As a non-profit finance team, are you struggling with financial challenges in today’s world of heightened donor accountability?
Managing and tracking funds efficiently has become vital. In this article, we explore cloud-based platforms that provide real-time access to data across multiple functional areas, such as HR, accounting, payroll, and operations management.
Before diving into these solutions, let’s first understand the importance of streamlining financial complexities. By doing so, you can redirect your time and energy towards strategic initiatives aligned with your organisation’s mission, freeing yourself from cumbersome manual administrative tasks.
Topics covered include:
- Decoding non-profit financial complexity
- Defining your goals
- Recruiting the right talent
- Enhancing visibility
- Embracing reporting and analytics
- Prioritising compliance
- Embracing simplicity and technology investment
- Leveraging automation for collaboration and scalability
- Embracing a bright future for non-profit finance
Decoding non-profit financial complexity
What is financial complexity?
Financial complexity measures how much work is required to maintain your financial system. For instance, how difficult is it for staff and board members to understand, monitor and report on your non-profit’s finances?
The more accounts, transactions, and reports in your system, the more complex it will be.
Why do you need to reduce financial complexity?
Non-profits are under increasing pressure to show results. The best way to overcome this is by reducing financial complexity and focusing on the core activities that make you successful.
The complexity of your financial operations can be a barrier to achieving results, making it difficult for you or others at your non-profit to track and report on progress toward achieving your desired outcomes.
It may also increase the possibility of mismanagement or fraud, as well as an inefficient use of resources.
Focus on your mission, not your accounting
As a non-profit, your primary focus will be to help others.
However, when you get bogged down with complex financial systems and reporting requirements, it can be easy for the focus on helping others to slip away. You can become so focused on navigating your finances that you lose sight of your original goals.
Members of your team might worry about not having enough time or resources while causing frustration among board members who feel they’re not receiving accurate information about how well (or poorly) things are going.
Defining your goals
For non-profits, focusing on the bigger picture is key to success. Clear and measurable goals make it easier to make informed decisions that drive your objectives.
Before fixing your finances, you might have to define your goals. This will help you determine how to allocate and use resources effectively. Make them SMART: Specific, Measurable, Achievable, Relevant, and Timebound.
Let’s take the example of increasing donor engagement.
A goal should be specific, such as “Increase the number of donors who participate in our volunteer events by 20% within the next six months”.
It should also be measurable to track progress and determine success.
The goal should be achievable, with a clear plan for how your team will work towards this objective. It should also be relevant for your non-profit, as increasing donor engagement can increase donations and build a stronger relationship with your supporters.
If your goal is to increase donations, it’s important to understand why people should donate to your non-profit.
Instead of simply aiming for a 10% increase in donations, consider building a strong case for why people should support your cause and what impact their donations will have on the community you serve.
This way, when it comes time to increase donations, you’ll have a solid foundation to work from.
Recruiting the right talent
Hiring the right people to handle finances for your non-profit is one of the most important things you can do to ensure success.
It’s also one of the hardest, especially when trying to find someone who fits into your culture and is well-suited for their role.
Ask questions like:
- Does this person fit in with the culture of our organisation?
- Do they share our values?
- Are they excited about what we’re doing?
- Will they be happy here?
- Do they have experience working at a non-profit, or are they enthusiastic about working for one?
- Is this person qualified for the role?
- Do they have all the skills needed for success on day one–and beyond that?
- How much training will be required before they can start contributing meaningfully toward company goals?
- Am I willing/able to financially support such training costs upfront if necessary (or over time)?
With goals and people in place, you’re in a better position to tackle financial complexity.
One big issue is a lack of visibility, making it challenging for your non-profit to keep track of your financial performance, monitor spending, and make informed decisions.
Justin Donne, a Trustee and Chairman of the Board at Autistic Nottingham.
Justin says: “One of the most common challenges for a non-profit is reporting and visibility of funds. This can be especially difficult if you receive funds from various sources. You depend on donations, grants, and other sources of funding, which can be hard to keep track of.
“Without clear visibility of funds, it can be difficult to manage and allocate them appropriately. Let’s not forget donors and funders want to see their donations properly used.”
With limited resources and staff, many non-profits rely on manual processes and legacy software systems that can be time-consuming and difficult to use.
Effectively managing funds poses a significant challenge for non-profit finance teams. To address this, it is crucial to establish a comprehensive budget and financial plan that clearly outlines how funds will be allocated and utilised. This proactive approach ensures efficient fund utilisation and provides a transparent understanding of where the money is directed.
As a non-profit organisation reliant on donations, grants, and various funding sources, it becomes paramount to manage these funds strategically, aiming to maximise the impact of your work. Accurate tracking of expenses and donations is essential, enabling you to utilise funds in the most effective manner possible.
Justin says: “It can be difficult to keep track of all the different funding sources and ensure you use them appropriately.
“Use your funds efficiently and meet all necessary regulations and compliance requirements. This can be a time-consuming process, but it is essential.”
Tim Doman is an investment analyst, ex-executive of a private equity investment fund, and the owner and CEO of Top Mobile Banks.
He points out that managing funds for non-profits is particularly challenging because you may work with limited resources.
Tim says: “With a limited budget and often multiple funding sources, non-profits must carefully manage their finances to ensure they are using funds effectively and efficiently.
“This can be especially difficult when dealing with complex regulations and reporting requirements, which can add to the already significant workload.”
Embracing reporting and analytics
The non-profit finance team holds a distinctive advantage in proactively leveraging reporting and analytics.
Transparency in fund utilisation plays a pivotal role in attracting donors who seek clarity on how their contributions are being allocated. Therefore, it is crucial to equip yourself with the ability to address any relevant inquiries promptly and comprehensively.
Moreover, harnessing data to identify trends and opportunities becomes essential. By analysing and interpreting data, you gain insights into what strategies are yielding positive results, areas that require improvement, and potential avenues for growth and impact.
Embracing the power of reporting and analytics empowers your non-profit to make informed decisions and maximise its effectiveness.
For example, if most of your donors come from one specific area of town or regionally, you should investigate expanding your reach outside this area.
This could mean finding new ways of reaching out through social media or other channels where people outside this location might also see your actions.
Or it could even mean launching a separate fundraising campaign targeting different demographics.
Room to Read is a non-profit that aims to educate children by teaching literacy in the first and second grades through government schools in low-income countries.
Room to Read CFO Shari Freeman told Diginomica that the non-profit could move its India office fully onto cloud accounting and financial management software, which helped keep donors happy as it allowed the team to report granular numbers.
She said: “I think the biggest change for us as an organisation going to Sage Intacct was our ability to deliver against our general reporting.
“We went from average cost, from peanut butter kinds of reports to very specific, transparent, ‘This is what you gave us money for; this is where we spent it, and this is how we spent it.’ We can do that across any country, in any way.
“That has resulted in an unbelievable shift in the kind of donations we’ve received. Our bread and butter were the $35,000 and $40,000 gifts. We get many eight-figure donations now.”
We’ll talk a little more about the other benefits of using financial cloud software later in this article.
Non-profits must comply with various laws and regulations to maintain their non-profit status.
These include laws related to taxes, financial disclosures, and other regulations. Non-profit finance teams must be knowledgeable about these regulations and be able to ensure that they are compliant.
Justin Donne says you need access to detailed reports that show where funds are coming from, how you are using them, and how much is available.
He says: “Non-profits must adhere to strict reporting requirements to maintain their non-profit status.
“This means providing detailed reports to the IRS, state tax authorities in the USA, HMRC, Charities Commission, Companies House in the UK, or other agencies in other countries.
“Non-profit finance teams must be able to provide accurate and timely reports to ensure compliance with all regulations.”
Tim Doman points out that failing to comply with these regulations can result in significant fines and legal consequences.
He says: “Non-profit finance teams must have a clear understanding of the regulations they must comply with and the reporting requirements they must meet.”
Embracing simplicity and technology investment
Once you understand your problems, think about how technology can help you fix issues like poor visibility and help you manage funds, reporting, and compliance.
You’ll want to bring in anything that makes it simpler for your non-profit team, stakeholders, and donors.
Cloud-based financial software is a great option. It’s easy to use, secure and accessible from anywhere. It can provide a centralised platform for managing funds, which can help non-profits to allocate resources more effectively and monitor their spending.
Non-profits should focus on their mission rather than worrying about financial details when it comes to technology investment, and cloud-based software offers an excellent opportunity to simplify your organisation’s finances while still maintaining control over sensitive data such as donor information.
Alastair Hazell, entrepreneur and founder of the Calculator Site, says: “One of the key benefits of cloud finance solutions is that they provide real-time visibility into financial data, making it easier for non-profit finance teams to track and manage funds effectively.
“Another benefit of cloud finance solutions is that they are scalable and flexible, which is important for non-profit organisations that may need to accommodate changing needs and demands.
“Cloud finance solutions provide secure, remote access to financial data, making it easier for non-profit finance teams to collaborate and work together, regardless of location.”
Leveraging automation for collaboration and scalability
By automating many manual processes and eliminating the need for paper-based record-keeping, cloud finance solutions can help non-profits reduce errors, minimise the risk of fraud, and ensure you meet all necessary regulations and reporting requirements.
Automation is a great way to free up staff time and allow them to focus on strategic work. This can help you improve efficiency, reduce cost, and increase work capacity.
Automate those tedious financial tasks where you can. This includes anything from payroll and accounting to donor tracking, fundraising, and reporting. The more you reduce complexity and free up staff time for strategic work, the better off you’ll be.
Automation can even help your marketing efforts by making it easier for people to donate or share content with their networks through tools like web forms, email campaigns, landing pages, social media posts, and more.
Tim Doman says: “Cloud finance solutions can help non-profit finance teams save time and focus on more important tasks by automating many manual processes. It eliminates the need for paper-based record-keeping.”
Effectively managing finances can be a daunting challenge for non-profit organisations. However, by embracing cloud-based finance solutions, you can overcome these obstacles and ensure compliance.
However, Justin Donne says that your non-profit may still want to consult with a financial expert or accountant to ensure you use funds in compliance with all relevant regulations.
He says: “At Autistic Nottingham, we employ a professional accounting firm to audit our books each year and do the filing for us. This virtually guarantees compliance and proper reporting.”
Embracing a bright future for non-profit finance
Non-profit organisations are actively seeking ways to simplify financial management and are aiming to allocate more time towards their core mission. As the non-profit finance landscape evolves and embraces innovation, it is crucial to thrive in this new environment by leveraging cutting-edge tools and systems.
Xplor, a trusted Sage business reseller specialising in Sage Intacct and Sage X3, is the ideal partner to implement these transformative solutions for your non-for profit organisation. By collaborating with us, you can streamline and optimise your business operations, making them more efficient and seamless.
Our expertise and experience empower non-profits to navigate the complexities of financial management, allowing you to dedicate your resources towards driving meaningful impact.
Experience the future of non-profit finance with Xplor as your trusted partner, enabling your organisation to thrive in this dynamic landscape and achieve your mission more effectively than ever before.