Category

MIP Fund Accounting

Aug 28
0

Current Technology & Five Key Tips to Keep Up

By | MIP Fund Accounting, Nonprofit | No Comments

Change is the only constant in life and technology is no exception to that rule.  Technology is such a huge part of our daily lives – personally and professionally, so it’s crucial to keep up.  It’s important for your organization to stay current, stay supported, and take advantage of new features, recommendations, security, and maintenance offered by your software partners.

So, what can you do to prepare your organization for all this change and ensure you’re fully prepared once the latest and greatest version is live? This can be a challenge, whether the upgrade is a push-button overnight process or a six- to 12-month undertaking with intense testing.

Here are some tips to help you prepare for your next software upgrade.

Familiarize Yourself with the New Features

    • *Software vendors typically make release notes available well in advance of a required or suggested software upgrade. Research and understand what is being updated, so you’re not surprised by new functionality and features, once you’ve gone live (or been delivered your test environment). New features often range from necessary security updates to exciting new functionality. Knowing what the changes are, up front, will allow you and your team to take full advantage of all the latest features right out of the gate and reduce potential post-live frenzy.

 Check System Requirements

    • *Upgrades typically come with new system requirements, and it’s important to ensure your system can accommodate the new requirements prior to beginning the upgrade. A decision might also need to be made on whether a fresh installation is needed or if it’s suitable to install over a previous version of the software.

 Prepare Testing Plans

    • *Review your testing plan with internal and external stakeholders, and forward key dates and milestones to anyone affected. Nothing is worse than coming into work one day with a brand-new system and not knowing it was happening! This can set employees back tremendously as they learn the new system and/or need training.
    • *Once you’re familiar with all the changes and requirements, a testing plan should be developed for all business-critical processes. Depending on the complexity of the software, this might be done after the upgrade has already been pushed live (in SaaS solutions), or it could happen in an independent testing environment with exhaustive User Acceptance Testing (UAT) prior to deploying to a live environment. In either scenario, test cases should be created for end-users to verify their business-critical tasks are functioning as expected after the upgrade.

 Define Points of Contact and Contingency Plans

    • *Make sure there is a defined point of contact within your organization, as well as with the company providing the new software version. Processes should be defined prior to the upgrade on who to contact (and how) should something go wrong during or after the upgrade. Is there a rollback plan if UAT does not pass? What kind of support is offered after go-live? How do you report issues and potential bugs? You will save a lot of time and potential headache if this information is gathered prior to the upgrade!

 Back Up Your Data!

    • *Prior to performing an upgrade of any kind, a backup of all your data is essential. A loss of        even a small amount of data can be detrimental to business. Protect yourself and your                customers’ data by ensuring proper backups have been made prior to making any changes.

      Change may be inevitable, but it doesn’t have to be painful, and Welter Consulting is here to help!  While upgrading your organization’s enterprise software may seem a little overwhelming, with a solid plan in place and a little prep work, you’ll be excited about the change and all the new features and functionality that come with it.

      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.

Jul 24
0

How Data Visualization Improves Your Nonprofit Organization

By | Abila, Accounting, Data, MIP Fund Accounting, Nonprofit | No Comments

Think about the reasons why bestselling authors like Dr. Seuss are prevalent and successful.  Is it because of the carefully selected words that grab your child’s attention?  Or could it be because of the bright, colorful images that leapt from the pages as you turned them?

In children’s books, illustrations are as central to the story as the text. They help little ones focus on the most important elements of the tale. They get readers enthusiastic about the material being read. They validate emotions and experiences; convey meaning; carry information; and help young children better understand the written words.

You may not be an Eric Carle (remember The Hungry Little Caterpillar?), but as a nonprofit or association financial professional you have an important story to tell. And, your audience – whether that’s your board, fellow executives, professional peers, donors, or other key constituents – may not want, need, or understand some of the financial complexities you deal with on a regular basis. So, providing them with data that’s presented visually will give you similar benefits to book illustrations.

Data visualization will help you, your team, and your audience:

  • Focus on the information that’s most important
  • Identify patterns and trends in your organization’s finances
  • Illustrate cause and effect
  • Pinpoint any details
  • De-emphasize unnecessary/superfluous data
  • Draw faster conclusions

The good news is you don’t have to be an expert in graphic or information design to effectively present your data visually. A modern true fund accounting system should do the work for you.

When considering financial software, look for a system that offers you:

  • Real-time financial data, so you’re telling an up-to-the-minute story
  • Dashboards that present clean, clear graphical representations of your data
  • Intuitive features and tools so staff members can get up and running with minimal training and can self-serve, going forward
  • Easy-to-use, drill-down capabilities for greater insight into the numbers
  • Operability on mobile devices, like tablets, for on-the-go access to your financial picture

In today’s all accessible and information overloaded world, you must be an effective storyteller. And your story – as a nonprofit or association financial professional – is essential, because your financial status and agency health ultimately determines your organization’s strategic opportunities.

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.

Jul 17
0

Challenges and Solutions for Allocating Indirect Costs

By | Abila, Accounting, Audit, Grant Management, MIP Fund Accounting, Nonprofit | No Comments

Accurate nonprofit financial reporting relies upon proper allocation of indirect costs. Indirect costs can be challenging to place properly, but once they are, they can make a significant impact on your overall budget. More importantly, they add an extra dimension to all reports reviewed by your Board and executive team and can help with budgeting, staffing, and other critical decisions.

Classifying Expenses

Although nonprofits may have multiple expense categories, many expenses actually fall into one of three simple classifications. These include:

  1. Administration: Management and General Administration
  2. Programs: Any programs that support the organization’s mission
  3. Fundraising: The cost of raising funds

Your organization may call them by different names, but upon closer examination, the major expense categories should fit into these areas. Those expenses which can be identified as belonging to one of these three categories can be quickly allocated. Others, however, fall into more of a gray area which cannot be identified with a specific program or budgeting category.

Indirect Cost Allocation and Its Effects

Indirect cost allocation impacts many areas of your organization. It impacts how donors view your organization, for example, by changing the way in which expenses are laid out in your financials. High administrative fees may be unacceptable to some donors.

Indirect costs also impact the budget for programs. If costs seem to be weighing heavily towards one area, that area may get more or less budget for upcoming years.

The allocation also impacts the final percentages that appear on Form 990 for each tax year. These are the numbers that are listed publicly and can impact the public’s view of your organization. Think carefully about how you apportion indirect costs as their ramifications can be long-lasting.

Coming Up with an Indirect Cost Allocation Method

Determining a fair and equitable indirect cost allocation method is a good solution to the problem of items that do not have an easy ‘home’ in your budget line. By examining the methods you have on file to share expenses, you can plan and allocate accordingly.

One method by which you can allocate indirect costs is to estimate what percentage belongs in each major budget line. Let’s assume that an administrative assistant works for both the donor relations and the program area. Which budget should contain his salary? If the assistant supports three people in donor relations and one in programs, then 75% of his salary budget can be allocated to donor relations and 25% to program areas.

Obviously, not every allocation will be this clean and easy. Square footage is one area that can get tricky. For instance, if you rent office space shared by multiple program and departmental areas, determining the percent of costs to be borne by each department can get complicated if many departments share the space. Sometimes, you just have to give it your best guess.

Consistency Is Key

The big thing to remember about allocation is that consistency is the key to successful indirect allocation. Whatever method you choose, put it in writing and file it in accounting and financial documents, plans, and budgets so that it is common knowledge. Then, apply the rules fairly and consistently to the budgeting process. It is this consistency of application that auditors look for to determine if an indirect allocation method is acceptable.

Indirect allocation is a common challenge in the world of nonprofit financial management. Fortunately, it’s one with a solution that makes sense and that can be rolled out fairly easily throughout your organization.

 

 

Jul 10
0

What You Need to Know About Nonprofit Payroll Taxes

By | Accounting, Audit, CPA, MIP Fund Accounting, Nonprofit | No Comments

Keeping abreast of payroll taxes can be difficult, but nonprofit payroll taxes can be especially challenging. Some nonprofit organizations mistakenly think that obtaining the tax-exempt status exempts them from recording and paying all payroll taxes. The truth may be more nuanced and complicated than that, with variances according to worker status and more. Get the facts about nonprofit payroll taxes in order to maintain compliance with local, state, and federal law.

Need help setting up or processing payroll in your Abila MIP Fund Accounting™ system? Join us for our hands on training event, “Payroll in MIP.”

Nonprofit Payroll Taxes: Tax Status

Tax exempt status is obtained by completing the appropriate forms and receiving notification from the IRS that it has been granted to a nonprofit organization. This is a federal tax exemption and not a blanket exemption from paying all taxes. That’s an important distinction.

You may be exempt from paying federal corporate income taxes, but your employees must still pay their payroll taxes. Social Security and Medicare taxes are also not exempt and are important contributions that must be made and recorded to remain compliant with the law.

FUTA Taxes

The IRS states that “Religious, educational, scientific, charitable and other organizations described in section 501(c)(3) and exempt from tax under section 501(a) are not subject to FUTA tax and do not have to file form 940.” You must receive and keep on file a designation from the IRS.

States, however, can have different rules from the federal ones, so you may be required to pay taxes on the state level. Check with your state taxation department or your accounting firm to determine state taxation requirements.

FICA Taxes

Like for-profit corporations, nonprofits are required to pay employment taxes on compensation to employees. There are a few exceptions to this which include:

  • Churches and some religious organizations can elect an exemption from FICA (Social Security and Medicare).
  • Ministers and other members of the clergy or religious organizations can exempt certain services from FICA taxes.
  • FICA compensation paid to students may be excluded.

 

Volunteer Compensation

By the nature of volunteer work, it is usually uncompensated time. However, many nonprofits give gifts to volunteers. Small gifts of appreciation such as an award plaque are usually untaxed, but major gifts such as gift cards, gift certificates and any gifts of significant value may be subject to taxes. Generally speaking, non-cash gift items with token value only or sentimental value aren’t taxed, but anything that can be construed as cash or the equivalent of, like a gift certificate, may be taxed.

Who Is In Charge?

Who is on the hook if mistakes are made on taxation? You may be surprised to learn that it is the Board of Directors. The Board has ultimate oversight on all financial matters, and that includes taxes paid. If mistakes are made, the responsibility lies with the Board.

Board members should be aware of this requirement and take precautions to ensure that all employment taxes are paid accordingly. Reviewing this information with your nonprofit’s accounting and financial management staff is vital to ensure compliance.

Although it may seem, by virtue of being a nonprofit organization, you should not have to pay any taxes, there are still some which might need to be paid. A bit of research now and prudent oversight from your Board can ensure that you are in good standing with federal and state taxation laws.

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.