Monthly Archives

February 2021

Post-COVID Nonprofit Operations

By | COVID-19, Nonprofit | No Comments

Systems and services nationwide are still struggling with the aftermath of the pandemic. This goes for nonprofits as well. Although many have risen to the challenges of continuing to serve their communities amid shrinking donations, new health mandates, and rising demand for their services, the pandemic has exposed many fragile areas in society. Nonprofits were able to help these areas, but now, they may no longer be able to do so.

New models, methods, and approaches are needed for the post-pandemic nonprofit world as exemplified by these two examples. The creative approach that nonprofits bring to the many problems uncovered by the pandemic will help them succeed in the future.

Systems Built for a Different Era

Many of the assumptions and systems upon which nonprofits were founded were based on norms and attitudes from a different time and place.

For example, the current model of community food banks which collect food at central distribution points and distribute it to queues of people needed to change during the pandemic. Such a model evolved during previous eras in which people lived closely together in cities. Now, it is just as likely that hunger exists behind suburban front doors or in rural enclaves. It’s difficult for some to travel to a food bank, and when people are asked to curtail their time out of the home to prevent the spread of infection, it is inappropriate to ask them to line up with strangers just to get food to feed their families.

Meanwhile, the wealthy who can afford meal delivery simply pick up the phone and dial for a pizza, Chinese or Thai takeout, or whatever they fancy. Families can order groceries online and have them delivered to their doorstep to avoid long lines at the supermarket.

Donations of food may be down as more people feel the pinch of joblessness or restricted income. According to one report, prior to the pandemic, 1 in 6 Americans needed supplemental food sources to stave off hunger. Now, that number is closer to 1 in 5.

“Get in line” isn’t an appropriate or helpful response to needy people during a pandemic. A creative response is called for to help fill the gap between the hungry and the resources available to them.

Exposing the Digital Divide

It’s not just nonprofit systems built for a different time that struggle during the pandemic. Expectations must shift around services, too.

Prior to the pandemic, many school children used the internet only in the classroom or at the library where free computers and Wi-Fi provided them with the same access as their wealthier classmates.

Now, however, with many schools switching to an all-online model and libraries closed to the public, children who lack broadband access aren’t getting the education they need. Nonprofits are being asked by their communities how they can bridge the ever-widening gap in these children’s education while some communities fail to address the root problem of the digital divide.

Solutions for Creative Nonprofits

It’s not all doom and gloom. Although the pressure on nonprofits to fill these ever-widening gaps is great, many are coming up with creative ways to serve their constituents.

Such creative solutions include:

  1. Partnerships with for-profit companies to bring resources to the communities. Food delivery services, for example, can be asked to take free food to the needy if they’re already heading into specific neighborhoods.
  2. Collaboration with community-based organizations that already have deep roots in the most underserved communities can help bridge many gaps. These organizations may know of resources, people, and places that can be tapped to help their specific communities that nonprofits outside of the community do not understand. Working collaboratively, both organizations can achieve more together than they can alone.
  3. Developing new methods, models, and delivery services. This may be the time for out-of-the-box thinking, testing models from the for-profit world, or seeking the advice of other organizations nationwide as to what worked and didn’t for them as they responded to local needs during the pandemic.

Nonprofits face a big challenge post-pandemic. But they are uniquely poised to meet these challenges through creative thinking, flexible approaches, and good stewardship of existing resources.

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.

Is “Overhead” a Dirty Word in Nonprofit Marketing?

By | Nonprofit | No Comments

Perhaps donors have inquired about your organization’s “overhead ratio.” Or, you’ve been asked by a prominent donor to confirm why your “overhead is so high.” What’s with the emphasis on overhead? Is it healthy? What, if anything, can nonprofits do to change the misconceptions people have about overhead?

The Myths About Overhead and Overhead Ratios

GuideStar, Charity Navigator, and other sites use some form of overhead or the overhead ratio to assess a nonprofit’s efficiency. But is this a fair number to use?

Since the aftermath of Hurricane Katrina, when journalists investigated the Red Cross’ finances in light of its handling of the humanitarian relief efforts, the term “overhead” has served as a red warning light instead of a natural descriptor of a particular type of expense a nonprofit naturally uses.

Many see overhead and the overhead ratio as synonymous with efficiencies. A nonprofit with low overhead costs, for example, may be viewed as thrifty, efficient, and better able to serve its constituents.

In truth, overhead may have little or nothing to do with efficiency. A nonprofit located in a large city may have greater overhead expenses due to higher rents, higher salaries needed to stay competitive in the local job market, higher utilities, and much more. A city-based nonprofit may need to remain in its present location to serve its constituents, so moving to a location with lower overhead costs is out of the question. In this small example, such a nonprofit may show higher overhead costs than its rural counterpart, but it may be just as effective, if not more so, at fulfilling its mission than a similar organization with lower overhead.

What Can Nonprofits Do to Combat the Misconceptions of Overhead?

Researchers H. Qu and J. Levine Daniel conducted a study examining the use of the term “overhead” among nonprofits. What they discovered was fascinating. If nonprofits simply redact the term overhead, but use the same descriptive phrasing to truthfully and accurately identify the expenses allocated to overhead, the negative connotations expressed by the public disappear. Framing the conversation around overhead by addressing the need for such expenses is equally as important to ensuring transparency and understanding among donors.

Nonprofits can, for example, help donors understand the need for overhead expenses. Clarifying their reasons for bearing higher costs is very helpful. For example:

  • When subjects in Qu & Daniel’s study were asked to define overhead, few among the general public could do so with any degree of accuracy. The word itself had become so negatively charged with meaning that it lost its original objective meaning. Therefore, providing a clearly defined meaning of overhead in financial and marketing statements, without using the specific term, may achieve the same goal of transparent communications without the negative connotation.
  • High nonprofit salaries are often perceived by the public as “greed” on the part of executives. But in order to attract and retain top talent, nonprofits must offer competitive salaries to woo executives away from jobs in the for-profit sector. Donors certainly want qualified leaders at the helm of a nonprofit, and the best leaders will help the organization achieve its mission and vision more effectively. Stating this argument in a positive light can help nonprofits frame the salary and expense category as part of overhead costs.
  • Explaining overhead as an investment in long-term, sustainable growth, may also alleviate donors’ discomfort with the term.

Nonprofits need unrestricted overhead in order to transact business and continue operations. With the public still feeling the negative taint of the term, however, it is wise to find alternative ways to describe the need.

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.



Three Ways in Which the Accounting Profession Is Changing

By | Accounting, Nonprofit | No Comments

If you’re a mid-career or senior accounting professional, you’ve seen many changes over the years to the accounting profession. Some of you may even have begun your career when computerized accounting was in its infancy; you used ledgers and calculators to match debits and credits. The changes to the profession over the past two or three decades have been astonishing, and the rapid pace at which changes continue to occur necessitates that accountants demonstrate curiosity, flexibility, and adaptability.

There are many ways in which the accounting profession is changing, but we’ve identified the following three as having major impacts upon the majority of accountants. Which do you see as the biggest changes in your work?

The Importance of Disclosing Non-Financial Information

Accountants have always been thought of as the “numbers people” – the professionals on the team that provide accurate information and insights into the numbers behind the organization.

Now, however, the public is no longer content with disclosure alone. Framing the disclosure of financial information and providing plenty of information about what, how, and why funds were spent at a nonprofit organization is essential to building trust with donors and supporters.

Working alongside marketing professionals, accountants are no longer responsible solely for the financial health of the organization. Now they must become advocates for the organization’s mission and help shape and frame the overarching story behind the financial information disclosed to the public.

Diversity, Equity, and Inclusion

Diversity, equity, and inclusion continue to be part of the current dialogue among business leaders. However, only 34 percent of business leaders identified in an Accenture report from 2020 are putting their organization’s efforts behind DE & I initiatives.

The sad truth is that although accountants perceive their profession as inclusive, minorities tend not to enter the accounting field at all.

According to the American Association of CPAs, African Americans and Hispanics make up only 4% of partners in accounting firms, yet represent 30% of the population. Caucasians hold 75% of the accounting positions and 90% of senior leadership positions in accounting firms. Howard University published a paper exploring why so few minorities enter the accounting profession. The sad truth is that both parents and educators tend to undervalue accounting as a career for their children, discouraging them from majoring in accounting in college.

The area of diversity, equity, and inclusion remains top of mind for most in America. Accountants should embrace this concept and strive to support diversity throughout their organizations.

One way in which accountants can lead the change in minority representation in the field is by working with their alma maters as mentors and speakers to incoming freshman. Those who are “undecided” majors may find that the accounting field holds just what they’ve been looking for in a career. Helping to mentor young people as they enter the early stages of their careers or encouraging minority high school students or college freshmen to choose accounting as their major is a great way to encourage diversity in the field.

New Technology

The third major shift in the accounting profession is the use and some might say reliance upon new technology for accountants to do their jobs. Productivity software is ubiquitous in every office, and most nonprofits use some form of fund accounting software to support their accounting and financial records. Additionally, other types of technology and software, such as browser-based or cloud software, have enabled remote work, near-instant updates of the accounting system, and seamless communications with other departments.

Mastering new technology is among an accountant’s many job duties today and is likely to continue to be an important task. Among the three, this is one area that is well within an accountant’s control. Most new technology now comes with excellent training and an abundance of online resources to help everyone using the system get the most from it.

The Future of Accounting

While the core concepts of accounting are unlikely to change, the tools with which accountants perform their jobs continues to evolve and change. If you are looking for a partner you can count on to update your technology, contact 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.