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Archive for the Not-for-Profit Category

Creating Financial Order in Small Nonprofit Organizations

A $100,000 organization is large enough to go under by blowing member trust and public reputation.

And it’s small enough to experience bookkeeper & Treasurer turnover…as well as difficulties in getting clear, complete, accurate, and timely financial information on an ongoing basis.

So about getting your org’s financial house in order, here is the quintessential problem:
* The stakes are high enough that the org *cannot* afford drama and waste in finance.
* But the org is too small to afford a high-end expert doing year-round bookkeeping AND board reporting AND internal controls (helping to protect organizational assets)
* So your org isn’t alone, a ton of $100K orgs rely on a volunteer Treasurer or a low-paid bookkeeper or even an intern. Result: Turnover, mess, or both. $100K is too large for a volunteer.

The solution:

[1] First, you get the books fixed by an expert. A one-time project. If you don’t do this, old incorrect balances will roll forward forever and haunt you (there should be no drama in accounting, remember?)

[2] Second, have the expert set up systems for automation of correct accounting and reporting. In accounting, never pay a human being to do what a computer can do. Let the computer run this thing on automatic.

Reserve the human beings for what we do best:
Exercising judgment, innovating, and creating connection with other living beings.

[3] Third, contract with an expert *just* for those functions. To exercise judgment (quality control), innovate by automating and streamlining processes, and to create connection with other living beings (preparing board-friendly reports, setting up financial information flows between key people), and to defend the organization’s assets and reputation (“internal controls” – jargon alert!).

Don’t have a CPA write checks and do the books; never have the same person write checks as doing the books. But there are ways to both automate/streamline payments and making the payments more secure than paper checks anyway. You handle the payments, or your Treasurer, and your expert makes it easy. Have the CPA or other qualified person monitor the quality of the books and prepare reports so YOUR board understands them and can make decisions based on them.

To create a success map, contact one of our team members! Start with (844) 844-3766.

Cash Crunch! Nonprofit Edition

 

The best paths out of a cash crunch depend on the cause of the problem. Some examples are below; I hope one or more is helpful.

We’re going to skip the obvious “Get more grants! Do more fundraising!”

Cause: Solution

Embezzlement: Plug the leak, make them give it back, get a line of credit if necessary to see you through until you do.

Unreimbursed grant expenses: Speed up your processes so you can invoice faster. Engage in faster communications with grantors so they don’t forget about you. Set up electronic inbound payments for the grant funds.

High monthly burn not covered by grants: Take a look at any expenses that aren’t providing the organization with value and cut them. Start with the largest ones, not your deluxe paper clips.

Typical seasonal flux: Consider a line of credit. This financing tool is what a lot of seasonal organizations use to get them through the predictable, seasonal tough times if they haven’t saved up from the abundant times. And next season when the organization has plenty of cash, squirrel more of it into a savings account and then you’ll be your OWN line of credit!

Disallowed grant expenses: Use technology to collect backup documentation so you can submit all of those documents to grantors. For example, use Expensify or Entryless so authorized employees can snap a photo of their receipts or scan them, and send them ultimately to the accounting system. And review grants/authorizations with everyone empowered to spend so no one spends on something not covered by a grant.

Overspending grants: Quickly realign your authorization policies for spending as well as the clarity of your accounting on a grant-by-grant basis. Even basic accounting systems such as QuickBooks and Xero are able to produce an income statement by grant if you set them up to do so.

How can a startup nonprofit create a budget needed to apply for its first grant?

 

A budget isn’t a guarantee. It’s a plan, a target.
Just because your nonprofit is a startup doesn’t mean you can’t have a budget.
Even for long-running nonprofits, no one can say what the future is. You don’t have to have guaranteed revenues in order to have a budget.
As you learn more about what revenue streams are available to you and what is available for your mission as a result, consider designing a target revenue portfolio.
Consider how some revenue sources come with rules about how to use the money (i.e. grants) and some don’t (individual contributions). Consider that come with easily definable costs (i.e. product sales) and some have costs that are less easily definable (i.e. sponsorships).
Use that information to shape up the expense side of your budget that corresponds to your revenue portfolio.
Then you’ll have your budget.

Accepting a Payment Plan from a Donor or Customer

 

If you accept a payment plan in any situation for any reason, bear in mind that risk is something you can play with and not just be subject to.
A payment plan introduces risk into the equation, because it’s replacing a certainty with an uncertainty.
So if you do ever accept a payment plan, propose terms that then reduce your organization’s uncertainty and/or compensate for the additional uncertainty.
Examples:
* AutoPay only
* Weekly payments, not monthly payments
* Pull from their bank account instead of the credit card account – lower fees for your organization – and only pull from the cc account if the bank account pull bounces, and of course if so then include that fee to get reimbursed plus a surcharge to cover the cc fees (check your state’s laws on this).
* Charge a financing fee
In my experience, a lot of organizations suffer for lack of training about how to identify and counter financial risks. My life certainly suffered for it. I did what I knew…and when I knew better, I did better.

How do you deal with a difficult co-worker?

 

Although it might seem strange to see this topic on a CFO blog, knowing why it’s here might might place it in context and help this to be more valuable to my readers.
[1] In smaller organizations, the Human Resource function often falls under the Office of the CFO. There is intersection with both compensation and compliance.
[2] We looove efficiency. And there’s nothing that will take a bite out of organizational efficiency than human drama. So those of us who fulfill the CFO role for a combo of hard & soft skills and not just for being geekier than everyone else are really great at this stuff.
How do you deal with a difficult co-worker?
Language is our access to high performance. Language is access to reaching our potential. Language shapes how we view the world and what actions we take.
The question has two powerful words in it and a powerful assumption, and none of these lead to making mission and none of them lead to joy.
There is no winning answer to the question as asked.
The second word (stay with me) is ‘difficult.’
The assumption is that a person is fixed and unchangeable, and this assumption is revealed by the language ‘a difficult co-worker.’
The first word is “deal.” If I do not have the ability to create relatedness with others and create transformation in relationships and in performance, I will need to ‘deal’ with people for the rest of my life.
As long as I continue to believe that a co-worker IS difficult, as if that were a fact, I will never be successful in ‘dealing’ with that person.
The key is to see the world as my co-worker sees it. To be able to describe life, work, mission, a challenge as my co-worker would use language to say it.
Once I can do that, and my co-worker knows that I can do that, change is possible.
Does my co-worker need to change?
No such assumption.
Miracles come out of communication like this. Possible results include:
* I use language more effectively because I can communicate in the way that my co-worker needs
* My co-worker creates a new relationship with life, with work, with mission, with me
* A loyalty is created between us, because I cared to get someone else’s world. Loyalty and high performance go hand in hand.
This list is only the beginning of what happens when in the face of ‘deal,’ ‘difficult,’ and an assumption of unchangeability we instead create relatedness and transformation.
Author Richard Bach wrote: “When you ask the question properly it answers itself.”
The only way to ask the real question obviates the need for the question because it illuminates the solution.
“How do you create transformation in a professional relationship with someone whom you currently do not know very well?”

“Compensating” Volunteers in Your Not-For-Profit Organization

Volunteers have their own reasons for devoting their time to your organization. If you’d like to offer them some perks but need to watch the cost of those perks, watch out.
If you have someone in charge of volunteers, it can be tempting for that person to start creating a lot of rules around those perks. Although some people will do this for a power trip or because that’s the only example they know, most people do it out of a well-intentioned desire to keep costs low for the organization.
However, beware: This will chase away volunteers, guaranteed. Don’t overcomplicate and overadminister something that is a huge arbitrage opportunity.
If your organization provides meals, for example, giving a free meal and beverage is a tiny price to pay for the labor required to make it all happen. Tiny. There’s your arbitrage, turning a tiny financial cost into a huge benefit. Don’t go making rules about which food they can eat or how many cups of coffee they can drink.
Find other ways to increase revenues and reduce costs. When reducing costs, choose expenditures with the greatest financial impact and the least benefit impact.
Start by looking at your financial statements for the greatest cost areas.
Typical cost areas that are worth looking at include:
* office supplies
* leases
* number of users for a technology subscription
* memberships that aren’t being utilized
* items that get renewed automatically on a monthly or annual basis
* insurances
* penalties being paid for being out of compliance
* bank fees
* costs related to having everything on paper instead of paperless back-office operations
* income tax preparation and/or independent audit services – can cost less if your internal staff does work that doesn’t require correcting by the tax preparer and/or auditor (who typically cost more)
* any outside services for which you are paying someone hourly – this is a misalignment of the service provider’s interests with your organization’s interests
* lost opportunities to get not-for-profit rates on technology, products, and services
Which areas might be available to help your not-for-profit save some money this budget cycle?

Course Corrections and Your Board of Directors

Shocking news: Life doesn’t always go as planned.

Where does this leave a not-for-profit organization with a board-approved budget and a mid-year realization that something has changed.

So how does one approach this conversation with the Board?

Go with the high-level points of the journey:
* because of [a] we had envisioned [b] * when we observed/learned [c], we realized that [d] * we made a financial plan in order to create workability in making mission
* the principal differences from the original budget include [e], [f], and [g].
* here is the updated plan, and we have tactical plans in place to make this a reality.

It’s important to be committed to the mission, not attached to a circumstance, process, or goal that you realize is an unreality.

So keep your eye on the prize, develop new strategies and tactics and include a financial plan for workability. Inspire your board and go after that mission!

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