Improving Communications with Data and Trend Analysis

By | Accounting, Data, Donations, Nonprofit | No Comments
people looking at papers on a desk with graph overlay

Charts, graphs, and financial reports may seem like they don’t say much to those outside of the accounting and finance department. But with the right data and trend analysis, the information contained in these reports can inform and improve constituent communications.

The Tip of the Iceberg

It’s an old cliché, but a good one—the tip of the iceberg. If you imagine an iceberg, you can only see the tip of it. The majority of the iceberg is underwater but it’s probably the more important part.

The same goes for your organization. The data that you can easily find is the “tip of the iceberg” and readily available. And it’s usually what your team uses to base their decisions.

However, what’s going on underneath the surface is often the more valuable information. Getting to it is the challenging part.

How Nonprofits Can Leverage Data

Many organizations only dig at the surface level into their data. They run basic financial reports to gauge how fiscally solvent an organization is, or which programs require more funding and leave it at that. But the data that can be used to assess funding can also be used to dig deeper into issues such as program demand, program use, and more.

Each nonprofit is unique and tracks different data. But, in general, nonprofits can mine their data to find information to help them improve programs, improve donor communications, and ensure transparency.

Look beyond your existing technology for additional data. Although your current accounting system may provide plenty of data, other data exists. If your nonprofit sells items, look at warehouse and inventory reports. If programs provide participation and survey data, add that to the data repository for examination. Consider many sources to leverage all of your data and build a stronger, better organization.

Improve Programs

Nonprofits that track program participation can look more closely at program data to update their offerings. Programs that receive higher participation, for example, should be examined to determine if they can be spun into additional opportunities. For example, an animal shelter offering a spay/neuter clinic may find that a free rabies vaccination clinic is also in high demand and brings people into the shelter to view (and potentially adopt) homeless pets. An education nonprofit that finds its free mathematics tutoring program for elementary school children in high demand may wish to expand into the high schools and so on.

Better Donor Communications

The same data that reports on your program activities can also be leveraged to improve donor communications. Program participation and success data can be parlayed into donation campaigns demonstrating the efficacy of your offerings. People like to give to successful initiatives as it makes them feel that their donation is worthwhile, so demonstrating how successful the programs are can go a long way towards encouraging additional donations.

Enhanced Visibility

Successful nonprofits know that increasing visibility into their activities and finances is an excellent way to court donors and participants. The more transparency and visibility into their actions, the greater the trust they engender with the public, which in turns leads to better utilization of their programs and increased donations. Sharing the data from your systems and using it to for storytelling purposes can take your nonprofit to new levels.

Increasing Nonprofit Success in a Tough Economic Climate

Inflation and global unrest have created a climate of uncertainty, and this in turn means fewer people donating to nonprofits … or does it? It doesn’t have to lead to a downturn in donations. Instead, leveraging stories and data, improving program offerings based on data, and ensuring transparency and communications can build up programs and services during times when other nonprofits may be struggling. For those nonprofits that can dig deeply into their data, they may find information that can lead them to greater improvements across the organization.

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.

How Should Your Nonprofit Handle Cryptocurrency Assets?

By | Accounting, Cryptocurrency, Donations, Nonprofit | No Comments
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Cryptocurrency presents many challenges to nonprofits that accept it as payment or donations. Crypto such as bitcoin, ether, and the many other digital assets on the blockchain, are becoming ubiquitous with everyone from college kids to grannies dabbling in the new financial asset. And while regulations are being discussed, companies and organizations are left struggling to understand how to track and manage it. Here are the challenges and some advice for nonprofits interested in accepting or utilizing crypto assets.

What Is a Cryptocurrency?

Cryptocurrency, or crypto, is a digital asset tracked on the blockchain—an immutable public register of transactions that enable anyone to track the original and transfer of the asset. While you may know the major “coins” from the news such as bitcoin or ether, there are hundreds of other coins on the market.

Challenges of Cryptocurrency

Crypto is a new category of financial asset and one that regulators continue examining to determine how to account for them. Are they investments (like stocks or bonds) or assets (like gold or silver)?

In addition to challenges understanding classification and the rules governing such classifications, there are additional challenges inherent in accepting them either as payment or donation, including:

  • Highly volatile value: Unlike fiat currency, which offers a stable store of value (despite inflation), the value of digital assets varies widely from day to day, even hour to hour. This makes it difficult to estimate and track over time.
  • Incompatible with ERP setup: Crypto values are tracked to the 16th decimal place, which is completely incompatible with ERP systems set up to track dollars, euros, and other common currency.
  • Difficulty tracking: GAAP rules require tracking of assets on a cost basis (the initial purchase price of the asset), the fair value of their holdings, and the book value. This is impractical with digital assets due to their volatility, but clear guidelines are lacking from regulators.

Forming a Crypto Asset Strategy

Given the many challenges, you may be wondering why your organization should even consider accepting cryptocurrencies. Donors may wish to contribute to your organization using crypto, and this is a valid reason to consider adding it as a donation method. To do so effectively, you’ll need to create a crypto asset strategy to guide your staff in handling such assets.

  • Learn first: As with any new technology, platform, or asset, it’s important to learn all you can about it before diving in. Discuss adding cryptocurrencies to your organization with your accounting team and outside CPAs (if you have one) to understand their point of view.
  • Research payment gateways: Cryptocurrency payment gateways enable you to streamline transactions. Bit Pay and others offer ways in which you can send and receive crypto in the easiest manner possible.
  • Discuss with your board: Your board needs to be fully behind the project to add crypto as a payment or donation method. Bring the issue to your board and ensure a thoughtful discussion by sharing industry statistics and information with them. Some board members will be unfamiliar or even put off by the news from the crypto world and may need some additional information prior to engaging in a discussion.
  • Engage stakeholders: Bring the issue to your internal teams, too. Ask representatives from each department to be on a committee or group to investigate adding crypto to your organization. It’s vital to hear from every department that may be impacted by the decision.

Keep in mind that if you do proceed with crypto, you may need to customize aspects of your accounting system as well as internal controls to adjust to this new method of payment.

Cryptocurrency seemed like a fad when it appeared in 2008, but it’s still going strong. If it looks like an opportunity for your organization, begin exploring it today.

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.

An Overview of In-Kind Gifts

By | Accounting, Donations, Nonprofit | No Comments

Many nonprofits rely upon in-kind donations for their activities. Gifts “in-kind” are any donations to a nonprofit that are not cash. A good example is food collected and given to a food bank to distribute directly to others.

If your nonprofit relies heavily upon gifts in-kind for its activities and programs, this guide to accounting for and handling the financial aspects of in-kind donations will be invaluable.

Distinguishing In-Kind Gifts from Other Types of Donations

It is important to distinguish in-kind gifts from other types of donations. For example, items given to a charity in which the use is specified by the donor are not true in-kind donations. Neither are items given to the charity that are to be used by another entity.

An in-kind gift consists of a broad array of goods that may include:

  • Computer hardware and software
  • Office furniture
  • Equipment such as saddles used in a therapeutic riding program
  • Wheelchairs or medical equipment used by a charitable health program
  • Food donated to a food bank

Such items are used directly by the organization or given to the people the charity serves.

Accounting for In-Kind Donations

Under GAAP rules, gifts in-kind should be recorded as revenue when received and also recorded as an expense. Recording them as revenue upon receipt means:

  • Recording the revenue at “fair market value.” Fair market value reflects the average price that your organization would have paid for the item if you had to buy it.
  • Recording the offset value, or the amount of revenue that is the corresponding value as an expense of in-kind good or services.
  • Recording tangible property, such as land or buildings, as an asset to your organization.

Budgeting In-Kind Gifts of Services

One important consideration is the gift of in-kind services. If these services occur on a regular basis, they should be budgeted for in your nonprofit’s budget. For example, if your accountant donates her time to preparing the annual report, she should provide you with a receipt stating the value of the services rendered. You would then budget for that amount in your yearly budget. This way, if your accountant retires, moves, or simply chooses not to donate her services again, you are still prepared to pay the going amount for similar professional services.

Acknowledging the Gift and Providing a Receipt

As we’ve shared in a previous article on tax donation receipts, gifts should be recognized with both a thank-you note and a receipt. The receipt should be similar to those provided for cash gifts. An in-kind gift donation form created by your organization also provides a consistent record of all gifts in-kind and helps you record and track their value over time.

Create a Gift Policy

Lastly, it is a good idea to create a gift policy for your organization that lists the types of gifts accepted, how gifts in-kind are recognized, and how they are used.

Donors come in all shapes and sizes. Some prefer to give cash. Others want to give tangible property that they know can be put to good use. Gifts in-kind offer a valuable asset to your organization, one that should be recognized properly both in your accounts and in the donor’s taxes. With the right tracking and organization, you’re on your way to a solid in-kind donation policy and process that can help you handle these gifts with ease.

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.

Acknowledging Donations Graciously – and With Tax Receipts

By | Accounting, Donations, Nonprofit | No Comments

Nonprofit managers know the power of a gracious thank you when it comes to acknowledging donations. It’s part of donor management—ensuring that donors feel valued and appreciated.

But accompanying a lovely thank-you note should be something more ordinary: a tax donation receipt. A receipt for donation isn’t just proof that the donor gave money to your organization, but a document that can be used by donors to take a tax write-off. Here’s what your donation thank you and receipt should include.

Tax Deductions for Nonprofit Donations

Tax deductions may be claimed for those who donate goods or money to a charitable organization. Charitable organizations should be recognized as a 501 (c) (3) organization by the IRS.

A donation means that the money or goods given to the organization are done so without anything given in return. If you paid for a t-shirt at a museum gift shop, for example, that would not count as a charitable donation because you received the t-shirt in return. If, however, you donated $25 to the museum without receiving an item in return, it may be considered a charitable donation.

Thank-You Letters and Tax Documentation

Thank-you letters may seem old-fashioned, but donors do appreciate the acknowledgement of their generosity. In addition to a personalized thank-you letter, your organization should also include a receipt for the donation which the donor can use for charitable tax deductions.

Such receipts should include specific information, such as:

  • The donor’s name, address, and date the donation was received
  • The organization’s legal name
  • The organization’s tax status
  • The organization’s EIR
  • Total dollar amount given
  • If anything other than money was given, a description of the item donated

You should also include a note stating whether or not a gift was given as a thank you. A simple description is fine— “We hope you enjoy this small bookmark as a token of our gratitude” is sufficient. Remember, they are not paying for the gift, but you should acknowledge it in the letter.

Lastly, be sure to include a reminder to the donor to keep the letter and receipt as proof of their donation. Keep a copy in your files, too. You never know when you might get a call from a donor looking for it!

MIP Fund Accounting Makes Donation Receipts Easy

If your nonprofit is running MIP Fund Accounting software, you have the ability to print donation receipts right from your system. It’s part of the general ledger module, and it’s included in every MIP package.

You can access it immediately or, if you’re a current client and can’t quite figure it out, give Vicki at call at Welter Consulting, 206-605-3113. And, if you’re not currently a client but you’re interested in finding out more about how nonprofit accounting software can make your organization run smoothly, we welcome your call too.

Other Ideas to Thank Donors

One of the best ways to thank donors is to do so personally. A handwritten letter, a heartfelt typed letter, and of course, that donation receipt is much appreciated.

Other ways to thank your donors include:

  • Mentions on social media
  • Mentions in printed newsletters
  • Share a story or picture of how the donation was used
  • Create a short “thank you” video
  • Offer a small gift or inexpensive token of appreciation

A gracious thank you goes a long way toward enhancing the donor experience. And, along with a thank you, be sure to include your donor’s receipt so they can take advantage of the tax deduction.

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 fo