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Alleviate Nonprofit System Scrutiny with True Fund Accounting

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A recent article in the NonProfit Times states that nonprofit hospitals that figure out how to absorb Medicare payments may do better than others. Hospitals have been under the microscope in the past year as more information has been uncovered surrounding their billing practices. With a greater push towards transparency in pricing, hospitals face greater scrutiny around their billing practices.

Yet charitable hospitals face the same pressures that for-profit hospitals face. The Affordable Care Act, for instance, requires nonprofit hospitals to assess the needs of their communities once every three years and to offer financial assistance to patients who need help paying their bills. Given that costs continue to rise along with demand for service, that’s a tall order.

Senator Chuck Grassley (R – IA), chairman of the Senate Finance Committee, has asked the Internal Revenue Service to monitor whether nonprofit hospitals are indeed meeting their charitable obligations. He has also stated he intends to launch a probe into the situation to ensure that hospitals who qualify as nonprofits are indeed acting as such.

You may wonder how this affects your nonprofit organization. You may run an educational nonprofit, or an arts foundation, not a hospital. Why would anyone scrutinize your accounts and activities?

The time may be coming when all nonprofits face additional scrutiny. Greater access to information has alerted the public that nonprofits must fulfill their missions with the margin that they make. The public wants to know that their donations to charitable organizations goes towards their mission, not a mansion for the CEO or a Board member.

True fund accounting can help alleviate this level of scrutiny on your organization. Download our free white paper on the 10 Reasons Why Nonprofits Need True Fund Accounting Instead of a Commercial Accounting System here to better understand this topic.

What Is True Fund Accounting?

True fund accounting is software purpose-built for nonprofit organizations. Unlike typical “off the shelf” small business accounting software, true fund accounting software takes into account the unique blend of funding sources fueling most nonprofits.

While a for-profit company may also have multiple funding sources, they generally do not have the complexities of tracking funding back to its source at the level of detail required of most nonprofits. For example, a shoe retailer may account for revenue from its retail store chains and from its e-commerce site.

A nonprofit organization may have dozens of revenue sources, each with its own requirements. For example, an education nonprofit that is affiliated with a university may have several funding sources, each with different stipulations on how the funds may be spent. Grant funds from a large, private donor may be earmarked for particular programs while money from product sales may be spent on any and all operating costs.

This level of complexity is quite common among nonprofits and one reason why typical small business accounting packages and spreadsheets don’t work well for nonprofit accounting. True fund accounting takes into consideration the many variables at a nonprofit and the different ways that money may be tracked, spent, carried over, and more. The Chart of Accounts for a nonprofit may require multiple dimensions to fully understand it, and only true fund accounting accommodates this level of complexity. Typical accounting software cannot provide the appropriate level of detail most nonprofits need.

True Fund Accounting Helps Avoid the Spotlight

Senator Grassley mentioned scrutinizing hospital spending to ensure they aren’t dodging their mission as nonprofits – to provide healthcare to the vulnerable.

By using a true fund accounting program to track how the nonprofit hospital manages its payments and services, the hospital could publish its results and allow public scrutiny on its documentation. Senator Grassley and his colleagues might find that the multi-dimensional approach to the chart of accounts provides the level of detail needed to allay fears that the hospital isn’t fulfilling its mission. It could call up the facts it needs to placate the senators investigating its activities and assure the public that its charitable status remains intact.

No one likes the IRS knocking at their door. With increasing demand for transparency in hospital pricing and other nonprofit organizations, it’s time to pre-empt any arguments about financials by using true fund accounting. Find out more about true fund accounting systems from Welter Consulting.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

The Changing Role of the Financial Professional Part III: Critical Skills for Accounting Leaders

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Welcome back to our three-part series on the Changing Role of the Financial Professional. In Part I, we looked at what’s driving changes. In Part II, we looked at just one of those changes, automation, and how it can be used to your advantage. In Part III, we’ll look at how the evolving role of technology is changing the critical skills needed for accountants and what skills organizations look for among its finance and accounting leadership.

Automation Changes Everything

As we’ve seen in Parts I and II, automation changes everything in both the for-profit and not for profit world. Automation enables organizations to save time, streamline processes, and access real-time data. Cloud-based finance and accounting systems, fundraising and donor management systems, and new grant management software enable organizations to simplify and automate many processes.

Organizations that once tracked grant applications using cumbersome spreadsheets, for example, can now use grant management systems to monitor applications, resources shared across grant applications, deadlines, and status of grants. What was once a complicated process that involved plenty of cross-referencing links in multiple documents can now be accomplished easily through one central database.

The same goes for accounting and financial management software for nonprofits, such as Abila MIP Fund Accounting, which can track revenue, expenses, and margin to ensure that funding meets demand for program services. With such automation at your fingertips, you can spend the time you used to take to manually update systems to work with program directors and others on their budget needs as well as other projects.

The Skills You Need to Succeed in Today’s Nonprofit Accounting World

Given that automation takes over many of the tasks accounting and financial professionals once performed in the nonprofit workplace, what skills are now in high demand?

  • Data analysis: The ability to analyze data and offer insights offers many opportunities for accounting professionals to lead in the context of nonprofit decision making. Not everyone can review financial data and understand the ramifications of specific decisions, for example. An accounting and financial professional can offer invaluable advice and insight into data found in the financial systems and guide others based on that information.
  • Communications: It’s not just the ability to review and interpret crucial financial information. Accounting leaders must articulate their findings to non-financial professionals, especially in the context of nonprofit leadership. Board meetings, constituent meetings, internal staff meetings and other places where financial information comes under scrutiny require an accounting and finance professional who can explain to the average person exactly what the data means and its impact upon the organization.
  • People skills: “People skills” are often thought of as secondary ‘soft skills’ in the accounting and finance world. But emotional intelligence, cultural intelligence, and other people skills set leaders apart from the rest. They help professionals lead with compassion and empathy, and motivate and inspire others to achieve their best. Today’s nonprofit accounting and financial leaders must have strong people skills to achieve success with their teams.
  • Technical abilities: You may work for a large organization with a dedicated IT department or a small nonprofit where you are the IT department. In both cases, you’ll still need technical abilities to navigate new software, assist with software selection, and utilize your current systems to their fullest capacity. Nonprofit accounting and finance leaders must have at least passing familiarity with the current slate of software available to help manage all aspects of finance and accounting, including membership, donations, grants, and more.

The nonprofit world’s technology evolves alongside that of its for-profit business counterparts. With the ever-expanding array of technology available to nonprofit accounting and finance leaders, all skills – quantitative, qualitative, and management skills – will be needed to help organizations remain cutting-edge and relevant for years to come.

In case you missed it:

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

The Changing Role of the Financial Professional Part II: Automation Experts

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Welcome back to the second of our three-part series on the changing role of the financial professional. As new technology, such as accounting and financial management software, fundraising and donor contact management systems, and much more, financial professionals may wonder what the future holds.

In Part I of this series, we talked about what’s driving these changes: constituent demand, artificial intelligence, and improved automation. Today, we’ll take a look at one area of the change drivers: automation. How is automation changing the way accounting professionals work? How can automation be used for added constituent and organizational value?

Automation, a Driver and Enabler of Change

It’s difficult to recall a time when automation wasn’t present in the workplace, but not too long ago, many automated processes we take for granted were once manual tasks. Great-grandparents may recall a time when bank tellers tallied up a customer’s account by hand, manually adding sums as they made deposits and entering the amount with pen and ink into a portable ledger eventually known as a bank book. Now, we wait for the computer to update in seconds what took the teller minutes to do and a receipt spit out from the teller’s terminal provides us with the proof we’ve made a deposit and our current balance. We can look up our bank balances online, write checks and pay bills, and all with the touch of a button.

Automation now provides accountants with simple, push-button technology to update many critical systems at their nonprofit. For those still using spreadsheets to provide financial data, it’s time to rethink spreadsheets and manual data entry and consider automated accounting and financial management software for a nonprofit.

Such software not only saves time, as in our bank teller example, but prevents mistakes. Consider how easy it was years ago for those old-fashioned bank tellers to make additional mistakes and end up accidentally shortchanging customers or perhaps crediting them with too much. Well, the same thing happens now in a spreadsheet, only it perpetuates the mistake as the spreadsheet potentially carries the error over into multiple formulas, columns, charts, and graphs!

Automated systems take away much of the potential for error. They gather data from different sources seamlessly, updating in the background. Cloud-based systems offer the ability to connect websites with financial systems so that sales of membership materials, books or periodicals, or donations can be accepted online. The system automatically updates the ledger, providing you with immediate and timely updates on the financial status of the organization. That’s a compelling reason to embrace automation.

More Time to Add Value

Another area in which automation can help accounting leaders is by freeing up valuable time so that you may add more value to your organization.

An accountant who no longer has to add up every penny in the general ledger has the time to think critically about budgets, expenses, and program needs. They have the time to advise department managers on cost-saving measures, work with the marketing team on donor campaign data, and assist others with their needs, too. The result is an accounting leader, not just a manager, but someone who advises, consults, and adds significant value to the daily workings on the nonprofit organization.

AI and Machine Learning

As the world turns more and more towards automation, look for new software to use machine learning and artificial intelligence (AI) to remember and act upon common data needs as well as retain and recall frequently required items. New systems offer voice-activated commands, simple remembered queries, and customized interfaces based on what the system ‘learns’ from its interaction with you and your team.

We’re at the beginning of a new era in the world of automation. As software evolves, the role of the accounting professional evolves alongside it. In Part III of this three-part series, we’re going to take a look at the skills that accountants need in this ever-changing world of technology. Check back soon for our new article.

In case you missed it:

The Changing Role of Finance Professionals in a Digital World: Part I

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.

Using eBay for Fundraising Auctions

By | Fundraising, Uncategorized | No Comments

eBay, the ubiquitous auction website, offers more than a platform to sell off old clothes or knickknacks you no longer want. It has become a powerful forum for nonprofits to raise funds.

The Nonprofit Times reports that eBay for Charity helped nonprofits generate a record $102 million in 2018. Many charities use eBay as a fundraising auction platform. Warren Buffet, the famous financial expert, helped raise $3.3 million for a human services charity auction via eBay. The charity auctioned the opportunity to enjoy a meal with the financial whiz (and the chance to ask him for tips!). Other charities have raised more modest funds, but many are using eBay as a reliable fundraising outlet.

eBay for Charity:  Four Opportunities

eBay for Charity offers nonprofits four ways to raise funds via the site:

  1. List your nonprofit on the website: Individuals can find and ‘favorite’ the nonprofit of their choice. When they shop on eBay, a portion of the proceeds is sent to their selected nonprofit.
  2. Donate directly: eBay sellers can check a box off during the listing setup process to indicate that a portion of their fees and/or sale goes towards a charity.
  3. Charity auctions: Nonprofits can set up a charity auction on their own, or a series of charity auctions, using the platform.
  4. Direct sales: You can also set up shops and stores on the popular site to sell goods with the proceeds going to the organization.

Does It Work?

Many people express skepticism about the site’s ability to help charities fundraise. After all, isn’t eBay a place for good bargains, discounts, and used goods?

Yes, and no. Over the past several years, the site has evolved as a viable shopping platform, a place where entrepreneurs can set up their online stores at a fraction of the cost of self-hosted sites and stores. Many run their entire businesses via eBay, either selling new goods, reselling goods, or using a combination of sales and auctions.

Warren Buffet’s charity raised over $3.3 million, as we mentioned above. Are other nonprofits raising money using the site’s features for charities? A press release issued by the company makes it clear that yes, they are:

  • The Prince’s Trust, a U.K.-based nonprofit headed by Prince Charles, raised about $138,000 in just 24-hours. The campaign promises to help budding entrepreneurs ages 18-24.
  • Homes for Our Troops, a USA-based nonprofit that helps veterans, raised $160,000 to build specially designed handicapped accessible homes for severely injured veterans. The nonprofit used a 10-day auction format to raise funds.
  • Seattle Goodwill: Goodwill stores offer clothing, furniture, and other items at retail shops around the nation. However, the Seattle store recognized the power of reaching a wider audience and listed their items in an online store powered by eBay. The store quickly realized that they were making much more money online than in their stores, with goods selling far above the asking price.

These are just a handful of stories shared by the company to demonstrate how different nonprofits use the site to raise funds. But doesn’t it give you some great ideas? For example, you can:

  • Run a celebrity auction: Like Warren Buffet’s donated dinner date, how about seeking a local celebrity for a charity meal auction?
  • List donated items: List donated items in an online store or auction site and promote the event to your email list. Make sure you have a suitable donor contact list and donor management software to run your campaign.
  • Ask your followers and fans to select your charity as their desired nonprofit on the site. This way, whenever they purchase on eBay, a portion goes automatically to your nonprofit.
  • Encourage people to list items for charitable sale and donate the profits to your organization. It’s fast, easy, and straightforward.

Are you ready to try eBay for Charities? Sign up on the site, and let the fundraising begin!

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.