How to Manage Payroll as a Nonprofit

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According to the United States Bureau of Labor Statistics, 12.3 million people are employed by nonprofits. That’s a lot of employees to manage!

Payroll is a critically important part of running any business and nonprofits are no different. This guide will explore everything you need to know about how to manage payroll for your nonprofit with accuracy.

Finding Payroll Services

Firstly, your organization needs a payroll manager and software to manage all the employee data. What is a payroll manager? This is someone specifically trained to manage the ins and outs of all your payroll needs including taxes and employee benefits.

Your organization likely needs to invest in a quality portal for payroll services. If your organization is really small and brand new, you might be able to get away with just a spreadsheet, but it’s not the best practice for accuracy and data transparency.

Payroll management isn’t easy and if you’re asking yourself how to manage my payroll, you’re definitely in need of professional assistance. Besides knowing the intricate details of payroll tax management and other tricky laws, these services can cut checks, facilitate direct deposits, and even track paid time off.

The best payment systems are two-sided so that employees can also log in and download their own data when they need it. Most of them even have smartphone apps!

This is a great resource for finding the payroll system that fits your organization. Paying a monthly cost for these services is well worth it in the long run for you and your employees to have a good work experience.

Getting Started With Payroll

As you get ready to start paying your employees, you should ask yourself a few key questions. This will help make tax season easier and ensure there aren’t any issues with your employees!

What Are Your Benefits?

Keeping track of all the information for each employee’s benefits can seem like a ton of work, but it’s crucial that the correct amount of money is removed from your employees’ pay checks each month.

Employee benefits might include, but aren’t limited to:

  • Health Insurance
  • Health Savings Account/Flexible Spending Account
  • Dental Insurance
  • Vision Insurance
  • Retirement Plan
  • Life Insurance
  • Transportation Fund
  • Paid Time Off
  • Sick Time

All of these benefits are up to the employer to offer, but every organization should verify their exact requirements to provide health insurance to their employees under the Affordable Care Act. This also may stipulate what portion, if any, of employee health insurance your nonprofit is required to cover.

Who Are Your Employees?

Do you hire contractors or part-time staff? These workers may not have employee benefits and their payroll will need some tweaking. Contractor taxes also differ from that of full-time employees, so be sure to have all of this information prior to starting.

In addition to collecting W-4 forms from employees, be sure to provide all necessary paperwork for enrolling in health insurance and other employee benefits. Keep meticulous records on each employee both digitally and in hard copies.

How Are You Handling Payroll Taxes?

Tax season might be everyone’s least favorite time of year, but it’s crucial for your nonprofit organization to withhold the correct amounts for each employee for both state and federal taxes, as your state allows.

After you collect each employee’s W-4 tax form, input the data into your payroll software and be sure to verify this information with your employee.

Here is a list of some taxes your organization might need to withhold from paychecks and potentially match per dollar:

  • Local Income Tax: This pertains to cities, like New York City or Washington D.C.
  • State Income Tax: Some states don’t have this, like Tennessee and Florida. It depends where your nonprofit is located.
  • Federal Income Tax: The W-4 will let you know how much to withhold for each paycheck.
  • Worker’s Compensation: This is to protect your nonprofit from any injuries that could occur on the job.
  • State Unemployment Tax: This is a pool of funds that go to unemployment benefits.
  • Social Security: This supports those on social security benefits.

What Are My Legal Requirements?

In addition to your requirements to provide healthcare, your full-time employees have rights that you must adhere to according to the law.

For example, depending on your state, you may be required to offer a certain amount of sick days or vacation days.

You also may be required to provide paid or unpaid leave for new parents. Check with your nonprofit legal counsel to learn your particular state’s legal requirements before setting up your payroll system and employee handbook.

Tips to Manage Payroll

Part-time employees, full-time employees, and contract workers all rely on your ability to pay them on time and in full. While nonprofits might be exempt from certain taxes, they still function as a business and owe their employees a progressive payment system that accommodates all their needs.

If you don’t want to hire a payroll service, here are a few more options.

Accounting Department: If your organization is growing rapidly, consider forming a department to handle all of the financial information in-house with the help of software.

Hire a Bookkeeper: Bookkeepers have an extensive knowledge of payroll and financial systems. They can either be someone you hire to be in-house, but if your organization is small it is worth investing in a company and being one of their clients. Then, your bookkeeper is only used when needed. This is a great way to cut costs while taking the burden of payroll off your own plate while ensuring accuracy for employees.

Online Payroll/Software: If you’re brave, scrappy, and financially inclined, try managing all of this on your own.

Finalizing Employee Payroll

Now that you have all the insider tips on how to manage payroll for your nonprofit, contact us for more information on how we can help your nonprofit have efficient and transparency pay processes.

After all, you should focus on your mission and we’ll handle the rest!

How To Start Using Finance Services As A Nonprofit Organization

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finance services

Financial integrity for a nonprofit is what keeps the doors open and the lights on so that you can continue your mission. Without good financial practices, nonprofits can’t continue their work.

If you’re a nonprofit seeking information about how to start using finance services, look no further. This guide will tell you everything you need to know about how to switch to a financial service and why you should. 

We’re going to do a deep dive on what type of financials nonprofits need to manage, from bookkeeping to expenses and invoices. Then we’ll explore why it’s important to outsource your organization’s finances. 

Let’s dive in! 

Bookkeeping for Nonprofits

Every nonprofit has cash in and cash out, just like a for-profit business. All of this information is arranged on a daily basis on a general ledger. Your first thought might be a big thick binder with line after line of additions and subtractions. We’re lucky that in 2020, it doesn’t have to be that way. 

Some key elements of bookkeeping are accounts receivable, accounts payable, payroll, and cash. These can all be managed online to ensure accuracy. 

Many nonprofit organizations use services that put bookkeeping into an easy management system. Some nonprofits use Excel or an online financial tool. While these are great methods, it’s still important to manage physical receipts and cash transactions, even if they’re small. 

A key component of proper bookkeeping is reconciliation. Essentially, the reconciliation process makes sure that your own records match the bank. In addition to knowing all the money is in the right place, the reconciliation process can catch issues. Some that might come up are double transactions, refunds, fraud, and bank errors. 

Reconciliation can also be done between departments at the same nonprofit. For example, a nonprofit fundraising team that logs donations has a financial record. Double-check all transactions, including online donations and cash, with the fundraising team’s books. Doing this once a month is a good way to make sure everything is accounted for.

Nonprofit Tax Preparation

Wait, but I thought nonprofits were tax-exempt? That’s true! Nonprofits don’t pay federal tax, sales tax, or property tax. 

But nonprofits still have to file an informational return, known as a 990. These are actually public data, which means that anyone can view them. If you’re applying for a job and want to see how much income a nonprofit has, you can look at their recent 990.

In 2016, 1.5 million nonprofits were registered with the IRS and that number is only growing. It’s a ton of work to compile all the information needed for taxes. Luckily, nonprofit financial services can help you do this. 

Read up on these six common mistakes that nonprofits make during tax season and get together all of your financial information for the prior year to share with our team.    

Accounting for Nonprofits

It’s easy to think that accounting and bookkeeping are the same thing, but they actually have a complex relationship. Accounting focuses on the big picture of the institution and overall financial stability. 

Accountants ask questions like: What is the overall financial health of the organization, based on the books? They are also typically required to present financial reports on the wellbeing of the charity to the board. 

Financial services can be very helpful for accounting because it requires many skills like data analyzation, mathematics, and a background in finance. 

Cloud-based accounting systems are critical for ensuring accuracy. Our approach to affordable accounting for your organization incorporates reconciliation with banks and expenses that can be very complicated to the untrained eye. 

Nonprofit Budgeting 

A key component of financial health for a nonprofit, budgeting for each department of your organization ensures that you’re bringing in more money than you’re making.

Budgeting doesn’t just include how much you can spend and how you can spend it, it also includes forecasts for fundraising and builds out each line item for developing your impactful programming. 

Finance services can help with budgeting for your nonprofit, even down to the grant level. As professional money managers, they know how to extend your dollars. 

Donation Tracking

In 2017, $410 billion was donated to various charitable organizations. That’s a lot of donations to track! 

As your organization grows, it’s almost reckless to use something as simple as an Excel sheet to track donations. Many content management platforms are able to house all sorts of information about your donors and can inform fundraising campaigns with data like giving history and membership levels. 

Content management systems are integral to growing the fundraising for a nonprofit. In addition to generating funds that go to a good cause, your nonprofit is also building valuable relationships that deserve to be tracked appropriately. 

These platforms can do everything from making you remember your wealthiest donor’s birthday (don’t forget to send a card!) to generating reports that assess your organization’s fundraising pipeline and fundraising goals year over year. 

If You’re on the Fence About Finance Services…

You might not be totally sold yet on the idea of outsourcing your finance services. Many nonprofit organizations prefer to keep a tight ship, but here are a few key reasons to make the switch today. 

Outsourced finance services can: 

  • Reduce costs for your institution 
  • Save time for your staff and increase bandwidth 
  • Ensure accuracy for all accounting and bookkeeping 
  • Be scaled easily when your organization grows

Drop Us a Line 

Affordable services for nonprofit organization management can be hard to come by. Our expert team and reasonable pricing can help your nonprofit surpass your goals.

Don’t think of us as another line item, we’re here to build a true relationship with your organization. Our job is to help you make financial choices that will ensure your organization is making an impact.

Ready to make the leap to using outsourced finance services? Gather some quick information on your charity, foundation, nonprofit, museum, faith-based organization, or membership organization and request a meeting. 

We’re so excited to help your nonprofit excel!

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Nonprofit Legal Pitfalls: A Complete Guide to Avoid Disaster

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nonprofit legal pitfalls

Nonprofit organizations often are made up of people that care about their communities and want to make a difference. They are committed to their causes and experienced in their own areas of expertise. 

But they are not necessarily experts at the legal considerations that go into starting and running a nonprofit organization. There are many nonprofit legal pitfalls that can sideline your 501(c)(3) before it gets going. Keep reading to learn more details about each one is and how to avoid it.

Nonprofit Legal Pitfalls

There are lots of laws that govern how nonprofits are set up and how they can operate. Most are made up of well-meaning people, but nonprofits are not immune from greed or fraud. 

The following are some of the most common legal issues nonprofits find themselves in, and how to avoid each one.

The Right Forms

Like so many things in a modern bureaucracy, it’s important to fill out the right paperwork and forms. The very first form is to simply write articles of incorporation to establish your nonprofit in your state. After that, in order to get 501(c)(3) status, you must start by filling out form 1023. 

This is a fairly long process. The form is 28 pages, but with all the accompanying documents and evidence, it could be about 100 pages when completed. 

The IRS takes nonprofit status seriously since it means the corporation has tax-exempt status. This form is like an audit into the nonprofit’s goals and methods. The government wants to make sure the organization is really doing what it says it is, and that it truly is benefiting the community. 

The other primary form that you’ll need to consider is Form 990. This needs to be completed each year. The form is the main way that the IRS and the public get basic information about the organization and its programs. 

Nonprofits don’t have to file for taxes, but they do have to file Form 990 to the IRS each year to demonstrate that they still deserve their tax-exempt status. 

How can you avoid any legal issues related to forms? Make sure to incorporate it correctly at the beginning. This may require seeking legal assistance to avoid mistakes. Follow all directions from the IRS and submit form 990 each year.

If you don’t turn one in for three years in a row, the company’s nonprofit status is revoked automatically.

Especially for large nonprofit organizations, the financial audits involved to prove you are in compliance can be intimidating. It is best to hire professional help. We offer financial audit assistance. 

Too Much Lobbying

Many people think that nonprofits can’t lobby or be political at all. This isn’t true, but there are limits. 501(c)(3) organizations can’t participate in specific political campaigns, but they can participate in some lobbying. 

After all, many nonprofits exist to address some common issues that groups lobby for. For example, it makes sense for an environmental nonprofit to lobby on behalf of policies that help the environment.

They can’t only do this, though. It can only be a certain percentage of their activity. And they can’t campaign specifically for the candidate they think will best serve the environment–only for the issues themselves. (It might not be hard for the public to figure it out, though!)

How can you avoid this? You will want to have an expert on the board or staff to help monitor the activities of the nonprofit. It should be someone familiar with the law or with public policy. For large nonprofits, it shouldn’t be too difficult to find qualified board members. 

For smaller nonprofits, this might not be possible. In that case, it may be better to avoid lobbying altogether. Lobbying tends to be more important to larger nonprofits anyway.

Victims and Unhappy Employees

It goes without saying that things like workplace bullying and sexual harassment are terrible behavior, even apart from any legal consideration. But this article is about avoiding legal trouble, and these types of behavior almost always lead to legal action against the nonprofit. 

If employees don’t feel safe at work and end up as victims of sexual harassment or any type of bullying, they will likely sue. 

What can be done to avoid this? Having solid internal processes for dealing with issues before they become worse is the best way. The board should develop (or approve) a system for dealing with human resource complaints.

The board should make it clear that management will listen seriously to all complaints and take action when appropriate. The system should be easy to use, as well. 

In a worst-case scenario, the board or the management should fire any employees responsible for illegal or unethical behavior. This can go a long way toward preventing further legal action. 

On a slightly less serious note, even unhappy employees who have not been victims may be more prone to create legal trouble. So, it is best to treat employees with respect at all times. The happier they are, the fewer legal problems the organization will likely have. 

Conflicts Of Interest 

Nonprofits typically have lots of partnerships with other nonprofits, volunteers, and board members. The community collaboration is a good thing, but it does create chances for conflicts of interest. 

For example, if a CEO for a drug manufacturer is on the board of a nonprofit health center, there could be a conflict of interest when it comes to choosing medications. These types of conflicts are not bad in themselves.

To avoid any legal action, nonprofits just have to be aware of the potential conflicts and make them public. As long as the conflicts of interest don’t lead to breaking the law or unethical behavior, it’s fine.

Get More Information

Please contact us for more information on ways to avoid nonprofit legal pitfalls. We can assure your nonprofit does not run into legal trouble because of financial or accounting issues. Your focus should be on completing your mission to help your community!

The Secrets Of Grant Writing For A Non-Profit

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A big part of the health of any non-profit is its ability to secure grants. Although the funding models of different non-profits vary, grants are a significant portion of the income for a vast majority of them. Most non-profits depend on grants to pay for their operational costs and to allow them to keep doing the excellent work that they set out to do.

Grant writing isn’t easy, but once you get the hang of it, it isn’t that difficult, either.

In most cases, non-profits have specific employees or volunteers assigned to the task of grant writing because it is a skill that takes some time to learn and to master. Most people who write grants will tell you that writing successful grants gets easier over time and with practice.

If you are new to grant writing, you may be feeling a bit overwhelmed. However, armed with the right guidance, tips, and tricks, paired with a little confidence and a lot of practice, you’ll be writing successful grants before you know it.

Keep reading, and soon, your non-profit will be celebrating the income you have earned through your grant writing efforts.

Why Grant Writing Is Crucial for Non-Profits

Over 50 billion dollars are awarded every year to non-profits through foundation and corporate grants. That’s a lot of money! These organizations want to give money to non-profits to help them accomplish their goals. If your organization doesn’t apply for this money, another organization will.

There are grants out there for every type of non-profit. Some work only with local non-profits, but others are national or even worldwide. Grants are often written to find funding for specific projects or needs, but there are also grants available for more general use funds as well.

Your organization will not get access to this funding unless it participates in grant writing. This money is there for the taking, but you have to ask for it to receive it. 

Grant writing is your key to this funding. If your organization is not writing grants now, it should start right away.

What to Know About Grant Writing

However, it’s important to know that grant writing is hard work. You cannot simply submit the same generic application to many grants and expect to win any of them. You will need to complete a new application for each grant for which you wish to apply, and each application can take many hours or even weeks. 

Your organization will need to do research to tailor each grant application to each grant and awarding agency. In most cases, you will need to create new, innovative projects and programs to make your non-profit attractive to the powers that be and, in turn, to win those grants.

Once your grant applications are complete, you will have to wait to hear back, and in many cases, you will not be awarded the grant even after all your work. Often, you and your non-profit will experience much disappointment – and then you will have to start all over again.

Although 35% of foundations fund at least half of the grant applications they receive, 6% of foundations report that they receive over one thousand applications for their grants each year. That’s a lot of competition to consider.

When you awarded a grant, you will celebrate, and it will all be worth it. However, you will likely have more failures than successes along the way.

How to Search for and Choose a Grant

Since grant writing is a time-consuming process, you will want to find and apply for grants that your non-profit may actually get. Therefore, it’s very important that you take time to find appropriate grants and choose only the grants for which you think your non-profit is eligible. 

Searching for Grants

There are many websites and databases out there to help connect non-profit organizations with organizations that fund grants. 

Grant Advisor is a free site that features reviews of foundations nationwide; you can search for foundations that offer grants in your non-profit’s realm and also learn about the foundations themselves. Once you find a foundation that seems to be a good match, you can search that organization’s site for grants. GuideStar is another site that can help in this way.

You can find other free grant search sites on the web as well. One of the most popular is grants.gov, which helps connect non-profits with government-based grants.

There are numerous paid grant search sites that are even more helpful, but they will cost a subscription fee. These include the Foundation Directory Online, Foundation Search, GrantStation, and others.

Choosing a Grant

When it comes time to choose a grant, there are a number of factors you should consider before moving forward. 

First, make sure that the receipt or denial of the grant will not make or break a special project. Create a diverse funding plan for your project and make sure that you are not counting on any more than 20% of your funding from grants. That way, if your grants fall through, you will be able to use your organization’s creativity to determine a way to move forward without it.

Second, make sure that you have plenty of time to research and write the grant proposal before moving forward. Rushed grant proposals rarely lead to successful grant awards, and you don’t want to waste your time. Make sure there is plenty of lead time to complete the grant in a thorough and conscientious manner.

If you have never written a grant before, there are tons of resources online to walk you through the required sections. Take the time to do your research and make sure that you use impeccable spelling, grammar, and sentence structure along the way. If you can find a grant writing course either in person or online, it will be beneficial, but many people write successful grants without any specialized training.

Finally, only apply for a grant if you are sure that your organization and project or programs meet the foundation’s qualifications. If you apply for a grant for which you are not eligible, you are wasting your time as well as the time of the people on the grant-awarding committee.  

Grants Open New Doors

Grant writing, submitting proposals, and receiving grants are very exciting. However, don’t be surprised if your first grant is rejected. More often than not, this is the case.

If your non-profit does not have a relationship with the organization to which you are applying, you will likely be turned down. Keep trying, though; with continued effort and perseverance, you can find success, and you can receive funding for your non-profit. Good luck!

Accounting can be tricky for non-profits of any size. If you are looking for assistance with accounting in your organization, please contact us today. 

Who Gets Paid In a Nonprofit? Nonprofit Employment Rules Explained

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Who gets paid in a nonprofit?

Turnover in nonprofits is around 19%, primarily due to low pay.

Nonprofits need to ensure that employees are paid fairly, following federal guidelines, but how does a nonprofit pay employees?

Read on to learn more about who gets paid in a nonprofit.

Who Gets Paid in a Nonprofit?

First and foremost, volunteers are not paid employees. Volunteers offer time and specific skills at no financial cost and are coordinated and directed by paid employees.

There are a few critical ways to determine who gets paid and how much they are paid. The determination of payment is through federal and state regulations on overtime and minimum wage. 

If you are asking yourself, “Can the founder of a nonprofit receive a salary?” The answer is yes.

The most important thing to consider with executive nonprofit salaries is that they are not excessive. The inurement clause of 501c3 salaries means nonprofit resources cannot benefit a private party.

How Does a Nonprofit Pay Employees?

When determining reasonable compensation for nonprofit salaries, you should consider a few things. These include:

  • Your organization’s history, purpose, and mission
  • Employee education, skills, experience, and pay
  • A comparison of similar jobs elsewhere

A great way to stay impartial and determine how and who gets paid in a nonprofit is with a board of directors. At a minimum, these voluntary members are an arbitrary source to help provide foresight, oversight, and insight.

How Do You Pay Yourself in a Nonprofit?

A qualified board of directors will help you pay yourself in a nonprofit, without the ethical dilemma of undercutting or overestimating your financial worth. Their oversight will provide the arbitration you need to determine 501c3 salaries fairly and appropriately.

As a founder or CEO, you can and most likely should be on the board of directors. As you’ll be working alongside several other people, you’ll still have the ethical accountability for determining who gets paid in a nonprofit. You will also have insight into how much each individual should be compensated for his or her expertise, beyond whatever concrete skills they bring to the table.

501c3 Salaries and Benefits

There are regulations on how you pay nonprofit salaries, but they can also offer similar benefits as for-profit companies. For example, you can offer a few things such as:

  • Vacation and sick pay
  • Medical and dental insurance
  • Retirement plans
  • Flexible work schedule
  • Educational assistance

Competitive benefits packages like these can help balance out your employees’ ineligibility for bonuses or stock options. 

Nonprofit Salaries: Getting Paid

You no longer have to ask, “Who gets paid in a nonprofit?” Instead, you can focus on paying employees fairly, as well as coordinating benefits packages that remain within federal regulations. Do not be afraid to refer to the IRS guidelines on 501c3 salaries.

For more information to reference on paying out nonprofit salaries or to learn more about information about financial operations in a nonprofit, please refer to our website today.