Tag Archive for: nonprofits

How to Succeed as a Nonprofit Executive Director

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Leading a nonprofit organization isn’t just about passion–it’s about effective leadership. Nonprofit executive directors play an irreplaceable role in steering their organizations toward success.

This guide will explore key strategies and insights to help you excel as a nonprofit executive director. Whether you’re a seasoned pro or new to the position, this roadmap will help empower you to make a meaningful impact in your community.

nonprofit executive director

Build Strong Leadership Foundations

You can’t effectively lead an organization–or a team–if you don’t have clear goals, missions, or plans for it. The first step to becoming a great executive director is to build strong leadership foundations that help define your organization.

This process should include:

  • Clarifying the vision, mission, and values of the organization
  • Developing a strategic plan for the organization
  • Establishing clear goals and objectives, such as defining nonprofit KPIs

Defining and clarifying the goals and mission of your organization sets you up as a successful leader. In turn, you’ll earn the respect of employees, community members, donors, and organizational stakeholders.

In many cases, the Board of Directors sets the vision, mission, and values of the organization. Additionally, the Board, in conjunction with leadership, develops a strategic plan. As a new leader, it’s important to understand where the Board is with this and how you help move their agenda forward. 

Learn How to Navigate the Nonprofit Landscape

The nonprofit industry has a lot of unique challenges, but it also offers truly powerful rewards. Great executive directors know they need to learn the ins and outs of the nonprofit sector. This includes both the industry as a whole as well as your organization’s local or community landscape.

A great way to learn your organization’s landscape is to identify stakeholders in your immediate network and across the industry. Then, you can work to build relationships with these leaders to help you advocate for your organization’s mission and causes.

Additionally, you should stay up-to-date on industry trends and best practices. Subscribing to nonprofit industry journals, podcasts, and news outlets helps you stay on top of the latest nonprofit sector news and insights.

Effectively Build and Manage Your Team

Effective team building and management make it easier for you to help your organization reach its goals and advance its mission. Building a strong team starts with hiring individuals who align with the organization’s mission and values.

You’ll likely have to prioritize the most important roles to hire for immediate success. For example, do you need to hire a CFO or more frontline workers to help perform programs and services?

But building your team is only the first half of a great organization. You also need to work on creating and encouraging a positive workplace culture. Too often, nonprofit workers feel overworked and underappreciated. As an executive director, you have much power to help foster a healthy workplace from the top to prevent burnout and keep employees happy.

Financial Management and Fundraising Strategies

As an executive director, one of your most important roles in your organization is providing financial management. Even if you have an extensive fundraising team, you’ll likely still be working hands-on in managing funds, creating fundraising strategies, and allocating resources effectively.

Essentially, you can consider yourself the financial steward of your nonprofit. Your work will likely include:

  • Planning a clear budget that aligns with strategic goals.
  • Exploring various revenue streams or fundraising ideas such as grants, donations, events, and partnerships.
  • Identifying opportunities to use technology to streamline processes and reduce costs.
  • Ensuring transparency and accountability in the financial practices of the organization.
  • Building, maintaining, and expanding donor relations.
  • Being the face of your organization at fundraising and community events to drive donations to the organization.
  • Balancing operational efficiency with initiatives to advance your mission and reach goals.
  • Providing regular financial reports to the board of directors and other stakeholders.

Lead with Communication and Transparency

Communication and transparency are essential for the success of your organization. Keeping communication channels open fosters trust and accountability within the organization and among stakeholders from the board or directors to community leaders.

Likewise, sharing stories about the organization’s impact helps engage donors, excite volunteers, and inspire the community. Active, excited community members lead to continued support for your nonprofit and its mission.

Additionally, leading with transparency helps you manage public relations to create a positive image of the organization. Handling any crises quickly and transparently helps you maintain trust and credibility with the community.

nonprofit executive director

Giving Yourself the Tools to Succeed as a Nonprofit Executive Director

Succeeding as a nonprofit executive director requires strong leadership, strategic thinking, effective communications, and a deep commitment to your organization’s mission.

While the journey may be challenging at times, the impact you make on your organization and community is immeasurable. If you embrace the opportunity to lead with purpose and let your passion drive you forward, you’ll be sure to succeed as an executive director.

Need a little help with the financial aspects of running your nonprofit? The team at The Charity CFO is here to help! We provide comprehensive bookkeeping and accounting services for nonprofits.

Contact us today to learn more about our nonprofit accounting services.

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Financial Reports to Share with Nonprofit Board

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Transparency and accountability are two of the most important factors in nonprofit accounting. Donors, the board of directors, and the public all want to know what your organization does with the funds it brings in. Being transparent in your nonprofit accounting helps build trust in your organization.

financial reports

But what financial reports are most important to build that trust through transparency with your board of directors? There are five main financial reports you may want to consider when presenting financial data to your board of directors, including:

  • Statement of Financial Position
  • Statement of Activities
  • Statement of Cash Flow
  • Budget vs. Actual Report
  • Fundraising and Development Report

1. Statement of Financial Position

Your statement of financial position is a financial report that provides an overview of the organization’s financials at a specific point in time. For-profit businesses also call the statement of financial position a balance sheet, and many nonprofits do the same.

Your balance sheet is a lot like a health chart for a medical patient–it shows the current overall financial health of your organization. Balance sheets show details on how much money and assets your organization has as well as what it owes to others. Your nonprofit balance sheet will typically have three main components:

  • Assets: What your organization owns
  • Liabilities: The amount your nonprofit owes
  • Net Assets: The value of your organization, or your assets minus your liabilities

Providing your board of directors with a statement of financial position can help them better understand the financial health, stability, and liquidity of your organization.

2. Statement of Activities

More commonly known as an income statement, the statement of activities report summarizes your organization’s revenues and expenses over a specific period. Generally, this report is provided monthly, quarterly, or annually. Organizations that have a high amount of revenue and expenses may want to provide multiple timeframes for their board of directors.

The statement of activities shows your board of directors how much revenue the organization has earned and the amount of expenses incurred over the specified time. The report also details whether your organization has generated a surplus or deficit during the period. Key components of the report include:

  • Revenue: Contributions, grants, program and service fees, and any other income
  • Expenses: Program expenses, payroll and staffing costs, fundraising events
  • Changes in Net Assets: Whether your organization has a surplus or deficit

An income statement report makes it easier for your board of directors to track revenue and expenses over time, which can help make long-term financial decisions.

3. Statement of Cash Flow

An organization’s statement of cash flow report tracks the inflow and outflow of cash over a set timeframe. The report is generally broken into three parts:

  • Operating Activities: Your day-to-day cash transactions including paying employee salaries
  • Investing Activities: Purchases and sales of an organization’s assets, such as buying new equipment
  • Financing Activities: Loans, grants, and donations to the organization

Proving your board with a statement of cash flow helps them better understand the ongoing cash flow management of the organization. You can the board can also use the report to look for opportunities to maximize cash flow and optimize cash flow management to make the organization more resilient to unexpected changes in the nonprofit’s finances.

4. Budget vs. Actual Report

A budget-to-actual report compares an organization’s actual financial performance with its budgeted figures. This report highlights the differences between budgeted and actual revenues and expenses.

Your board of directors can use this report to better assess the organization’s financial discipline and operational efficiency. Organizations with major variances between their budget and actual may need to adjust their cash flow and expense management practices.  Reviewing a budget vs an actual report also helps your organization identify discrepancies such as errors in accounting.

5. Fundraising and Development Report

A fundraising and development report focuses on the organization’s fundraising efforts and donor contributions. This report shows information on funds raised through various campaigns and events. It also generally includes data on donor acquisition and retention rates.

Your board of directors can use a fundraising and development report to evaluate the effectiveness of fundraising strategies. The report can also help show the organization’s financial sustainability through donor retention rates.

Fundraising and development reports are great tools for planning future fundraising ideas for the organization. You can use the report as a starting point to see what fundraising efforts your donors respond to best.

financial reports

Preparing Financial Reports for a Nonprofit Board

These five financial reports can provide your board of directors with an accurate picture of your organization’s financial health. Depending on your organization, some of your reports may be more or less in-depth, and some organizations may not need each report for every board meeting.

Working with an experienced nonprofit accounting firm, like the Charity CFO, is an easy way to ensure you’re providing the right reports for your board. The Charity CFO team specializes in nonprofit accounting and can help you navigate the complexities of financial reporting for your organization. We’ll help you create a nonprofit accounting system that uses technology to automate some aspects of reporting, saving time over manual processes.

Need help setting up a financial reporting process? Contact us today to find out how we can help!

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Use Technology to Simplify Nonprofit Bookkeeping

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Efficient bookkeeping is essential to the success and sustainability of any nonprofit. As a nonprofit leader, it can be difficult to give your bookkeeping the time it needs to stay accurate.

Luckily, modern accounting software and other bookkeeping technologies can help you keep up with day-to-day bookkeeping, reporting, and accounting tasks more efficiently. 

Let’s take a closer look at the importance of efficient bookkeeping for nonprofits, common challenges, and how you can use technology to improve the accuracy and efficiency of your accounting system.

nonprofit bookkeeping

The Importance of Efficient and Accurate Bookkeeping

Just like for-profit businesses, nonprofit organizations need to have an efficient and accurate accounting system. Messy, broken accounting systems can lead to inaccurate financial reporting which can then cascade into further issues like noncompliance with regulations or loss of donor trust.

On the other hand, efficient and accurate nonprofit bookkeeping can help your organization:

  • Maintain Compliance with Regulatory Requirements
  • Accurate bookkeeping helps you adhere to strict reporting and tax requirements, making it easier to stay compliant and avoid legal issues.
  • Build Trust with Donors and Stakeholders
  • An efficient bookkeeping system improves the financial transparency and accountability of your organization with donors. In turn, this helps build trust with important stakeholders throughout your organization and community.
  • Support Decision-Making
  • Running an efficient bookkeeping system gives your board of directors and other decision-makers the tools they need to make the best financial decisions for your organization.
  • Efficiently Use Resources
  • Good bookkeeping helps track expenses and allocate resources effectively to maximize the impact of the organization’s programs and initiatives.
  • Prepare for Audits
  • Inaccurate financial data is one of the top mistakes found in nonprofit audits, but a well-organized bookkeeping system can help you be ready for an audit.

Efficient bookkeeping isn’t just about keeping records–it’s about building a solid foundation for your organization’s financial integrity and operational success.

Common Nonprofit Bookkeeping Challenges

Nonprofits face unique challenges to keep their organizations running, including nonprofit accounting challenges. 

Although nonprofit accounting challenges may seem overwhelming, having the right bookkeeping and accounting processes in place can help your organization overcome challenges including:

  • Managing restricted vs unrestricted funds
  • Tracking multiple revenue or funding services
  • Complex reporting and auditing requirements
  • Effectively allocating funds and resources
  • Cash flow management

Benefits of Technology in Bookkeeping

Technology is one of the most effective ways to improve the accuracy and efficiency of your nonprofit bookkeeping system. The rise in modern nonprofit accounting software and tech tools is making it easier than ever for nonprofit leaders to manage their finances.

Adding technology tools to your bookkeeping processes can have a range of benefits for your organization, including:

  • Improving Accuracy and Reducing Errors: A small typo in your bookkeeping could lead to disastrous results. Bookkeeping technology and software help reduce human errors and ensure consistent data entry and calculations. This leads to more accurate financial records and reduces the risk of costly mistakes.
  • Providing Real-Time Tracking and Reporting: Cloud-based accounting tools provide real-time access to financial data from anywhere with a secure connection. Real-time access to data makes it easier for stakeholders to make timely and informed decisions based on the latest financial information.
  • Enhancing Data Security and Backup: Modern nonprofit bookkeeping solutions offer enhanced security measures to protect your organization’s sensitive financial data, such as donor and staff information. Additionally, many software tools use automatic backups to ensure your data is secure and recoverable if necessary.

Key Technologies for Nonprofit Bookkeeping

Technology can help you simplify your nonprofit bookkeeping and help you maintain more accurate records. However, it’s important to consider your nonprofit accounting tech stack to help maximize the benefits of technology for your organization.

To get the most from your technology implementation, consider these factors in your nonprofit accounting system:

  • Integrations: Try to choose technologies that play well with one another through integrations so that each software can seamlessly share data with the other.
  • Cloud-Based: Cloud-based solutions make it easier for remote teams to work together while also reducing the need for physical hardware products.
  • Recognizable: Using software that is well-known, such as QuickBooks Online, makes it easier to bring in new data from partners and increases the chance that your accountant will be familiar with the program.
  • Ease-of-use: Your bookkeeping technologies should be user-friendly and easy to use to increase adoption among staff and volunteers.
  • Reporting: You want to choose technology that has ample reporting capabilities, whether you’re preparing a monthly financial report for the board or gathering data for an audit.

nonprofit bookkeeping

Learn More About Nonprofit Accounting Technology

Diving into the world of nonprofit accounting software can feel like information overload. There are almost endless tools and configurations you could use to run your accounting system, so how do you choose?

Simple: work with a trusted nonprofit accounting partner to create your customized nonprofit bookkeeping system.

The Charity CFO is an accounting firm specializing in nonprofit accounting. That means we know the unique challenges and needs of nonprofits like yours. Our team can help you sort through technology options to find software and services that work best for your organization.

Learn more by scheduling a call with us today!

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How to Prevent Burnout in Your Nonprofit

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The term burnout is more than a buzzword. In many nonprofits, burnout is the emotional, physical, and mental exhaustion of employees due to prolonged stress. The impact of this goes beyond individual well-being and can affect your organization’s effectiveness and ability to advance your mission.

Keep reading to learn how burnout can happen and get tips for implementing a burnout prevention strategy for your organization.

Burnout

Understanding Burnout in Nonprofit Organizations

Burnout at work can happen to anyone. Jobs that require long hours or have high-stress environments can lead to this.

Unfortunately, many nonprofit roles have unique stressors that can cause burnout, such as:

  • Passion for the mission that adds personal investment to work
  • Limited financial resources
  • Lack of staff and heavy workloads
  • Emotional tolls related to working on sensitive issues such as poverty, abuse, or social injustice
  • Ambiguity in each staff member’s role
  • Unrealistic expectations from the public, donors, or the board of directors

A nonprofit with high levels of employee burnout can’t operate at optimal efficiency. Burnout can cause decreased productivity and high turnover rates in staff. Additionally, burnout can cause the quality of your services or programs to diminish as employees pay less attention to detail or offer lower-quality customer service. This can also have cultural impacts within your organization such as low morale and high cynicism among employees.

But burnout doesn’t only affect employee relationships. High levels of burnout could pose legal, compliance, and financial risks as employees lose focus or drive in their jobs.

Signs and Symptoms

The signs and symptoms of burnout can manifest both physically and mentally. Many employees facing burnout experience a combination of symptoms, including:

  • Chronic fatigue
  • Insomnia
  • Forgetfulness or impaired concentration
  • Chest pain and heart palpitations
  • Gastrointestinal pain or issues
  • Increased chance of illness
  • Loss of appetite or significant weight loss
  • Anxiety
  • Depression

Strategies for Preventing Burnout in Your Nonprofit

Although nonprofit organizations unfortunately regularly see high levels of burnout, there are steps you can take to prevent burnout in your nonprofit. Consider these four strategies to improve your workplace culture and reduce burnout in your nonprofit employees.

Foster a Supportive Organizational Culture

The best way to help prevent burnout is to create a supportive culture in your organization. You can do this by promoting open communication and transparency throughout your nonprofit. Your staff should feel confident that they can rely on other team members to help one another succeed.

In addition to communication, you can help reduce burnout by prioritizing employee wellness and mental health. Offering wellness programs, family-friendly policies, or other mental health benefits for employees gives them the resources they need to proactively manage stress and stop burnout.

Another way to create a supportive organizational culture is to provide employees with opportunities for professional development and growth. On-the-job training, mentorship programs, and career planning sessions can help employees get more out of their jobs.

Clarify Roles and Expectations

Many nonprofit employees face burnout due to unclear expectations or duties of their roles. With many nonprofits facing limited staff and financial resources, it’s common for employees to pick up additional duties and wear many hats in their roles. While this can help foster a sense of pride and teamwork, it can also quickly cause burnout as staff are unsure of what’s required of them.

You can combat this problem by clearly defining employee roles and expectations. Well-defined job descriptions help employees understand what’s expected of them from the start. You’ll also need to set realistic goals and priorities in your organization to prevent the need to overextend employees.

Allocate Resources Wisely

It’s no secret that many nonprofits face limited resources, especially financial resources. As a leader in your organization, you must advocate for adequate funding and resources for your employees. You may need to increase fundraising efforts, grant applications, or program fees to help bridge the gap between limited and adequate funding.

You can also improve your resource management based on historical spending and revenue. Comparing your nonprofit budget to actual, for example, can help you better understand where resources are going. You can use that data to make more informed decisions about spending and look for areas where you can reduce expenses.

Outsourcing can be a great way to reduce costs and improve your team’s efficiency. Consider financial management as an example. You might rely on your administrative team to handle all of your accounting and bookkeeping work as well.

This leaves them with less time to process other aspects of your organization. You could remedy this by outsourcing bookkeeping to remove a significant stress factor from your team.

Increase Recognition and Appreciation

A simple way to help reduce burnout in your organization is to create a recognition program for employees. Sometimes just knowing they’re appreciated can help an employee feel less stressed.

If possible, try to offer rewards or perks through your program. However, if that’s not in the budget you can provide appreciation by thanking employees. Be sure to consider each employee’s personality when recognizing them. Some employees may prefer a public acknowledgment while others are more comfortable being thanked in private.

Burnout

Outsourcing Tasks to Prevent Burnout

Burnout in your nonprofit organization can come from a variety of sources, including limited resources or undefined job descriptions. Once your employees start facing this, you may see higher levels of turnover or disgruntled team members.

Luckily, you can implement strategies to help reduce and prevent burnout in your organization, including:

  • Creating a supportive workplace culture
  • Setting clear employee expectations
  • Allocating resources wisely
  • Developing a recognition and appreciation program

Outsourcing your nonprofit’s financial management to a nonprofit accounting firm like The Charity CFO could be one way to help prevent burnout. Our team knows the stress nonprofit employees have to face. We’re happy to provide nonprofit accounting services to help take some of that stress off of your team.

Contact us today to learn more about outsourcing your financial management.

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5 Challenges Nonprofits Face in 2024

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It’s no secret that running a nonprofit isn’t always easy, especially if you don’t know what challenges await you in the coming months. Luckily, we’ve put together a list of the five most common challenges for nonprofits in 2024. These challenges include financial issues, data security compliance, and talent retention problems.

Let’s look closer at the challenges nonprofits will face in 2024–and how to solve them!

Nonprofits

1. Financial Sustainability

For nonprofits, financial sustainability means the financial security to cover expenses and advance your mission. Unfortunately, many nonprofits struggle to find–and maintain–financial sustainability.

One of the most common reasons for nonprofit financial insecurity in 2024 is the increase in expenses in the past several years. Higher costs affect nonprofits on two sides:

  • Higher overall expenses for the nonprofit itself
  • Lower revenues from decreased donations

Say you run an animal shelter. The cost of cat and dog food is going up, so your expenses are higher to feed the animals in your care. At the same time, your regular donors are cutting back on charitable giving because their personal expenses are increasing as well. This leaves your organization with higher expenses and lower revenues.

How Nonprofits Can Maintain Financial Sustainability in 2024

While rising costs may make it more difficult for nonprofits to find financial sustainability in 2024, it’s not impossible. Try these strategies to help your organization maintain financial stability in 2024 and beyond:

  • Diversify your revenue streams with new programs, donation initiatives, and fundraising events–so long as you can implement them efficiently.
  • Try fundraising hacks like doubling efforts for successful fundraising initiatives.
  • Review your nonprofit budget and cash flow data to find areas for improvement.
  • Increase your chances of successful grant applications by understanding the do’s and don’ts of grant writing.

2. Compliance with Evolving Regulations

Nonprofits are no strangers to regulatory and compliance issues. 2024 will be no different. Your organization will need to keep up with current regulations and prepare for upcoming changes, especially related to:

  • The use of AI in your organization
  • Fundraising solicitation and donor privacy
  • Funding from foreign sources
  • Political activism and election-year initiatives
  • Employee categorization versus independent contractors

Keeping up With Changing Nonprofit Regulations

The key for your organization to stay in compliance with regulatory changes is to stay up to date on them. Of course, this is easier said than done when you have a nonprofit to run!

Consider assigning an employee or forming a task force committee dedicated to monitoring regulatory changes that could affect your organization. Having a dedicated team working on regulatory issues reduces the chances of you missing something as you focus on other parts of your organization.

You may also want to reach out to professionals who can help guide your organization. For instance, working with a nonprofit accountant, like The Charity CFO, can help you reduce your risk of financial non-compliance.

3. Nonprofit Technology Integration and Data Security

One of the best things you can do for your nonprofit is to start leveraging data. Data-driven decisions improve the efficiency and effectiveness of your organization from daily processes to fundraising efforts.

However, it can be difficult to choose the right nonprofit tech stack to fit your organization’s needs. And once you do implement technology into your organization, you have to be careful to keep patron, employee, volunteer, and donor data safe from digital threats.

Data from the Identity Theft Resources Center suggests that 69 nonprofit organizations faced direct data compromises in the first three quarters of 2023. On top of that, over 1,300 nonprofits faced indirect data compromises due to breaches from suppliers or vendors. As you integrate data into your organization, you must take steps to keep it safe.

Strategies to Leverage Data and Keep it Safe

There are several ways to use technology while also ensuring data security. Consider these three tips to help you start leveraging data without compromising user data:

  • Use cloud-based accounting and customer data software like QuickBooks Online.
  • Implement staff and volunteer training on security best practices.
  • Audit and adjust technology and data practices based on current cybersecurity best practices.

4. Donor Retention and Engagement

Building positive donor relationships is an integral part of nonprofit management. Many nonprofits rely on donations as a significant portion of their revenue. If you don’t keep donors happy and engaged, you could see a drop in your finances.

As we mentioned before, rising costs could already be affecting a donor’s willingness or ability to make contributions to your organization. That makes it even more important that you build and nurture relationships with existing and new donors.

Ideas to Help Strengthen Donor Relationships

As everyone feels the strain of increased costs in 2024, it’s more important than ever to make sure donors are recognized. You can make donors feel special by adding personalized messaging to donor communications.

Another way to improve donor relations is to focus on sharing stories and highlighting their impact. For example, use impactful storytelling in your newsletters or on social media to let donors know where their money went and how it helped your mission.

5. Talent Acquisition and Retention

Nonprofits thrive when their employees are talented and invested in the mission. However, nonprofit employee recruitment can be an ongoing challenge. Many nonprofit organizations struggle to attract and retain top talent, whether from limited budgets or stigmas from job seekers.

In 2024, nonprofits have to further compete with for-profit businesses that may be better equipped to offer highly competitive compensation packages, such as well-funded startups.

How to Attract and Retain Qualified Talent

The good news is there are great employees out there just waiting to connect with your organization. In addition, the shift to remote work is making it easier for nonprofits to offer competitive compensation by reducing in-person office costs.

A few ways you can help attract qualified employees for your organization include:

  • Improving the visibility and brand perception of your organization.
  • Creating a comprehensive benefits package for employees–even if you can’t offer the highest salary compared to for-profit businesses.
  • Offering professional and personal development and training for employees.
  • Cultivating a positive workplace environment and culture.

Nonprofits

Need Help Facing Nonprofit Accounting Challenges?

There are many challenges nonprofits will likely face in 2024–from expanding fundraising efforts to ensuring donor data privacy. While it may feel overwhelming, these strategies can help you proactively address challenges and keep your organization running smoothly.

But what if you need extra help setting up your nonprofit accounting tech stack or recording donations correctly? That’s where The Charity CFO can help! As a nonprofit-specific accounting firm, we know your organization’s unique challenges. Our team of qualified nonprofit accounting experts can help you better understand your financial situation and create a plan to overcome challenges head-on.

Contact us today to learn more about nonprofit accounting services.

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What to Look for in a Nonprofit Accounting Partner

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Managing a nonprofit can be complex, especially when it comes to nonprofit accounting. Nonprofits face unique financial challenges and responsibilities that require specialized expertise and support. Finding the right accounting partner for your nonprofit is essential to the financial success of your nonprofit organization.

Take a closer look at the importance of a strong nonprofit accounting partner and what you should look for when choosing a nonprofit accountant for your organization.

accounting partner

The Importance of a Strong Nonprofit Accounting Partner

A nonprofit organization’s finances can be complicated, thanks to reporting and filing regulations and laws. In addition, you need to make sure your financial data is accurate and readily available for donors, board members, and other stakeholders.

Keeping up with your nonprofit’s accounting needs might simply take too much time away from your ability to run other aspects of your organization. That’s why you need a strong accounting partner who specializes in nonprofits.

A nonprofit accounting team provides important benefits to your organization, including:

  • Expertise in nonprofit financial regulations and reporting requirements
  • Understanding of nonprofit funding and grant management
  • Strategetic financial planning and advice tailored to nonprofits
  • Increased financial transparency and accountability throughout your organization
  • Resource optimization and improved cost efficiency through effective nonprofit accounting setup
  • Access to nonprofit sector insights and best practices from your knowledgeable nonprofit accountant

Elements for a Good Nonprofit Accounting Partner

Not all accounting firms are created equal, even those that specialize in nonprofit accounting. It’s important to do your due diligence when looking for an accounting partner. As you look for an accounting team, consider the elements that make a nonprofit accountant a good fit for your organization, such as:

  • Nonprofit accounting specialization
  • Commitment to accuracy and on-time reporting
  • Education and experience in providing financial planning and advice
  • Open communication channels and a team that’s regularly available for support
  • Knowledge and recommendations of technology and tools for your organization

Specialization in Nonprofit Accounting

One of the most important things to look for in your accounting partner is a firm that specializes in nonprofit accounting. Nonprofit accounting has several major differences from for-profit accounting. An accounting firm that specializes in nonprofit accounting knows the legal and tax limitations of a nonprofit organization.

In addition to knowing the legal requirements of nonprofit accounting, a good nonprofit accountant also understands the things that make the nonprofit sector unique. They’ll know how to approach common financial issues for nonprofits, such as limited budgets or restricted funds.

Accurate and Timely Reporting

Most nonprofit leaders have been there: you can’t make a crucial decision until a certain financial report comes in, but you’re never sure when the data will be available. Even worse, sometimes the report looks different than previous months–or it never shows up at all. This leaves you scrambling as you try to appease your board of directors and donors all while attempting to make data-driven decisions for your organization with inconsistent and inaccurate data.

Luckily, a good nonprofit accountant removes the responsibility of reporting from your shoulders. Your nonprofit accounting partner will help ensure your monthly financial statements and reports are delivered on time. They’ll also work to eliminate inaccuracies within your data, so you can make data-driven decisions you trust and avoid accounting mistakes that might come up in an audit.

Proactive Guidance and Expertise

An unexpected and sometimes overlooked element of a good nonprofit accounting team is the ability to offer financial guidance and expertise. Good nonprofit accountants do more than just provide reports, they also become your trusted source of nonprofit financial advice. You should aim to work with an accountant who has the experience to provide expertise and financial planning for your organization.

If you’re facing a financial question and your first thought is to reach out to your accounting partner for guidance, you’ve likely found a strong nonprofit accounting team. If you don’t trust their advice, it might be time to look for a new accounting team.

Strong Communication and Accessibility

Your nonprofit accountant can only provide expert advice and accurate reporting if you can easily get in touch with them. Whether you have a pressing filing question or just need general financial guidance, you want to be sure your accountant will respond to questions in a timely manner.

As you search for the right accounting firm, think about how easy they are to contact. Generally, a firm that is easy to communicate with before you’re even working together will remain so after you partner together. This can be an invaluable quality in your nonprofit accountant.

Technology and Tools

Technology can be an absolute game-changer for nonprofit organizations. However, technology and financial tools are only as good as their implementation and use.

Your nonprofit accounting partner should have knowledge of the latest accounting software and tools. They should be able to make expert recommendations for a tech stack that’s tailored to your organization’s unique needs.

accounting partner

Searching for an Experienced Accounting Partner?

The right accounting partner can make all the difference in managing your organization’s financial needs. From on-time reports to consistent, accurate data, a nonprofit-focused accounting team like The Charity CFO can help your organization be more effective and efficient.

While many accounting firms focus on for-profit business accounting, The Charity CFO specializes in nonprofit accounting. Our team meets every element of a strong nonprofit accounting firm by providing:

  • Nonprofit accounting expertise
  • A commitment to timely reporting with accurate data
  • Expert guidance and advice from nonprofit accounting specialists
  • Ongoing communication and a friendly, easy-to-reach team
  • Recommendations and education on the latest technology and tools for efficient nonprofit accounting

Want to learn how The Charity CFO can help manage your nonprofit’s financials? Contact us today!

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The Ideal Nonprofit Accounting Tech Stack

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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

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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

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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?

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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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When You Should Consider Merging a Nonprofit

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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.

merging

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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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.

tax

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

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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

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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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Provide a ‘WOW’ Experience in your Nonprofit Marketing

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About David

Welcome everyone to A Modern Nonprofit Podcast. Today, we explored the importance of websites, nonprofit marketing, and how to bridge the gaps between departments to achieve digital success.

When we think marketing, we think of getting the word out and expressing the  mission behind the help non-profit organizations (NPOs) provide. In 2023, this goes much deeper than we could imagine. There are many tools and resources that can be utilized to enhance NPOs, especially online. 

We invited David Pisarek of Wow Digital, Inc. to give us a behind the scenes look at SEOs, attracting and retaining visits to websites, digital marketing  and much more! 

David started Wow Digital Inc. with the goal of providing effective websites, branding and design for Canadian based charity organizations. With over 20 years in the nonprofit sector, passionately working to revolutionize it one website at a time. An expert in design and programming, he’s also an educator at the college level. With a track record of 240+ complete projects since 2016, David and his team are the go-to experts.

We welcome David to the show! 

Continuous Improvement 

We engaged in an in-depth conversation with David, where we unraveled a series of questions regarding nonprofit website redesign and the importance of web analytics.  

  • When should nonprofits consider a full redesign on their website?
  • What does that process look like?
  • What should it include?
  • How often should a NPO consider a redesign? 

Of course, there is much to learn about in each of the posed questions. David stresses that websites are not something that are sat and forgotten about. Or ‘one and done’ as he calls them. 

They need constant love and care. A part of that care comes from measuring analytics. A free tool that can help organizations achieve this is Google Analytics. It’s important to note that Google Analytics 3 is the system that has been used for years. And as of July 20th, 2023, this was updated to GA4. So, if analytics are the next move for business, make sure GA4 is the system used. 

GA isn’t just for tech-nerds; it’s a great tool that can help businesses identify what consumers, donors, or website searchers are looking for and take them back to the website over and over again. Keep an eye on:

  • What keywords are being used?
  • Which call to actions are listed?
  • Where are consumers landing on the business website?
  • Are they navigating 3 to 4 pages in order to find what they are looking for?

All of these are key questions that businesses should be asking when it comes to analyzing their web traffic. 

David makes a great point regarding website analytics. The word ‘conversion’ is a data point that can be measured. So for example,  on a for-profit’s page this may mean that a conversion leads to an eventual sale. This has a different definition for NPOs. A conversion data point may indicate converted volunteers, donations, or simply subscribing to an email or newsletter. 

Not only is it important to understand what data points to pay attention to, but also how they differ from business to business. 

Revamping a Website 

Before Tosha and David take a deeper dive into the topic of SEOs, David compliments Tosha’s question about a website revamp. 

He and his team did an audit that lead to 5 indicators for revamping a website: 

  1. Is the page layout unique or common in comparison to other websites?
  2. How old does the site look?
    1. Building more off of this point, how does the website look on a smartphone? Is it compatible? Google will rank the site lower if it isn’t mobile friendly – certainly something to consider. 
  3. Is your mission and purpose clear as day on the website?
  4. Is the website accessible? 
    1. World Wide Web Consortium (W3C) is a website that creates accessibility guidelines. For example, when defining accessibility is the website accessible for an individual that may be physically impaired? The tiny detail that goes into naming a photo on a website could play a huge role in this consideration. 
  5. Finally, how identifiable is the business contact information?

Number 5 may seem like a small task in the big scheme of things, but this is actually a great segway into the SEO conversation. Even if your organization is completely remote, putting a PO Box on your website can do wonders. Why? When people search for things near them (like volunteer opportunities), Google uses their location to find the best match. 

In most cases, each device holds an IP address that gives Google some idea of your location. Because of this, when searching for ‘volunteering opportunities’ while the IP is in, let’s say the St. Louis, MO region, then Google can direct individuals to a website associated with that area. 

Measuring Frequency 

Piecing the conversation together, NPOs are a different breed than for profit businesses. They still require constant measurement and effort, but the data points that are studied are much different. How this plays into the website traffic and SEO conversation, is what makes all the impact. 

For example, revenue may increase in the winter months because of a historically associated ‘giving season’. Therefore, measuring data on a quarterly basis may be more effective when it comes to the NPO’s website as opposed to week over week or month over month analytics. 

NPOs also work on a conservative budget basis, meaning that they can stretch a dollar. 

With this, they may not be able to pay an individual, group, or department to only analyze data points for their website development. Looking at the numbers on a quarterly basis can help whomever lands this task a better window for analysis and time management. 

Want to connect with David and his team?  Email him at [email protected] or check out their website, wowdigital.com. His team also works with NPOs and website development by providing templates and website management through a website called, Mighty NPO. By using the coupon code charitycfo, this may qualify your business for a lifetime discount up to 70%. 

To hear the full story, listen to our podcast here.

You can also find Tosha and The Charity CFO team on Youtube or our website, thecharitycfo.com!

Modern Fundraising: Community Centric Fundraising Movement

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Nonprofits host many of the same fundraisers time after time, year after year. But, these are all for good reason! Such efforts contribute towards the advancement of your organization’s mission as you strive to better your community. No one is shaming you for that! But, there are also several other factors that make up your fundraising strategy you may not be considering.

For example, have you considered (or are familiar with) Community-Centric Fundraising? Community-Centric Fundraising is a fundraising model that is grounded in equity and social justice. It believes in prioritizing the entire community over individual organizations, fostering a sense of belonging and interdependence, presenting work not as individual transactions but holistically, and encouraging mutual support between nonprofits.

It’s a movement led by Rachel D’Souza-Siebert, who is also a passionate advocate for collaboration, racial equity and community/movement-centered fundraising as her role at Gladiator suggests.

Because of her passion and expertise, Tosha Anderson of The Charity CFO knew Rachel was the ideal guest to invite on for a chat on the recurring and informational podcast series, A Modern Nonprofit Podcast. 

On this week’s episode, Tosha and Rachel discuss:

  • Values that shape decisions to work with clients, or to not work with clients!
  • How can nonprofits integrate community-centric fundraising into their orgs?
  • Barriers when trying to bring equity into the not-for-profit space?
  • Balancing between wants and needs when analyzing fundraising
  • And more!

LISTEN TO RACHEL AND TOSHA DISCUSS MODERN FUNDRAISING STRATEGIES ON A MODERN NONPROFIT PODCAST HERE! SUBSCRIBE FOR FUTURE EPISODES AND CONTENT! 

This is a great episode, one that anyone who wants to respect donors and build strong relationships with should not miss a single second of. That’s why you should also subscribe to our podcast for future episodes!

Rachel D’Souza-Siebert joins Tosha on this week’s episode of A Modern Nonprofit Podcast!

Lastly, interested in discussing fundraising, nonprofit management and more with other listeners and nonprofit leaders? Join us in A Modern Nonprofit Facebook Group, where these discussions are frequent and ongoing. Join hundreds of like-minded professionals today!

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!

The Insider’s Guide to Bookkeeping Services For Nonprofit Organizations

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Bookkeeping includes invoicing, employee payroll, financial reporting, and more. Is your nonprofit interested in using bookkeeping services? You’re in the right place.

Affordable bookkeeping services for nonprofits are crucial for ensuring financial stability and accuracy. Keep reading to learn exactly how nonprofits can benefit from outsourcing bookkeeping.

What Are Bookkeeping Services?

Bookkeeping and Accounting may be used interchangeably, but they’re very different. Bookkeeping is focused on cash flow for an institution while accounting is basically analyzing all of that data. This helps assess the overall financial health of the organization.

Nonprofit organizations have many financial needs like any business. They have to file complicated taxes, certify for tax-exemption status, and report out. They also have to track donations! This can be a lot for a small staff to handle.

Bookkeeping services are handled by a team of professionals who have experience in the field with nonprofits. Many of these experts have worked with religious organizations, foundations, and even museums. They use software and knowledge of financial trends to help your nonprofit succeed.

Why Should I Use Bookkeeping Services?

There are many reasons to outsource bookkeeping. In addition to being safer and more secure, it enables you to focus on your organization’s mission.

Get Auditing Assistance

Nonprofits typically undergo an annual audit, unlike many other industries. This is time-consuming for the bookkeepers and accountants at the institution.

Save time and money by using bookkeeping services. These services can ensure that your organization is reporting accurate information to the Internal Revenue Service. They can also ensure that your institution is in a state of financial health.

Auditing involves a complex analysis. It also involves finding records of all transactions and donations for an organization. Some nonprofits choose not to do this because of the workload. However, completing annual audits shows donors that your staff is committed to transparency. This can help secure future funds and help with grant applications.

Avoid Fraud

No one wants to talk about the possibility of fraud, but it can happen within the nonprofit world. Embezzlement is also a risk, especially with multiple employees in the finance department. If there aren’t checks and balances in place, tracing money can be difficult.

Luckily, outsourcing bookkeeping services can ensure integrity for your nonprofit. These highly-skilled bookkeepers know exactly what to look for to avoid fraud and can easily identify issues. That way, the issues are caught before they become harmful to the organization.

For example, bookkeepers can see double payments or cash from a new vendor. Maybe they see a sudden increase in payments. They can even comb through documents that appear to be backdated or have questionable signatures. These can be indicators that something fishy is going on at the organization.

Since they manage all documents, data, and cash flow, professional bookkeepers add a level of security to the institution. As a third-party entity, bookkeepers can help your organization stay safe. This ensures security for your nonprofit.

The typical organization loses 5% of it’s annual revenue to fraud. That can be a lot if your organization is a multi-national nonprofit. Avoid lost revenue by using an outsourced bookkeeper.

Get Tax Filing Assistance

For nonprofits to earn their 501(c)(3) status and tax exemption, they have to be transparent. This means complete accuracy with the IRS on all financial matters. This includes strategic and accurate bookkeeping to provide easy filing when it is needed.

Nonprofits can have many revenue streams, including tax-deductible donations, membership dues, and even ticket admissions. Getting everything organized for tax season can be really complicated.

Bookkeeping services are useful because they use software that organizes all records perfectly. These professionals can also help identify areas to lower expenses for your organization. That way, you can reap the most benefits of the money your organization receives.

Using a dedicated bookkeeper absolutely makes this a seamless experience. This reduces stress during tax time for the nonprofit staff. Instead, it gives you the time to work on your mission and serve the community.

Save Time and Money

Instead of spending time organizing receipts, invoices, and payroll, handoff those duties to an expert. Your staff can then spend more time executing your mission.

In 2013, nonprofits paid $634 billion in wages. Hiring and training new employees, even if they’re very talented bookkeepers and accountants, can take a lot of time and energy. Instead, spend that manpower and resources on finding an outsourced financial services business.

Once your outsourced bookkeeper is set up, it requires very little management on the nonprofit’s side.

Bookkeeping Software Is More Accurate

Your organization might not have the funds to have a full-time bookkeeper and bookkeeping software. Luckily, an outsourced bookkeeping service has those resources for you to benefit from.

Bookkeeping software makes everything much more accurate. There is so much room for error when a team handles financials by hand or in a simple Excel sheet.

Avoid that hassle by investing in affordable financial services.

Ready to Outsource Bookkeeping Services?

Now that you know the many benefits of using an outside service, request a meeting with us to get started.

Pretty soon, your nonprofit’s bookkeeping services will be a breeze.

Our dedicated and experienced team works with an array of nonprofits. Many of our clients have been able to expand their impact on the community due to our financial help.

Check out our blog for more information on how our nonprofit financial services could work for your organization.