Accounting Systems and Best Practices for Nonprofits Series
Article 2 – The Birth and Growth of a Non-profit and its Data Delivery Needs
There are many reasons why a non-profit is born. In my last article, we talked about the ways in which a non-profit is successful. Today we’ll address the birth of a non-profit and closely examine how a non-profit can go from “Mom and Pop” to a large fully-functioning organization with financial rules and guidelines….and pain-points that can be better managed along the way.
When we make the effort to start our non-profit, it may be a few families or professionals who get together and come up with a solution for a need within their community. This could be a medical related service, it could be a professional learning need, or it could be a simple desire to help your favorite cause. Whatever it may be, you start from ground zero, establishing yourself as a 501 xx non-profit, maybe managing your books in Excel or in QuickBooks. As moneys are raised, you begin to build your foundation. You learn the best revenue generating techniques and in-turn you are able to start fulling the objective of your non-profit mission statement. This continues to flourish and becomes a non-profit where a small administrative staff is needed to manage the overall finances and business. As resources are added, the organization becomes better managed. Growth happens and even chapters or sub-entities may be created to handle the volume of service needs and out-reach. The sub-entities or chapters may have their own board, budget and ledger through which they will have to report up to the national organization. The success of this non-profit becomes very exciting however, there are also responsibilities that we have to manage along the way.
In the first article on the series “Accounting Systems and Best Practices for Nonprofits” (Read 1st Article here), we talk about some pain-points that can become challenging during this growth process. The first group of items that may be the most changing during your growth from a small non-profit to a medium-size may be in the realm of the first 5 bullet points listed in our last article:
• Delivery of reporting needs from sub-entities (local chapters and affiliates) to a national organization and vice versa.
• Budget Planning.
• Transparency of expenses.
• Adhering to our “cost to raise a dollar” guidelines.
• Petitioning sponsor and donors with the most appropriate documentation.
Today, let’s talk about data delivery. Delivering data for reporting needs can be a huge pain-point in a fast growing non-profit. What factors play a role in enhancing the pain?
The Volunteer: One of the key players in your organization may be a volunteer. We love them. They work for free! But how often are you able to rely on a volunteer who is not necessarily computer-savvy? Or, how often are you waiting for data from them when they have a full-time job and even a family to support. Getting this data from them could in fact be quite a struggle. How many email requests do you have to send to them?
The best option for this pain-point would be to have a system where multiple players can login and perform data entry and run reports as needed. Volunteers can be trained. When you have a system that they can enter the information real-time, it makes life all the easier.
The Data “Storage” Method: How do you receive the information? Through an Excel Spreadsheet? An email? A napkin with crayon scribbles? Let’s face it…a high-end data storage application (AKA Accounting System) in a non-profit world could be considered a luxury. So we are more-than-likely asking our chapters and affiliates to get this data into a somewhat consistent spreadsheet. How many different versions of this spreadsheet exist? When GL accounts are changed in the master spreadsheet, is it cumbersome to deliver the updated spreadsheet to everyone? Do you find that people delete calculations or use antiquated spreadsheets? Do you find yourself sending instructions with the spreadsheet that get left un-read? Do your auditors require backup documentation to your reported numbers?
Consider this statement: What was once a luxury could now be considered a necessity. I look at all of the man-hours I put in for my non-profit. Years of blood, sweat, and tears put into fund raising events. I wouldn’t want my efforts to be wasted because of incorrect accounting data. The work that I do as a volunteer directly impacts the services that are provided to my friends and family in the Northern Ohio Area. If the chapter doesn’t consistently provide accurate financials, these services will be cut. I want my non-profit to be successful. I want the data to be well-managed and safe. I expect that the data storage that they use can carry us through our growth and be adequate for the needs of our sponsors and auditors. An accounting ERP system configured properly with the right tools can not only provide the necessary accounting tools but it will also have many additional features to help with forecasting and budgeting. It may also have a document imaging add-on that can be attached for auditors.
Turnover: This can fall in-line with “the volunteer factor” but in this case, let’s consider that we could be dealing with administrative turnover. Training and process acceptance take time. We can also look at the event “Chair Person”. Whether it be a fund raising event or an educational event, does this person consistently and accurately report revenue and expenses? In my experience event Chair people turnover quite frequently. Do you have an issue with disgruntled employees/volunteers? Have you ever had to deal with getting information from someone who just doesn’t want to cooperate?
Again consider this statement: What was once a luxury could now be considered a necessity. An accounting ERP system that can be controlled from the staff level can save you lots of time and energy where this is concerned. Security protocols are met in an accounting system if configured properly. Accounting Systems that CAI would recommend also have knowledge portals, user groups, training, and documentation helpful for new staff.
Data Delivery Method: Emailing seems to be the most popular way of send data. How often is this process compromised? How often do you hear, “My email is down, you will have to wait until its back up.” True story, I recently switched careers and the regional manager of the non-profit for which I volunteer asked me to send her some evidence that a very large donation was made for a particular event. This was a request from our auditors. Guess what, when I switched my job, I must have forgotten to forward a few emails to my new address. I no longer had access to my old account. It took me a few weeks to get the correct evidence for our auditors.
An accounting system obviously would alleviate this pain. From the reporting tools that are “canned” with accounting software, to outside tools such as SQL Server Reporting Services that can be scheduled to “dump” reports into a network directory or emailed out….there are so many options that can deliver data un-manned.
Data Security: There are a few instances where we want our data to be secure. I don’t necessarily want all of my data to be readily accessible. As a non-profit we adhere to the guidelines of being transparent however there are some areas where we may need be discrete. Administrative costs such as salaries is probably one of the most obvious examples.
The ERP Accounting systems that CAI would recommend has security setup that is configurable to your data-access needs. From read-only access to module limitation…you name it, we can handle it.
Stay tuned for our next article that will dive deeper into some of other areas of non-profit financial best practices. Please email me at mackenzie@caidynamics.com for comments or questions on this subject.