May 19
0

From Spreadsheets to Systems: How Automation Transforms Nonprofit Accounting

By | Accounting, Nonprofit | No Comments

Automation sounds like the buzzword of the day, but it is actually a part of a long-term strategy that can free up an accountant’s time in many ways. Most accountants enjoy the challenging puzzle of managing nonprofit finances and helping to shape the strategy of any organization doing work that matters. Yet somehow, there always seems to be more work than hours in a day. With the right automation, you can get more done in less time. It frees up accountants to use their skills in other meaningful ways.

Save Time Through Automation of Manual Tasks

Many daily, weekly, and monthly tasks handled by accountants are repetitive tasks. Things like entering payment information, approving expenses, and reconciling bank statements take time. While these tasks are necessary for the organization’s overall financial well-being, they aren’t particularly challenging tasks.

If you’re using spreadsheets to maintain the organization’s accounts, you know that there are many steps to logging each entry. And with each step, there’s the chance of making a data entry or formula error. Catching mistakes and fixing them gets harder the further you are from where the mistake originated, and it can take hours to untangle a mess made by a single formula error.

Using a nonprofit accounting system and its built-in automations significantly reduces the risk of data entry errors. Although you can make a mistake entering the initial number, if it’s corrected in the entry, the correction flows through the system, so fixing a simple mistake takes a minute instead of hours.

The entire accounting process becomes faster with automation. For example, invoice amounts are automatically posted to the general ledger through software automation, eliminating manual tasks. Multiply this by the number of manual tasks performed through automation in accounting software, and you’ll quickly see how automation saves time.

Better Audit Trails

Another area in which automation improves the entire accounting workflow is in audit trails. Thanks to routine automation, the entire audit trail now happens seamlessly within nonprofit accounting software. Who entered what information and when, and who approved which invoice—each piece of information is now entered into the software and appears in the audit trail. This makes the entire information chain crystal clear and easy to understand for auditors.

Accurate, Real-Time Reports

Generating reports from spreadsheets requires time and skill. First, the information must be pulled from the spreadsheet, sometimes from various worksheets and files. Then, it must be formatted and checked again. Lastly, if charts or graphs are needed, these must be created manually too, with time spent formatting, adjusting labels, and so on.

With nonprofit accounting systems, reports are automatically created at the tap of a button. It’s easy to generate balance sheets, profit and loss statements, and graphs and charts. Often, the reports that come with a nonprofit accounting system are adequate for an organization’s needs, but if they do need reports that aren’t included in the system, additional ones can be added through customizations or integrations with business intelligence software.

Compare the time it takes to generate reports from spreadsheets with the automations inherent in nonprofit accounting systems, and it becomes clear why most accountants prefer using automation.

AI and Automation

One area worth exploring for nonprofits is the use of AI in accounting automation. It’s been a gamechanger for many teams, improving productivity and efficiency. A study from the Stanford School of Business found that accounts that use AI finalize monthly statements 7.5 days faster than those using traditional methods. The same cohort also spent 8.5% less time on routine back-office processing.

Nonprofit Accounting Software – Automation and Efficiency

If you’re looking to improve automation and efficiency, nonprofit accounting systems are worth exploring. Many come with AI enhancements and excellent out-of-the-box reporting functions. They can save you plenty of time on routine tasks and make it easier for auditors to analyze your finances. The right software, whether it is a nonprofit accounting, donor management, or other platform, can significantly improve accounting productivity.

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 14
0

Budgeting During Leadership Transition – A Guide for Nonprofits

By | Accounting, Budget, Nonprofit | No Comments

There’s an old saying that the only constant in life is change. Changing leadership at a nonprofit organization can be a time of great opportunity. New leaders bring fresh ideas. However, this can mean shifting priorities and the budgets that accompany them.

Nonprofit financial leaders can help manage some of the uncertainty surrounding leadership changes through smart budgeting practices. These include stabilizing the financial position of essential operations, planning for transition costs, and maintaining flexibility.

Stabilizing Essential Operations

Nonprofit leaders establish organizational strategy and direction. From this basis, budgets and plans are made. When leadership changes, strategy can change too, which means new plans and budgets.

Because times of transition can be turbulent, it is important to bring stability to essential operations. This includes stabilizing core financial fundamentals. Ensure you have a strong cushion to cover operating expenses, such as rent, insurance, and salaries. Budgeting for emergencies is also important, as unforeseen expenses can occur during leadership changes.

One area to pay special attention to when building a stable financial core is new expenses. Try to avoid incurring new expenses during times of leadership changes. These may include adding new staff positions, launching new programs or services, or making major technology investments. Hold everything as steadily as you can until the new leader comes aboard and takes the helm.

Planning for Transition Costs

There’s more to planning transition costs than budgeting for a retirement or going-away party for the old CEO. Although it’s tempting to hurry the search team to find a new leader, it may take some time to find the best person to lead your nonprofit. During that time, an interim or fractional CEO may be required. This can be an unexpected transitional cost.

Another unanticipated transition cost may be search fees. Search fees may include the cost of an executive search firm or travel expenses for candidates who come to your office for in-person interviews. Budget for all anticipated expenses related to filling the leadership vacancy.

Lastly, don’t forget to conduct a compensation review for the leadership position. It may have been quite some time since you benchmarked the compensation for a nonprofit leader in your market and niche. After the benchmarking review, you may need to work with the human resources team to make the salary more competitive to attract the right candidate or adjust the benefits package. Either activity can lead to unexpected costs.

Maintaining Flexibility

Lastly, focus on maintaining flexibility. It’s easier said than done, right? Keeping an open mind and anticipating various scenarios can help you maintain a flexible budgeting approach.

We briefly touched on transitional financial planning—how the position may remain vacant for a while, requiring a fractional or interim CEO, or how a compensation benchmarking study may necessitate raising the salary or benefits package to attract a good candidate. These are great examples of maintaining flexibility during leadership transitions.

Other examples include watching for staff uneasiness with the transition. Staff loyal to the previous leader may be uncertain about their position with the newcomer. Consider how you might approach retention activities and incentives.

Donations may slip during times of transition too. Donors who liked the previous administration’s strategy may wonder if the new leader will do things the same way. They may withhold donations until they can see which direction the organization is headed. You may wish to proactively seek additional revenue sources or cut back on expenses until the transition is complete. This flexible approach also helps build that stable core that is essential to supporting an organization during times of transition.

Change Is Inevitable – Budget Stress Isn’t

Change may be inevitable, but budgetary stress shouldn’t be. A flexible, proactive approach to nonprofit budgeting, focusing on reducing expenses, holding off on new expenses, and planning for some financial uncertainty, is the best way to build a sound budget during the transition to new leadership.

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 25
0

Successful Fundraisers Rely on Modern Technology

By | Accounting, Accounting Software, Fundraising, Fundraising Software, Nonprofit, Technology, Uncategorized | No Comments

Recent studies indicate that successful fundraisers rely on modern technology to support both short and long-term fundraising goals. This study, “The Future of Fundraising in the AI Era,” published by the Blackbaud Institute, surveyed 559 nonprofits on their fundraising efforts. The results indicate that organizations with digital maturity and a long-term fundraising perspective are most successful in meeting their goals. Here’s a look at their findings and the implications for nonprofits of all sizes.

Most Fundraisers Meet or Exceed Their Targets

One of the most exciting findings from the study is that most of the fundraisers who responded met or exceeded their targets, with 53% experiencing growth and 24% indicating steady numbers.

How did they do it? Without a doubt, digital maturity plays an important role in fundraising success. Digital maturity may be defined as a mindset that incorporates technology across all aspects of work. Technology isn’t seen as a separate platform but rather as an integral part of the workflow.

For fundraisers, this means using technology to solicit donations now but also to cultivate long-term relationships that lead to future gifts. Technology provides an important service, automating marketing and outreach, enabling highly specific targeting, and helping fundraisers maximize limited time and budgets.

Revenue Streams and Missed Opportunities

Another aspect of the study examined revenue streams. Non-education nonprofits focused on four revenue streams: government grants, major donations, individual donations, and foundation grants. What’s missing from this list is peer-to-peer fundraising. Although 61% of survey respondents reported using peer-to-peer fundraising, the remaining 39% did not, representing a potential missed opportunity.

Digital Maturity Stages and Fundraising Success Are Linked

One of the most important findings from the study is the link between an organization’s digital maturity and its fundraising success. The greater an organization’s digital maturity, the more likely it is to meet or exceed its fundraising targets. There is also a compelling link between digital maturity and year-over-year revenue growth.

Many organizations have embraced nonprofit accounting software. Nonprofit accounting and financial management, fundraising and donor management software, and grant and contract management platforms enabled fundraisers to use powerful automation and reporting features to improve their targeting and reach. This software, some of it AI-enabled, allows nonprofits to do more with the same team as before.

Sage Intacct, for example, offers Sage Intacct Fundraising powered by DonorPerfect to automate, modernize, and accelerate fundraising with personalized donor communications. The Intelligent GL feature uses AI to continuously monitor accounting. It can pick up anomalies in transactions. These features, when taken together, help build transparency and trust with constituents. That transparency and trust support fundraising activities.

Technology Opportunities

Given the clear link between digitally mature organizations and fundraising success, nonprofits should seek to maximize technology opportunities. But how can you do this with limited time and budget?

A few tips:

  • Maximize the use of existing technology. Many nonprofits have great resources already at their disposal, but they aren’t using them to their full advantage. Explore your existing software platforms. Are you using all the available features?
  • Set aside training time. Training goes hand-in-hand with technology use. Employees will only use technology that they feel comfortable using. You can help them overcome any barriers to adoption and use by including more training in your schedule. Consider surveying your staff to find out what they want to learn, then planning training around users’ wants and needs.
  • Explore integrations. Integration means systems that work together. They share information seamlessly, allowing you to do more with less work. Integrating accounting, finance, fundraising, and donor management platforms can provide better reports and personalization to improve fundraising activities.
  • Work with external vendors and consultants. If you already work with a technology vendor, don’t hesitate to call upon them for training and advice. Finding and working with a nonprofit consultant is a good idea too. They can help you pinpoint weaknesses in your current systems and find ways to improve them so that your organization can make the most of its existing technology resources and invest wisely in new ones.

It’s become clear that thriving organizations are those that use technology effectively. It’s not that they’ve invested the most money in the latest and greatest software packages. It’s that they have found useful ways to include technology in their daily workflows. They make the most of what they have, and they aren’t afraid to explore new ways to use technology, such as AI, in their fundraising efforts.

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 18
0

How Can Your Nonprofit Build a Strong Financial Foundation?

By | Accounting, Nonprofit | No Comments

“No margin, no mission.” That sign hung on the wall in the marketing department of a large New York City nonprofit. It was a constant reminder that, even though the organization was a nonprofit and completely committed to its educational mission, without sound finances, it wouldn’t be able to function.

Nonprofits often deal with lean budgets. They want to put every penny towards their mission. However, with a focus on running lean, the slightest disruption can jeopardize the organization. And let’s face it: the last several years have been nothing, if not disruptive. From the global pandemic to soaring inflation, financial pressures are mounting.

Smart nonprofits have learned an important lesson: building a strong financial foundation is integral to fulfilling their mission. The following ideas will help you create the sound financial infrastructure you need to maintain operations.

Five Financial Steps to Build Your Nonprofit’s Future

There are five financial steps you can take to shore up your organization’s foundation:

  1. Build a reserve fund
  2. Calculate indirect costs
  3. Incorporate AI into finance
  4. Automate Accounts Payable
  5. Use a specialized nonprofit accounting system

#1: Build a Reserve Fund

Think of an operating reserve fund like an emergency fund. It gives your team time to adjust and adapt if the funding environment changes suddenly. You’re not forced to make snap decisions but can take a bit more time to figure things out when you have enough emergency cash reserves to continue operations.

To build a reserve fund, identify the amount you might need to keep operations going for 3, 6, and 12 months. Just like individuals are urged to have a cash cushion on hand that covers daily expenses for up to a year in the event of job loss, so too your organization should have a cash cushion. Once you figure out the expenses for each time period, review your financials to see how you can set aside some funds for the operating reserve fund. Blackbaud provides a toolkit to help nonprofits calculate operational reserve funds.

#2: Calculate Indirect Costs

Indirect costs can be tricky. Many nonprofits miscalculate them. To calculate indirect costs, consider expenses spread out over multiple programs or projects, such as rent or utilities. These are expenses incurred by the entire organization, whether a specific program remains or not.

#3: Incorporate AI Into Finance

AI can automate many processes, including common financial processes. Before investing in new platforms, examine your current systems. Many have been updated to infuse AI into existing software. You may have powerful AI-enabled tools available to you now that you can use without buying new software. See if you can use existing AI resources more effectively.

Be sure to review internal AI use policies. If no policies exist within your organization, now is the time to create them. The continued advancement of AI across every facet of business shows no sign of slowing. Make sure your organization is prepared for an AI future.

#4: Automate Accounts Payable

Automation has also been added to many software systems, including accounts payable automation. It’s a time-saving advantage for busy nonprofit accounting departments. Be sure that automation is right for your organization. Examine the time spent manually cutting checks. If it’s significant, automation may speed things up.

#5: Use a Specialized Nonprofit Accounting System

Generic small business accounting software or spreadsheets may be fine to track your finances when you’re just starting your nonprofit, but as it grows, you need a more robust system. A purpose-built, specialized nonprofit accounting system or fund accounting system helps you monitor expenses and income, manage grant-funded projects more easily, and comply with nonprofit accounting guidelines. Speak with Welter Consulting to learn more about whether stepping up to a fund accounting system can help your organization prepare for the future.

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.