the organization’s exempt, charitable purpose.
Special Cases & Exceptions
Most tax-exempt organizations must follow the UBIT requirements, including those in social welfare, advocacy, trade, veteran groups, labor organizations, and employee benefits.
However, some special cases fall under modifications, exclusions, or exceptions to unrelated business income, such as:
✔️ Volunteer labor
✔️ Convenience of members
✔️ Sale of donated merchandise or in-kind gifts
✔️ Corporations organized under Acts of Congress and are instrumentalities of the United States
✔️ Some charitable trusts not subject to private foundation taxes
✔️ Dividends
✔️ Interest
✔️ Certain investment income
✔️ Royalties
✔️ Certain rental income
✔️ Certain research activity income
✔️ Gains or losses from property disposition
✔️ Certain bingo games
It can get a bit complicated, but the Form 990-T Instructions give you more specifics on what constitutes an exception and what does not.
What Is Considered Excessive Unrelated Business Income?
Although nonprofits can earn profits from unrelated business activities, these profits can only make up a certain percentage of the nonprofit’s overall income.
This limit is not clearly defined, however. Instead, it is up to the IRS to determine if your percentage of total income coming from UBI is too high. In cases where the IRS is evaluating unrelated business income to determine adequacy, it considers various factors specific to the situation at hand.
Examples of Taxable and Non-Taxable Business Income
Example 1: Selling food and beverages
Related business income: If an organization sells food and beverages to its members, it would be considered part of the entity’s regular operations to further its purpose. The money earned goes towards paying back the expenses used to obtain the food for its members to work on their mission.
Unrelated business income: If the same organization sells food to non-members regularly to make additional profits without working towards its non-exempt purpose, then the income is unrelated and taxable.
Example 2: Charging for parking
Related business income: If an organization has a parking lot and it charges members to use during working hours, then this income is not taxable. The money earned goes toward paying the lot lease and provides a service to members who use their parked time for furthering the purpose of the organization.
Unrelated business income: However, if the entity decides to take advantage of its non-working hours by regularly opening the lot to non-members to turn a profit, then this income is subject to the UBIT. The money is no longer from and for members and is not necessary for furthering the organization’s purpose.
Example 3: Providing pay-for-entry entertainment
Related business income: Consider an organization such as a church that charges admission for a small fair or arcade in which themed games and activities educate the children of members on the church’s views and purpose. This activity specific to members and to the purpose of the church would not fall under UBIT rules.
Unrelated business income: If the same church ran a general arcade next door open to the public and with no educational aspect, then the resulting income would be subject to the UBIT.
Other forms of income which would be susceptible to the UBIT include proceeds from the liquidation of assets, the sale of resources found on the property of the exempt entity, income from paid advertising in the organization’s newsletter or publications, or the sale of unrelated merchandise to the public.
Each of these examples and those described above involve various factors that, if changed, could change the exempt status of the activity in question.
Not Sure If Your Nonprofit Income Is Taxable Or Not?
You should always consult your legal counsel or a qualified accounting professional before making decisions that could cost you a lot of money down the road.
But as a nonprofit, sometimes it’s not easy to find someone to answer your questions. We frequently hear stories of CPAs that don’t return their nonprofit clients’ phone calls or emails. Often, nonprofits get stuffed at the bottom of the pile.
If you’re tired of being the last priority of the financial professionals in your life, consider outsourcing your bookkeeping and accounting to The Charity CFO. We’ll modernize and optimize your accounting system to get you audit-ready financial reports every month.
And our team of former nonprofit CFOs and auditors are available to answer all your most challenging questions about tax liabilities, transparency, compliance, budgeting, and more.
Reach out to us today to see if outsourcing your bookkeeping and accounting can save you time, money, and stress.
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How To Avoid Nonprofit Accountant Turnover
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