Jan 02
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Is Your Nonprofit Ready for the New FASB Rules?

By | Accounting, Audit, FASB, Nonprofit | No Comments

In the world of nonprofit accounting, only one thing remains constant: Change. FASB’s new rules are in effect in December 2017. Are you ready?

The Financial Services Accounting Board (FASB) issued new rules for nonprofits in August 2016. Since then, we’ve covered some of the clarifying questions nonprofits asked FASB about various aspects of the rules. This is the first major change to the guidelines for accounting for nonprofits since 1993 and thus a substantial amount of change is going into effect. Let’s take a look at the new rules and how they may impact your nonprofit organization.

Overview of the New FASB Rules

The new guidelines aim at making financial statements easier to read for all stakeholders. Stakeholders such as directors, the public, donors and granting institutions need clarity and consistency when reviewing nonprofit financial statements.

Nonprofit financial statements are more than debits and credits. To the keen eye, they provide a story of how your organization spends its time and money. Providing better clarity and consistency is critical because understanding the financial statements provides insight to decision-makers about which organizations they choose to support.

Four Major Areas of Impact

There are four major areas of impact to nonprofit financial statements. The goals of the changes are to improve:

  1. Simplicity and clarity: As previously stated, FASB hopes that the new guidelines will improve both the simplicity and clarity of nonprofit financial statements. Some level of consistency in the presentation of information is also desirable. The new rules simplify the treatment of net assets. The emphasis is on donor-imposed restrictions. The goal is to classify temporarily restricted versus permanently restricted funds. The current three classifications of net assets are replaced by two categories, restricted and unrestricted. Although the temporarily unrestricted category is eliminated, nonprofits can still provide clarification in the notes section and in other areas of their financial reports.
  2. Clarity on cash and available assets: Nonprofits are now required to reveal any limitations on the use of liquid assets. Quantitative and qualitative information must now be provided to demonstrate how an organization manages liquid assets. It’s a good idea to speak with your nonprofit auditing firm or CPA when preparing financial statements to adhere to this new guideline. Keep in mind that quantitative information is determined by the nature and limit imposed upon it.
  3. Consistency reporting investment expenses and returns: Income must be reported net of related internal and external expenses. Currently, this is optional.
  4. Communication about Statement of Cash Flows and Related Presentation Options: Nonprofits may continue to present operating cash flows using direct or indirect reporting methods at their discretion.

Now is the time to prepare your accounting setup for the new year. If you haven’t adjusted your plans for reporting, this is the time to do so. We urge you to seek professional assistance with your audits or end of year reporting if you aren’t sure how to adhere to the FASB guidelines. It’s important for the financial health of your organization to report its funds and expenses in a clear, concise manner so that donors, the public, granting organizations and directors can understand the good work that you do and how their money is spent.

About 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.

Dec 26
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Technology Budget: Getting Buy-In from the Board or Association

By | Accounting, Budget, CPA, Nonprofit | No Comments

Regardless of a non-profit’s budget, the technology world is quickly revolving and to stay competitive, it is imperative to stay current on technology.  Even the simplest of computing advancements can require that some hardware or software be upgraded from year-to-year. Failing to keep up with the techno-curve can leave your organization in a deep hole that ends up costing you more in lost time, money, and resources then it would if you were able to justify the expense of upgrading.

So, we have a need to communicate how to balance the cost of doing nothing with the cost of spending on new technology in a business environment.

The need to present an annual technical budget to an association or nonprofit board may have its own unique circumstances, such as the need to adhere to strict or mandatory budgeting requirements. To meet these constraints, consider the following criteria when preparing for your annual budget review with the board:

  • Supports mission statement: Be transparent about how any funding is being used to further the group’s mission.
  • Forecasts contributions: Show how future contributions, gifts, and grants can offset operating expenses.
  • Plans for updates: Communicate how budget updates will be handled throughout the year to keep the original budget on track.

Presenting the right budget for your organization will differ materially from what is right for another organization. Each organization will have its own challenges and needs. Some of these variables can include:

  • What an organization is capable of and prepared to spend on technology.
  • Access to a discounted or donated upgraded system.
  • Ability to absorb implementation and training costs.
  • How effectively current technological resources are being used.
  • The number of staff available to participate in a technological update.

Although it may be tempting to propose that your organization adopt the latest technology can offer, generating a business case that shows an immediate and positive return on investment (ROI) using such technology may be a stretch. For example: Are you able to demonstrate to the board how your present technology is slowing your business process down to the point where it’s causing lost revenue? And can you then show how the proposed upgrade will alleviate your staff’s business challenges resulting in smoother office operations and higher revenue returns?

Your ability to identify your organizations biggest technological challenges and technology needs will help you to better outline your budgeting options to your nonprofit or association board for their review and approval. Based on a clear understanding of these options, presenting a cohesive set of recommendations that are more likely to be approved by the board becomes more certain.

By remembering the importance of comparing the ROI to the cost of upgrading, while showing the cost of doing nothing, you have a better opportunity to realize board approval of your technology budget that moves your group’s stated mission forward.

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.

Dec 18
0

The Right CFO Makes a Big Difference!

By | Accounting, CPA, Grant Management, Nonprofit | No Comments

Finding a CFO with the right skills, experience and chemistry with the organization’s leaders is critical. A CFO is more than an accountant. He or she is also a strategist. The CFO creates budgets, analyzes financial statements, provides strategic direction, and helps others in the company understand the plethora of data provided by the accounting and finance department.

When Should You Hire a CFO?

As your organization grows beyond its original size and begins to make a larger impact among its constituents, it’s natural to wonder when you should hire a CFO.  A few signs that indicate it is time to hire a CFO include:

  • The Executive Director, CEO or President is wearing too many hats. As a result, critical financial tasks aren’t getting done on time simply because the leader is too busy to handle them.
  • The organization’s finances have grown to be complex, requiring someone in the leadership chair who understands nonprofit accounting.
  • The Board of Directors feels a layer of oversight and leadership is needed to manage the accounting needs of the organization.

The right CFO will use their expertise to:

  • Bring a strategic, high-level perspective to the organization’s finance and accounting needs.
  • Build the organization’s capacity to manage its finances as it grows in size and complexity.
  • Reduce excessive workloads in the areas of finance, administration, real estate, technology or legal for the Executive Director (ED) and/or the Chief Operating Officer (COO).
  • Balance or supplement the skills of the controller or other finance team members.
  • Partner with the ED and COO to make decisions that benefit the organization from a financial perspective.

How to Find “CFO Right”

You may need to allow several weeks or months to search for the right CFO candidate.

The first task is to create a job description outlining the desired characteristics of the CFO. Focus on the necessary core capabilities, strengths, and experiences. It’s imperative that a non-profit CFO has experience with nonprofit financial management. Other core characteristics to look for among candidates include:

  • Understands non-profit budget models, contracts, and regulatory requirements
  • Knows and demonstrates passion about the organization’s mission
  • Produces detailed and precise work
  • Exemplifies strong listening and perspective-assessment skills
  • Communicates well, in a transparent fashion
  • Exercises good judgment in the midst of ambiguity

We mentioned it before, but the right CFO also has a certain chemistry with the leadership team. That’s not as an ambiguous term as you may think. Chemistry is essential to a calm, orderly, and productive relationship with the organization’s top leaders. The better they work together, the more work they can get done.

It’s difficult to assess chemistry, but allow all your top leaders to meet and interact with potential candidates. Give them time to get to know one another during the interview process. Ask them how they feel about each candidate. If you have several equally qualified candidates, you may need to rely upon the team’s judgment about compatibility as the deciding factor.

Can You Afford a CFO? Options

While hiring a full-time CFO is a great solution for many mid-sized and all large non-profit organizations, many are too small to afford or need a full-time CFO. If your organization falls into that category, there are several things you can do to afford to hire a CFO.

One idea is to hire an interim or temporary CFO. No one earns the title of CFO without building an extensive body of knowledge and experience. Bringing someone into the role on an interim or fractional basis gives the Executive Director and the organization immediate access to the many lessons learned over the course of their career, at significant cost savings.

If you’re interested in finding your next CFO or placing an interim CFO in your organization, Welter Consulting can help. 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.

Dec 11
0

The Skills Nonprofits Need in 2018 – and Beyond

By | HR, Nonprofit | No Comments

As you start thinking about the year ahead, it’s time to think about the skills your team needs to move your nonprofit forward. Whether you already have team members with these skills or you’ll need to hire new employees with them, the fact remains that these are the skills most sought-after among employers.

The Top 5 Skills Nonprofits Need Now – and Why

  1. Cloud and Distributed Computing: So much of our software is moving to the cloud we predict that site-based software and support is going to be hard to obtain in the future. For these and other reasons, it just makes sense to move things to the cloud. Not only can you save money on your software, hosting, and security, but it also enables better data sharing, storage, and updates. If you don’t have someone on your staff knowledgeable about cloud computing, consider adding it to an IT job description or finding a consulting firm to assist with cloud migration.
  2. SEO and SEM: Search Engine Optimization and Search Engine Marketing refer to specific tactics your website utilizes to boost its visibility and hence its clicks and interactions. Adding these skills to your nonprofit will be invaluable in the upcoming months and years as competition for clicks increases.
  3. Business Intelligence: Business intelligence refers to the ability to gather data and information from one or more computer systems and distill it into usable facts. BI system can synthesize financial, accounting, sales, marketing, donation, grants and other information into one report that your nonprofit can use for better business management. Without BI systems in place, your organization runs the risk of having to export multiple data files or reports and manually extract data from each to get the big picture of the organization.
  4. Network and Information Security: You may think that your nonprofit is safe from cyber attack, but in many cases it’s not. Cybersecurity is critical for nonprofits, many of whom rely on small teams and volunteers for assistance. And while many security breaches are preventable, you still need someone in your organization to advise your teams while troubleshooting and fixing your systems.
  5. Corporate and Nonprofit Law and Governance: Corporate laws, including laws that apply to nonprofit organizations, continually change. It’s important to have someone in your organization who understands their application to the nonprofit world and who can help you adhere to all laws pertaining to corporate management and governance. It’s also helpful to have an accounting team member who understands the nuances of pending FASB changes as they pertain to financial reporting, such as FASB 606 changes, which will impact grants and contracts.

Hiring or Outsourcing to Get the Skills You Need

To find the skills you need on your team, you’ll need to hire new employees, train current employees, or outsource the needs to a consulting firm.

Network security and high-level accounting are both examples of skillsets that can be outsourced to a consulting firm. In both areas, consultants may actually be a better choice, because they regularly interact with numerous organizations and work hard to stay abreast of the latest developments in their field.

Training is available through local colleges/universities and professional organizations. This may be sufficient for current staff members who need a refresher or update on specific skills.

As the new year approaches, make a commitment that you’ll work to ensure your team has the right skills to meet the challenges the future brings. To serve members, constituents, and others, you need to be on the cutting-edge of many areas that the corporate world emphasizes, too.

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.