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Accounting

Apr 24
0

Best Practices for Nonprofit Excellence, Part 2: Finances and Fundraising

By | Accounting, Fundraising, Fundraising Software, Nonprofit | No Comments
meeting with a person up front talking to others seated at table, finances and fundraising

Welcome to Part 2 of our series of best practices for nonprofit excellence—finances and fundraising. Without enough margin, you won’t be able to fulfill your organization’s mission. That’s why learning about the best practices in finance and fundraising goes hand in hand, because it’s not just money in (fundraising) but managing that money (finance) that ensures a robust budget for a nonprofit.

Nonprofit Financial Management Best Practices

Donors, members, and granting institutions have entrusted funds to your organization so that it may carry out its mission. These gifts represent trust – trust in your nonprofit, its management team, employees, volunteers, and board. To win and keep this trust, you must use nonprofit financial management best practices.

Budgeting

Of course, you are using best practices for budgets, including updating the budget periodically. The board should review the annual budget and discuss any questions or concerns with leadership. It’s important that the board fully understands how the organization derived its numbers and how the expenditures relate to achieving program—or organization-wide goals.

Internal Controls

Another financial management best practice is to ensure the organization has good internal controls in place. These controls involve implementing measures such as segregation of duties, where different individuals handle recording, approving, and reconciling transactions to prevent errors and fraud. Nonprofits should also establish clear policies for financial authorization, requiring approvals for significant transactions to maintain accountability.

Regular reconciliations of financial records, such as bank statements, with internal accounts help identify discrepancies early. Additionally, conducting periodic audits—both internal and external—can ensure adherence to established policies and uncover potential issues. By safeguarding assets, maintaining accurate financial records, and upholding industry standards, nonprofits can foster stakeholder trust and effectively pursue their mission.

Financial Management Software

Another best practice is to have good nonprofit accounting software. This system can save a great deal of time and effort by accurately tracking revenue, expenses, payroll, and more. The reporting features found in nonprofit accounting software also make it easy to generate reports you can share with the board and donors for clear and transparent communications. If you’re currently managing your finances using spreadsheets or small business software, you’ll find switching to nonprofit accounting software like night and day in terms of its efficiency and usefulness. Adopting nonprofit accounting software is definitely a best practice to incorporate into your organization.

Fundraising Best Practices

There’s more to fundraising than promotion. Fundraising should also include processes, procedures, and guidelines about how funds are raised, acceptable contributions, and how to handle gifts in kind.

Transparency and Accountability in Fundraising

A few years ago, several nonprofits made the news for high overhead spending. Their overhead and fundraising costs seemed to the public like an extravagance. However, the public’s negative reaction was probably based more on lack of transparency than on expenditures. Always be transparent with the public about your expenses: share reports and updates with the board, donors, members, and the public. This level of accountability demonstrates a high degree of trustworthiness as well as good financial stewardship.

Pay Your Fundraisers

If your organization subcontracts fundraising to an external person or company, always pay them a reasonable fee. Do not offer a percentage of money raised as their payment. It is considered a best practice to pay directly for these services rather than to ask the subcontractor to take a percentage of the gross.

Monitor Fundraising Practices

One best practice often overlooked among nonprofits is to monitor fundraising activities and ensure that you follow all the required rules and regulations for your state. These vary according to where your nonprofit is registered, so take time to understand them. For example, in Washington state, if you are using a commercial fundraiser, the relationship must be disclosed in your fundraising materials. Fundraisers must also follow additional requirements for phone solicitations, mass distributions, and collection containers or vending machines to ensure accountability and compliance with state regulations.

Ready to Implement Best Practices?

It may seem overwhelming to read articles like Part 1 and Part 2 in our series and see so many areas for improvement. Every organization has some areas to improve. Choose your starting point on the area that will experience the greatest impact from the changes. Whether it’s improving transparency with the public about your expenditures or exploring nonprofit accounting software, making big changes starts with today’s small step. 

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.

Apr 22
0

Best Practices for Nonprofit Excellence, Part 1: Governance and Accountability

By | Accounting, Nonprofit | No Comments
person at laptop and holding a tablet - nonprofit and other for overlay, finance and accountability

Welcome to the first in a two-part series where we will examine best practices for nonprofit excellence. In our first article, we’ll look at governance and accountability. Then, in Part 2, we’ll examine Financial Management and Fundraising.

Governance and Accountability Best Practices

Nonprofit boards of directors are stewards and guides of the organization’s direction and finances. They set policy and should actively support the organization’s mission by approving adequate funding, providing direct oversight to leadership, and evaluating the effectiveness of the organization’s programs and how well these programs achieve its mission.

Choose Board Members Carefully

However, the effectiveness of a board depends upon its members. There are several best practices for developing strong, effective, committed nonprofit boards. These practices include recruiting board members who reflect the constituency you serve. While the entire board may not be a perfect reflection of your constituency, it should at least reflect the majority of the people you serve.

You should also strive to find board members who are as deeply committed to your mission as you are. Board members should have a passion for your organization’s work.

Board Responsibilities

Board members should have a comprehensive understanding of their roles and responsibilities to the organization and the public. This can be achieved by providing a clear set of expectations and responsibilities, access to bylaws, articles, and other key organizational documents, an introduction to the organization’s work, and continuous opportunities to engage in discussions and review their duties.

Members must also fully comprehend their legal and fiduciary responsibilities, ensuring the effective execution of their duties in key areas. These include strategic planning, policy approval and periodic review, annual evaluation of the executive director’s performance and compensation, succession planning, determination of compensation structures, preparation of annual budgets and revenue plans, oversight of financial procedures, management of risks, and compliance with nonprofit financial filings and regulations.

Governance Frameworks

Boards should convene at least six meetings annually and expect regular attendance from members. A consistent meeting schedule helps board members remain actively engaged and accountable for their responsibilities. Term limits on board participation encourage a healthy influx of new ideas and perspectives. 

Boards should adopt practices that maximize participation, including providing accommodations for remote or electronic participation during meetings, deliberations, or decision-making. 

Committees are an important part of governance. A committee structure enables a board to function effectively by creating smaller working groups with specific goals. 

Choose your board chair carefully. This person presides over meetings, oversees committees, and ensures all board members have access to the documents and materials they need to be effective. Like a good CEO or president, board chairs must be good leaders and communicators, able to run effective meetings, gain consensus among members, and listen to differences of opinion. 

Accountability

Lastly, as part of governance and accountability, ensure that your organization follows best practices related to compliance with laws and regulations. For example, filing IRS Form 990 and the organization’s annual report is an essential part of nonprofit compliance.

Your organization is accountable to more than just the IRS. It’s accountable to its donors, members, or constituents. Ensuring that annual reports, audited financial statements, and other reports of how your organization manages its finances and achieves its mission are also part of nonprofit best practices. Prioritizing donor communication is a best practice worth following. 

Next: Financial and Fundraising Best Practice Ideas

We hope you enjoyed Part 1 of this series. Next up, we’ll share financial management and fundraising best practice ideas. 

For more fresh ideas and best practices to implement at your organization, subscribe to our newsletter or read our blog.

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.

Mar 26
0

Human and AI Collaboration: Working Better Together

By | Accounting, Accounting Software, Nonprofit | No Comments
people shaking hands with AI screen overlay - Human and AI Collaboration Working Better Together

As time has passed, more organizations are testing the potential of AI to augment job functions. AI tools may be readily available. For example, AI and machine learning may be built into newer versions of nonprofit accounting software, speeding approvals, automating reminders, and helping complete many tedious jobs faster.

Where once we feared that AI might take over the work of humans, we now see that people, working in tandem with AI-based platforms, can achieve much more together than singly. Here’s why human and AI collaboration can mean more efficient work for nonprofits.

AI Enhances Productivity and Efficiency

One of the best ways that people can partner with AI is to use this new technology to enhance productivity and efficiency. AI cannot (and should not) be expected to take over tasks entirely. But it can provide exceptional efficiency gains. Here are five ways in which your team can use AI to enhance their productivity.

Automation

AI can handle repetitive tasks, freeing up time for you to focus on more complex activities. For example, email filtering, scheduling, and data entry can be automated to reduce the workload. Within nonprofit accounting software, AI can automate the routing of approvals, running reports, and sending reminders, saving your team minutes that add up to hours of productivity gains per week.

Data Analysis

Another benefit of using AI is to leverage its power to analyze large amounts of data. It can find patterns and make suggestions based on these patterns. Your team then needs to review the suggestions and act on them according to their judgement. AI produces the reports, but people need to sift through its findings, confirm them, and then choose which ones to act on.

Predictive Capabilities

AI can predict outcomes based on historical data, helping you anticipate trends and make proactive decisions. This comes in handy with marketing and donor outreach, for example. AI can examine response patterns based on previous outreach campaigns and make suggestions to maximize your efforts for the best response.

Research Assistant

When you need to find facts and data, AI can scour the web more quickly than a person can search and examine the results. The AI-produced results can be refined and enhanced to find the research you need to support a presentation, pitch, or other activity. Be sure to check the citation link and confirm the accuracy of the data or statistics produced by AI searches. It sometimes makes mistakes analyzing the source material and matching it to the search query. A quick scan of the source document can help you confirm if the stats are accurate or not.

The AI – Human Partnership

AI isn’t a stand-alone tool, but rather a potential efficiency booster for the workplace. Humans, according to a Harvard Business Review article, must determine the value of the insights generated by AI and weigh their merits. As you can see from the list of suggested ways in which teams can use AI to improve productivity, it can enhance speed and efficiency, but people should always review its results and findings and confirm them.

Moving Forward: Understanding, Training, Governance

It is vitally important, however, that before you encourage staff to use AI-based platforms, you understand how they use, store, and serve data.

Public AI, for example, ingests everything from the web, and if you feed it new material, which becomes part of its massive data repository. This is why you should never enter anything proprietary into “free” tools like ChatGPT or Copilot.

Developing a set of guidelines for your team on how they may (or may not) use AI platforms, especially free or public-access AI, is essential, as well as training sessions to help them understand responsible AI use.

While the headlines may hype AI as a replacement for people, it’s really the partnership between AI and people that gets the best result. AI is a tool like any other. It’s how the tool is used that counts.

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.

Mar 12
0

Tips to Choose the Right Auditor for Your Organization

By | Accounting, Audit, CPA, Nonprofit | No Comments
auditor working at desk with spreadsheets, computers, and calculator

The right auditor is much more than a CPA. Auditors provide valuable guidance and ensure donors, members, and constituents trust that your organization is a good steward of their finances. These tips will help you find the right auditor for your needs who is both well-versed in nonprofits and a good cultural fit for your organization.

Find Potential CPA Firms

The first step is to find potential CPA firms who provide auditing services. You can look online for local firms or ask other nonprofits who they use and like. Your employees may also suggest companies or individuals with whom they have worked in the past.

It is vitally important to find an auditor who specializes in nonprofits. Nonprofit accounting has unique requirements and regulations, such as fund accounting and compliance with IRS Form 990. A CPA familiar with these aspects can ensure accurate financial reporting and adherence to relevant laws.

CPAs with nonprofit experience can also provide valuable insights and recommendations tailored to the organization’s unique financial situation. This can include guidance on improving internal controls, financial management, and strategic planning.

Lastly, because nonprofits are subject to various regulations and compliance requirements. A knowledgeable CPA can help navigate these complexities, reduce non-compliance risk, and identify potential issues before they become significant problems.

Develop Questions

To ensure that you have an apples-to-apples comparison of CPA firms after you’ve completed your research, develop a set of questions to ask each firm. This approach is similar to a request for proposal (RFP) process. Consider your organization’s needs. Some potential questions may include:

  • Can you provide references? May I contact them?
  • Who will I be working with?
  • Do you work on site, or do you need remote access to materials?
  • What is the typical audit process your firm uses?
  • What can I expect during the audit?
  • What do you provide me with afterwards? How long will it take?
  • How much does it cost?

Depending on your needs, you may also have other questions to add to this list.

Consider a Formal Request for Proposal

A request for proposal (RFP) is a formal document issued to multiple possible vendors. It outlines your organization’s background, the project you have available, and the scope of work. It also includes a due date for the project and response requirements, such as references or case studies demonstrating experience with previous projects.

Responses are written following the outline given to vendors in the scope of work. The resulting documents help compare the relevant credentials of all potential CPA firms. Because the RFP requires all responses to be written in the same format, following identical guidelines, the results provide an apples-to-apples comparison among respondents, allowing you to sift through what makes one stand out above the others.

Gather all the responses, whether through a formal RFP process or a sit-down meeting with questions. Then, meet with your team and consider the answers. Your final selection should weigh all factors, including the firm’s relevant experience, assessing its approach, and comparing prices.

Consider Cultural Fit

Lastly, consider the cultural fit of the CPA with your organization. The best credentialed expert will not be effective if you feel intimidated or rushed when you work with them. Look for someone with whom you feel good rapport, a CPA who communicates clearly, who listens patiently, and who isn’t afraid to answer questions.

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.