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May 30
0

Overcoming and Managing Challenges Faced by Nonprofit Organizations

By | Nonprofit | No Comments
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Nonprofit Organizations face many unique challenges which are constantly changing with the shifting economic and working landscape. In addition to common challenges most businesses face such as keeping up with new technology, remaining compliant with regulatory requirements, and cyber security, nonprofits are faced with additional issues that may not be so obvious.

So, what are some of these challenges that might be flying under the radar and what can you do to overcome, prepare for, and/or manage them? Let’s take a deep dive.

Challenges Nonprofits are Facing Today

  1. Limited Government Funding

In times of economic uncertainty, unfortunately, nonprofits can take hard hits. If your nonprofit depends on government assistance (which many do) in the form of grants, matching programs, or safety nets, a shrinking government budget means that your organization might come up short on funding. One tool that can help solve this challenge is grant management software. Software such as AmpliFund, available through Welter Consulting, manages many aspects of the grant process including recording, management, and reporting, and having a clear picture of what funding is currently available to you as well as understanding what’s down the pipeline will help your organization navigate uncertainty.

  1. Income Stability and Accurate Budgeting

Sometimes, nonprofits may feel like they’re already running on a shoestring budget, but when that’s paired with the anxiety over an impending financial crisis, nonprofit organizations might feel that shoestring pulling a little thin. By practicing financial discipline and establishing a robust financial framework, your chances of understanding the real state of your budget are going to be much higher. Your organization must be willing to have difficult conversations about funding and long-term viability which are not only necessary but will also help you navigate income instability in the long run.

  1. Pressure to Perform

Hopefully your nonprofit organization already has a strong mission statement and depending on the longevity of your organization’s founding, you’ve enacted programs that reflect and carry out that mission. However, when funds are running tight not only governmentally but in the general public, your organization’s ability to perform and carry out your mission may very well be what determines your funding. Donors and contributors are much more likely to continue to support your organization if the results of your mission are clear and consistent.

  1. Ignoring the Bottom Line

As your organization considers software, social impacts, and funding, the “bottom line” may fall off to the back burner and it’s crucial that as a nonprofit, you don’t let this happen. Sometimes, nonprofit workers wear many hats and so there might not be one dedicated employee keeping an eye on this bottom line. As your organization focuses on the mission and what needs to be done to carry that out, make sure you’re still using the right tools and/or software to recognize and understand where your bottom line lies and then, continue to track it as you move forward. Task someone specific or engage the whole staff to have a clear picture and way to track your organization’s bottom line.

  1. Scouting and Retaining the Right Talent

Competing with the for-profit sector when it comes to recruiting can be a daunting task. Those companies often have more lucrative assets which can make it difficult to compete for potential new hires, but it’s important to focus on the positive here. Jobseekers who are attracted to nonprofit work are often passionate about whatever cause and/or mission that your organization supports. So, when you’re seeking talent, look for individuals who share the same passion as your organization. Your company may not be able to compete with the salaries offered in the for-profit world, but nonprofits can offer jobseekers the opportunity to participate in real change.

Also, it’s important to consider the retention of your dedicated staff. If your organization is not in a place to take on new employees, study who you do have and be sure that you’re investing in them. Ensure that your team remembers why they came to your organization in the first place—keep up the passion for your mission and make sure they have what they need to do that, too.

  1. The Need for Nonprofits …

As our country sees a rise in homelessness, poverty, and other social hardships, the need for nonprofit services is rising too. Because of this, as the demand for resources rises, so does the demand for funding, staffing, and availability. As a nonprofit organization, it’s important to keep your finger on the pulse of whatever it is your organization is supporting. For example, if your nonprofit’s mission is to help people experiencing homelessness, you’ll want to keep your eye on those statistics in the area(s) you serve so that you can plan as best you can.

  1. … But also, the Decrease in Need for Nonprofits

Hopefully, as a nonprofit organization, you find yourself engaging in programs that help you continue to achieve your mission. But if you find yourself too successful, it’s possible you might run out of work to do and end up having to scale back. If you find that your organization is having a huge impact in the area in which it’s focused (which we hope that it is!) but to the point that you might run out of work, it’s a good idea to plan on diversified versions of your mission statement; or ways in which you can branch out so that you can continue to make an impact even when parts or all of your original mission are complete.

Navigating These Challenges: You’re Not Alone

There’s no one answer that’s right for all nonprofits, but now is the time to recognize and face these challenges head on. Working together with your teams, colleagues, and community can help your nonprofit organization adapt and adjust to obstacles you may be facing. Also, we’re here to help.

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.

May 11
0

3 MD&A Preparation Tips for Nonprofits

By | Nonprofit | No Comments
tips and tricks on notebook on desk

Management’s discussion and analysis (MD&A) explains how an organization performed financially as well as how it has furthered its mission from a management perspective. In addition to providing a strategic context for the financial statements, it promotes transparency and enhances readers’ understanding of the organization’s finances, stewardship, and prospects. Although MD&As are not required of not-for-profit entities (NFPs), they can provide valuable information about their financial and non-financial performance. 

MD&As do not have a specific format, so you don’t have to write a long, detailed essay. Ideally, an MD&A should be written clearly and concisely, focusing on the most critical aspects of the NFP’s mission and purpose. Consider these three preparation tips before you begin, particularly if this is your first time assembling an MD&A.

#1 Development Planning

The first step to successful MD&A preparation is planning how it will be developed. Planning ensures efficiency in the process and allows for more effective delivery. To begin planning, you should first decide who will be part of the core group putting this analysis together. Your team should include people from all important areas of the organization, such as HR, legal, and program services.

Once you have your team, decide together on the project’s purpose and goals. Finally, part of your planning should be deciding if this project will be part of your annual report or if it will be a stand-alone report.

#2 Structure Your Content

Once you have a game plan in place, it’s time to structure your content to showcase your vision and strategic focus in an engaging manner. To do this, you must consider the perspective of your readers. Consider who your readers will be, what they need to understand, and which questions they may have after they review your report.

Your introduction should cover the organization’s mission, structure, and strategic objectives. You might also want to include Key Performance Indicators (KPIs) and how they reflect progress toward the organization’s goals. Then delve into qualitative insights that explain the results of your NFP’s operations and financial position, and any additional details and analysis for selected areas.

Your overall structure should focus on three things: 

  • Results that are relevant to the NFP’s ability to fulfill its goals.
  • Qualitative discussions that may add to what is found in the financial statement.
  • Strategic insight into why the organization did or did not achieve its goals and how those factors may affect the NFP’s ability to achieve its objectives. 

Other items to include are charts and graphs, excerpts from the financial statement, historical trends, benchmark data, and other helpful data. Follow this by highlighting key risks and opportunities that your NFP may encounter, and then wrap up with a concluding statement summarizing the overall outlook of the organization.

#3 Review the MD&A

To ensure that all your bases are covered, reviewing the MD&A once it’s finished is critical. Enlist the help of your external auditor, board and audit committee, senior leadership representative, legal counsel, and chief communication officer. These key people can assess the clarity of your MD&A from the perspective of people who are not financial professionals and can advise you on areas that need improvement.

A well-written and informative MD&A provides clarity and insight into the organization’s financial performance and mission-related impacts. Ensure that your MD&A has a strategic purpose, is easy to understand, and is practical and relevant for your organization’s audience.

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 us for more information.

May 09
0

Avoid These 5 Common Financial Statement Errors

By | Accounting, Nonprofit | No Comments
person sitting on sofa with open laptop and credit or debit card in hand

Common financial statement errors can undermine the credibility of a nonprofit organization and can also make compliance reporting difficult, resulting in audits, fines, and other problems. That’s why it’s essential to be aware of the most common financial statement errors found in small- and medium-sized not-for-profit entities, so you can watch for and avoid them.

5 Common Mistakes

They say to err is human, but your work must be superhuman when it comes to keeping accurate financial records for nonprofits. Even a seemingly small mistake can tremendously affect decision-making within the organization. Here is a nonauthoritative illustration of five financial statement errors commonly found in small- and medium-sized not-for-profit entities. This is not a comprehensive list of all possible misstatements, so be sure to review each financial statement thoroughly.

  1. Statement of Financial Position Errors

There are several reasons for errors in the statement of financial position, including missing or invalid entries in the general ledger or errors in drafting the statement of financial position by including general ledger accounts on the wrong line item.

There are a few possible errors when using a classified statement, including displaying current assets without current liabilities or incorrectly disaggregating cash and restricted cash. 

In addition, it is common to record conditional promises to give as revenue and receivables, trust or foundation receivables before the grantor formally awards the grant, or deferred revenue for amounts received under a grant instead of recording time- or purpose-restricted revenue, especially when the grant is a time- or purpose-restricted contribution rather than a true cost-reimbursement arrangement.

Another common mistake is not including one or more of the required totals: total assets, total liabilities, total net assets, net assets without donor restrictions, and net assets with donor restrictions.

  1. Statement of Activities Errors

A nonprofit entity quantifies its revenue and expenses in a Statement of Activities. This is the same as a for-profit income statement.There can be errors here, such as omitting one or more required totals, reporting contribution revenue that is due in future periods as net assets without donor restrictions, or not recognizing solicitation costs.

Additionally, revenue transactions may not be properly classified, expenses may be improperly included in net assets with donor restrictions, and fundraising expenses may not be reported.

  1. Statement of Cashflow Errors

The Statement of Cashflow bridges the income statement and balance sheet by summarizing the amount of cash flowing into and out of an NFP organization. There can be several common mistakes here, including not netting investment purchases and sales, not displaying donor-restricted capital contributions as a financing activity, and not displaying noncash gifts for endowment or property, plant, and equipment.

There may also be errors in netting property, plant, and equipment purchases and sales, borrowing and repaying long-term debt, and failing to include payables and receivables related to investing as investing activities, securities lending activities, and financing activities.

  1. Statement of Functional Expense Errors

An organization’s functional expenses statement shows how expenses are incurred for each functional area. In a statement of functional expense error, managers of not-for-profit organizations may omit certain applicable expenses on this statement or fail to include them in their financial statements altogether. 

A few common errors of this type include failing to include certain expenses in the statement or other presentation and improperly allocating management and general expenses to other functional categories.

Including a function or program line item within the listing of natural expenses and failing to report information about all expenses in one location are other mistakes often seen.

  1. Errors in Notes to the Financial Statement

Notes to the financial statements convey information not readily apparent or not included in the financial statements themselves that are necessary for presenting the financial position and results of operations fairly. 

Common mistakes may include failing to reveal the required disclosure when presenting prior year summarized financial information; i.e., failure to disclose an adequate description of the organization’s activities, including each major class of programs, the capitalization policy for property, plant, and equipment, and discount rates used in present value measurements, such as in measuring unconditional promises to give or split-interest agreements.

Information about the nature of donor restrictions on net assets, the nature of board-designated net assets, the programs and activities for which in-kind donations and contributed services were used, and advertising costs should also be correctly disclosed.

Avoiding Financial Statement Mistakes

To avoid these common errors, it is important for a nonprofit to formally document its accounting processes in detail, including how to accept and deposit donations and pay bills. If your nonprofit doesn’t regularly back up all accounting and tax information, now is the time to start. Meticulous record-keeping is critical to avoiding errors.

Nonprofit expense accounting can be complicated and, as humans, we all make mistakes now and then. You can prevent material misstatements by developing a comprehensive monthly and year-end checklist with your accounting team. In addition, software designed to utilize the most up-to-date best practices will help you avoid these common errors and more and will ensure compliance when reporting transactions.

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 us for more information.

May 05
0

Accomplish More in Your Accounting Business with Mindfulness Meditation

By | Accounting | No Comments
person sitting in sunset

Mindfulness may seem like an odd topic in the world of accounting, but it’s a topic worthy of your consideration for several reasons. Practicing mindfulness can reduce stress, improve focus, and help you accomplish more in your accounting business. It’s easier than you think to begin a meditation practice. All you need is a comfortable place to sit and breathe.

What Is Mindfulness

Mindfulness is a mental state achieved by focusing on the present moment, including thoughts, feelings, and bodily sensations, without judgment. According to Jon Kabat-Zinn, author of Full Catastrophe Living (1990), mindfulness has seven basic pillars. 

Non-Judgment: You must become an impartial witness to your own experiences without judging or categorizing them. By doing this, you release yourself from the patterns of reacting and repeating thoughts, feelings, and actions.

Patience: Cultivating patience means you accept that things happen in their own time. You allow yourself kindness and compassion so you can deal with the situation as it is instead of trying to rush through it.

Beginner mind: A beginner’s mind watches as things unfold with curiosity, but without trying to force or control a situation, much like a child seeing things for the first time.

Trust: Learn to trust your own feelings and believe that no one knows you better than you. You don’t have to look outside of yourself for understanding.

Non-Striving: Non-striving means you release the need to constantly change a situation or feeling. 

Acceptance: Let yourself see a situation for exactly what it is without imposing your feelings as a filter. Focus on the here and now, not the “what if.”

Letting Go: Instead of clinging to a desired outcome in a situation, learn to let it go. Regardless of your feelings, what needs to happen will happen, so just let it be.

Why Mindfulness Is Important for Success

Mindfulness is critical for success as an accountant because the skills you cultivate while practicing mindfulness will also carry over into your time management, productivity, and ability to handle stressful situations at work. 

You’ll interact better with your accounting clients through the practice of mindfulness. You’ll communicate more clearly, collaborate more fully, and develop a stronger sense of wisdom to help you confidently advise your clients. 

This starkly contrasts with the modern mindset of “push, push, push” to be in control, work more, and accomplish more, which is a common mindset among accountants who feel the pressures of handling multiple accounts, clients, and deadlines. But a Control Mindset actually creates a lack of control because it forces you to look beyond the here and now and focus on everything at once while accomplishing very little.

Meditation: It’s Not What You Think

So how do you learn to be more mindful? Meditation is the key to a more relaxed, mindful state of mind, but meditation isn’t what you think. You don’t have to sit on the floor with your legs crossed, chanting “Om” to meditate. In fact, there are many ways to meditate, including a relaxing walk, yoga, or even dancing. The most important thing to understand is that mindfulness meditation is a practice. That means it’s an ongoing thing, not a once-and-done activity.

To do it, just find a quiet place to sit, and wear something comfortable. You can even practice at work on your lunch break if you’d like. Consider an app like Insight Timer to give you a gentle alarm after a certain time has elapsed, so you don’t have to worry about meditating too long and being late. Other helpful apps are Calm and Headspace.

Once you are seated comfortably, close your eyes, and focus on your breath. Breathe in and out through your nose and pay attention to the rise and fall of your belly. When thoughts cross your mind—and they will—just witness them. Let them float past like a leaf floating on a gentle stream. Then return your focus to your breath again. If your mind wanders and you get lost in a thought or feeling, just acknowledge it and then return to your breath. When you first start meditating, this will happen often. Don’t worry. It will get easier the more you practice. You can start with just five or ten minutes of meditation; over time, you may build up to 20 minutes or more. Soon you’ll wonder how you got through the day without 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 us for more information.