Author: kathy-beck

Nonprofit financial management includes ideas that can help you increase income from donations, events, and charitable giving. Segmentation, a concept borrowed from the world of for-profit marketing, can help you market smarter, achieve better results, and reduce marketing costs.

What Is Segmentation?

Segmentation refers to evaluating the characteristics of an email or mailing list and grouping people together according to similar characteristics. Marketing outreach can then be directed at smaller groups according to their unique interests or characteristics.

Why Segment?

Think about your current mailing list. It’s probably a mixture of long-time “friends” of the organization, new donors, and everyone in between.

But these groups need different information from you. Longtime friends of your organization or donors may welcome updates on programs while newcomers may need to learn more about your basic services. Others may be interested in specific programs or initiatives.

If you send the same information to all groups, you run the risk of people growing bored with the information you send because it doesn’t feel relevant to their needs. The more you can speak to your individual constituents through segmented and targeted communications, the better you will engage them. The more engaged someone is in your organization’s mission and activities, the more likely they are to donate to it in the future.

How to Start a Segmentation Program

First, you’ll need software that can be updated to include segmentation models. That’s usually accomplished by adding a simple field to each address record that can be keyed to reports so all people in each segmentation group can show up in the same cluster.

Begin with the data you do have on your constituents. You currently have addresses, so you know their location. You may be able to segment communications around location-based activities such as volunteer days, charity events, or other locally-based activities. This enables you to send mailings or invitations only to those who live near the event, and perhaps garner a better response rate by targeting those most likely to attend.

Another concept is to link the amounts donated to an actual situation to show donors how their money impacts the cause they care about. Since your records may indicate how much people have donated, you can segment by donations like this:

“The $50 you donated last week will pay for veterinary care for one cat or dog at our shelter. Thank you for your compassion towards shelter animals.”

“It costs $500 to train a service dog for our veterans. Your generous donation of $100 put us a big step closer to helping a deserving veteran get the help he needs. Thank you.”

“Each family who comes to us has a simple need: food. Your $25 donation puts a bag of groceries into a family’s hands. We can’t do it without you.”

In each case, the segmentation was around tiers of giving. Donors were grouped into $25, $50, $100 and up tiers and messages could then be tailored to each. By showing people how their gift impacts the cause they care about, you make it more personal and give donors a good feeling about their support.

A/B Split Testing

Another technique you can use after implementing a simple segmentation strategy is called message testing or A/B split testing.

In this marketing methodology, you create one message (A) and test the response against an alternative message (B). You then measure the response to decide whether A or B produces the best results.

Over time, you can test variables such as the message, the timing, or the design of the marketing materials to see which, if any, of these elements, impact the results. For example, by testing a known email design (A) against a new design (B) and measuring the results against the results you know you get for A, you can see if the revised design of B improves the response rates.

Nonprofit Financial Management Strategies from Beck & Company

Since 1987, Beck & Company has helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.

Part of nonprofit financial management is ensuring that your organization’s funds are spent prudently. That includes, of course, both saving where it matters and spending on what counts. When it comes to software, you may be saving a penny to spend a dollar later if you cut too many corners.

You can purchase software on a budget. The key is to use a streamlined process for software selection. There are many software choices for nonprofits today to help them with everything from accounting to grant management. Some software provides comprehensive, all-in-one management; others allow for easy integration of additional packages so, as funds become available or needs change, you can update and upgrade your software.

The Software Selection Process

The software selection process for any organization begins by ascertaining the need. Why do you need this software?

A few reasons why you may need to upgrade your software include:

• We’re spending too much time on manual tasks such as updating spreadsheets when software could simplify that task.
• We are making mistakes because we do everything manually.
• We are spending hours to record activities and build reports on grants, donations, and other updates when we could run such reports with the push of a button.
• Our current software is obsolete, no longer supported, or unable to run on new equipment.
• We have maxed out our user license and cannot add any more.

These are all excellent reasons for upgrading your software.

Can You Scrimp or Should You Splurge? Rush or Take Your Time?

You probably have a budget in mind for your purchases. Before going shopping for new software, there are a few more questions you’ll need to ask yourself:

• Will the new software be deployed through the organization?
• Will this software change how our organization functions in any significant way?
• Will shifting to this software take time or additional investments?
• Will we need to send people for special training to manage this software?

If you answered “yes” to one or more of these questions, then you may be looking at a more significant investment of time, money, and resources for your software selection process.

Any software that will change how you conduct your business, or software that requires additional investments of time or resources, should be selected based more on quantity than cost. That’s easy to say, we know, but important to mention. If you skimp on the investment or rush to pick a package for your organization, you may come to regret your choice.

New Software or Make-Do Software?

Another important question is whether you actually do need new software or whether you can make do with the software you have. Often, an organization will buy new software when a package they already own may have the functions they need—they’re just not aware of them.

Start by making a list of the reasons why you want to buy new software. Then, take an inventory of what you have now. Can any of the software packages or subscriptions you currently have add the functions you need?

Ask Other Nonprofits

Another step to take is to ask other nonprofits what software they are using. It helps to get a sense of which products other, similar organizations have chosen and why they like or dislike them.

Online studies can also help you find software that meets your organization’s needs. Idealware, TechSoup, and Nonprofit Matrix provide resources to assess nonprofit software.

Pick Your Package and Test It

Once you’ve decided on the package that meets your needs, imagine how you’ll use it in your daily work. Gain consensus among the people and departments who will use it if it meets most of their needs.

Few software packages meet 100% of the needs of an entire company, and this is where you may need to compromise on certain features. Once you’ve chosen the package, purchase it. Ask about support, training, and warranties, and return policies if you feel it just doesn’t meet your organization’s needs after you’ve given it a fair trial.

Buying software can be a scary process if you’re investing your organization’s hard-earned money into the unknown. By taking these steps and doing your due diligence, you’ll be able to find great software at an affordable price.

Looking for Software? Beck & Company Can Help

We offer nonprofit accounting audit services, financial management, accounting, tax and other consulting services to help nonprofits thrive. This includes software selection.

Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.

You may wonder what nonprofit financial management and blockchain have to do with each other. After all, isn’t blockchain part of that new-fangled thing called cryptocurrency that everyone is talking about— bitcoin, ethereum, and all that jazz?

Blockchain is indeed the technology undergirding the new economy fueled by cryptocurrency but it is also a powerful method of creating a transparent, secure, and permanent record. Blockchains can be built to create new currencies but they can also be used to securely transfer records, demonstrate transfer of ownership, and many other applications.

Forbes reports 35 uses of blockchain as examples of how blockchain is reshaping such disparate industries as healthcare, banking and finance, and even nonprofit. The Israeli government, for example, is collaborating with Microsoft to create a blockchain for managing bank securities. And, lest you think that the nonprofit sector isn’t interested in blockchain, Bitgive is a new blockchain that seeks to give donors greater transparency around how their donations affect outcomes.

Just as the invention of the combustion engine forever changed transportation so, too, will blockchain forever change how transactions are made. Nonprofit financial management is just one area that will eventually adapt to the new model of transparency, security, and authenticity fueled by the blockchain.

What Is Blockchain?

Blockchain is an open, distributed ledger. Anyone can see transactions on a blockchain. Transactions must be accepted by consensus, distributing the authentication of transactions across multiple parties. No one person can alter the blockchain; once a transaction is recorded and authenticated, it is permanently recorded.

What’s the Appeal?

If you’re still scratching your head trying to figure out how blockchain impacts nonprofit financial management, we don’t blame you. It’s one thing to conceptually understand an unalterable, immutable chain of transactions, and another to understand how it applies to your daily world in the nonprofit sector.

The main appeal of blockchain is trust. The security and transparency inherent in the blockchain bring a level of trust to transactions unheard of in the past. Because every transaction on a blockchain must be verified through a process called consensus, transactions cannot be forged.

Transactions are also time and date stamped so all parties involved in the transaction can quickly and easily see when it was made and confirmed.

Enhanced Trust Is a Plus for the Nonprofit Sector

The area where blockchain has the best potential to make a splash in the world of nonprofit financial management is in donor relations.

Millennials now make up the largest demographic—larger, even, than the Baby Boomers. They are also very interested in supporting the causes championed by their favorite nonprofits.

This is also a demographic which values trust and transparency. Public trust in nonprofits is currently on shaky ground with 49% of donors complaining that they don’t know how nonprofits spend their money.

The transparency and traceability inherent in the blockchain model appeal to millennials. Many are already familiar with blockchain and are open to new technology. Using the blockchain, nonprofits can demonstrate a permanent, immutable record of how donations were received and used.

Reporting Time Saved

Another advantage of using blockchain to track donations in nonprofit financial management is the time that can potentially be saved with government or grant reporting. Many nonprofits receive funds from entities that require frequent reports.

The blockchain model saves the need for reports by providing an open yet secure record. Entities can immediately check the blockchain’s time and date stamps to see transactions. They do not need to wait for reports to be filed. That saves time and effort on both your side and theirs.

Clearly, blockchain is in its infancy. There’s a lot more to it than one article can cover, but now you’ve got an idea of how blockchain may impact the nonprofit segment. It’s worth following as it develops into a more fully fleshed out model for the nonprofit world.

Beck & Company

Beck & Company is an independent certified accounting firm specializing in nonprofit organizations. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.

Our nonprofit financial management tips continue with tips for choosing an online donation system. Most donors now expect to be able to donate online using their credit or debit cards. Accepting donations through your website makes it easier to run email campaigns, social media campaigns, and other campaigns online since you can encourage respondents to click through to donate immediately.

But, choosing your online donation processing system can be confusing, especially if you’ve never dealt with merchant accounts, bank card systems, or aggregator systems. Here, we provide you with a handy guide to online processors and how to choose between the two most commonly used systems by nonprofit organizations: merchant accounts and aggregators.

Accepting Online Payments: How It Works

Almost everyone reading this has purchased goods or services online, and most have also donated online. You’re familiar with how systems work from the front end or user interface.

Behind the scenes, however, there is a complex network of information shared by multiple parties to complete a credit card transaction online.

After clicking “pay” or “order”, your credit card information is encrypted for security purposes and sent to either a merchant account or an aggregator. They, in turn, verify the purchase and process it. Money may be sent to your bank account and the transaction is complete.

Merchant accounts are created by a merchant bank (called an acquirer). The bank settles and deposits the funds from the transaction into your bank account. They are responsible for ensuring that payment is rendered to your account once the transaction is approved.

An aggregator is a company that processes payments. They enable multiple entities such as merchants, nonprofits, and others to accept credit card payments and bank transfers without the need to set up a special merchant account. The aggregator forms an agreement with the merchant bank and batches multiple companies under their account for processing. In return, they assume a greater risk since they are dealing with multiple entities and may charge more for their services.

Which Is Better for Nonprofit Financial Management?

Neither a merchant bank account nor an aggregator is a clear-cut “better” choice for sound nonprofit financial management. There are pros and cons to each.

1. Setting up payments: Merchant banks may have a lengthy due diligence and approval process. The process to set up an aggregator account is faster and less cumbersome. It may be easier for new nonprofits or those with a limited credit history to establish an aggregator account.
2. Payment processing: Merchant banks provide somewhat better customer service than aggregators, although this varies. They are more likely to alert you rather than freezing your account due to suspicious activity, for example. Aggregators accept risky clients and therefore take few chances with potential fraudulent activity.
3. Fees: Fees vary with both types of processors. Merchant banks may adjust their fees based on volume while aggregators typically have fixed fees. Generally, aggregators charge more because they assume greater risk when they accept clients and transactions.
4. Size: Smaller nonprofits or those who anticipate few donations through credit cards may be better off starting with an aggregator. Merchant banks may require you to estimate transaction sizes and quantities and base fees upon those estimates.
5. Fraud prevention: Aggregators are on high alert for fraud since they process so many transactions for a wide range of entities. Merchant banks also pay attention to potentially fraudulent transactions. However, aggregators are faster to pull the trigger and shut down an account if it hints at fraud, which could cripple your ability to accept donations, especially during a busy marketing campaign or donor season.

Choosing the Right Fit

Ask yourself the following questions to choose the best fit for your nonprofit?

Count 1 point for every “yes” answer.

1. Is this the first time you are accepting donations online?
2. Is your nonprofit newly incorporated?
3. Do you expect only a handful of donations online each year?
4. Do you tend to receive small donations rather than big donations? For example, donations of $5 – $25 rather than $100 – $1,000?
5. Has your nonprofit every been the target of online fraud?

Score:

0 – A merchant bank is likely to be your best choice

1 – 2 – Merchant banks may take a bit of time to approve your account but are likely to be the best choice

3 – 4 – Your nonprofit may benefit the most from working with an aggregator.

5 – An aggregator is likely to be the best fit for your situation.

As you explore your options for accepting donations online, don’t forget about mobile apps for taking donations at events. Card readers, which transform a smartphone or tablet into a credit card processor, can make it easier to accept payments at charity events, dinners, and galas.

There are many options for nonprofit organizations to accept donations online. Whether you choose a merchant bank or an aggregator, be sure to shop around and take your time comparing services and rates. Read the fine print in any contracts and be sure that the rates aren’t going to be a burden for your organization. The benefits, as always, must outweigh the risks and costs of accepting donations online.

Beck & Company

We provide nonprofit financial management, auditing, and CPA services throughout the northeast region from our Washington, D.C. headquarters. If your nonprofit is looking for solid financial and accounting advice and services, contact us today.

As part of your nonprofit financial management best practices, keeping up to date on FASB standards is important. We have an update on FASB ASU 2016-14 that nonprofits should understand and follow to comply with the latest accounting standards updates.

FASB ASU 2016-14: Net Asset Classification Information

As you may recall, FASB ASU 2016-14 changes net asset classification from three categories to two. The reporting and disclosures of net assets changes with this update.

The two new categories are:

1. Net assets with donor restrictions
2. Net assets without donor restrictions

These two categories replace the current three categories:

1. Unrestricted
2. Temporarily restricted
3. Permanently restricted

Many areas may affect financial statements and how net assets are classified. It’s smart to speak with a CPA who specializes in nonprofit accounting. A CPA may ask you, for example, if your organization has already updated the statement of financial position and the statement of activities. You may wish to update these areas to change the net asset categories from temporarily and permanently restricted net assets to the updated terms. Remember, the updated terms are net assets with donor restrictions and net assets without donor restrictions.

Review the Notes to Financial Statements

Take time now to review the notes to the financial statements. Replace “temporarily restricted” and “permanently restricted” net assets with the new categories, net assets with donor restrictions and net assets without donor restrictions.

You Can Disaggregate the Two Net Asset Categories

If you feel as if you still need more leeway in the net asset categories, the option remains open to further disaggregate them in the financial statements. For example, after reflection and discussion, your nonprofit financial management team may decide to disaggregate net assets with donor restrictions between those expected to be maintained in perpetuity and those expected to be spent over time. The amounts for each of the two categories of net assets, as well as the total of net assets, must be reported in a statement of financial position.

Required Enhanced Disclosures

Also of note, the ASU will require enhanced disclosures about the purpose and amounts of the governing board’s designations, appropriations, and similar actions that result in self-imposed restrictions at the end of the period.

The placed-in-service approach will also be required when releasing restrictions related to long-lived assets.

Also, the option to imply a time restriction and release the restrictions over an asset’s useful life will no longer be permitted unless it’s explicitly stated by the donor.

Confused? Please don’t be. There’s still time to read up and learn more about ASU 2016-14.

For more information on ASU 2016-14, please see:

• Changes to Accounting Standards
• Nonprofit Financial Management: FASB Update

Beck & Company

We can help you with the FASB and ASU updates, with audits, and any nonprofit accounting needs. We are CPAs who focus on the nonprofit area and who have the experience to help you navigate the unique needs of nonprofit financial reporting. Contact us today.

Nonprofit financial management comes with inherent stressors. Tax time, budgeting time, and end of year accounting can call for some long meetings and late nights. While we like to think we are all as productive as we can be, the fact remains that our days are filled with interruptions that can lead to lost productivity rather than increased productivity.

Experts tell us it can take up to 20 minutes to refocus after an interruption to our thoughts. Think about all the interruptions during your average workday. Phone calls, emails, text messages, instant messages, and people showing up unexpectedly at your desk with urgent needs are all interruptions that can break concentration and slow productivity.

Now, add onto that the late nights of tax preparation season, the long days during budgeting cycles, and other potential business activities that add to your work and you will quickly see why reducing stress and improving productivity in nonprofit financial management is essential.

Five Tips to Reduce Stress and Enhance Productivity

We’ve reviewed the best stress management and productivity advice around to develop this list of nonprofit financial management stress relievers, productivity enhancers, and all around helpful hints.

1. Plan: Even though some people insist they cannot plan their days because of work interruptions, planning ahead tends to take a lot of stress off people. Knowing the work you need to accomplish this week, the people you need to speak with, and the other work that takes priority during the workweek helps you fit it into the week’s activities. Even if you are interrupted during the day, you can return to your list and plan and pick up where you left off.
2. Turn off instant messages: Turn off the instant messenger apps unless they are absolutely essential to your workplace. Constant dings, pings, and other sounds and flashing messages break your concentration and make it difficult to return your focus to the task at hand. Pick one channel such as Skype, Slack, or another messenger for your team and teach them to use it only for emergencies.
3. Schedule time to review and respond to emails: The average employee receives 200 emails a day. We can almost guarantee that just a handful of those emails are truly deserving of a response. To that end, don’t feel obligated to respond to every email immediately. Instead, set aside three time periods—9 a.m., 12 noon, and perhaps 3 p.m.—to respond to emails. This is usually adequate for the majority of nonprofit financial management tasks.
4. Set office hours: Set specific periods during the day when your door is open to interruptions. Use this time as your planning period or to review materials and make it the time when you can be interrupted. Then, set aside other times when you wish to be undisturbed. By making this schedule public, you’ll manage interruptions and block them into specific time slots.
5. Prioritize: Push the work that will get maximum impact to the top of your list and let everything else flow from there. You may not be able to get to everything you wish to accomplish in a day, week, or month but if you can prioritize around maximum impact work, everything else should fall into place more easily.

Technology as the Servant, Not the Master

Lastly, make sure that the technology available to you is your servant, not your master.

• Learn how to use any time-saving features on it but do not feel obligated to use every feature all the time.
• Turn off notification sounds, pop-ups, or other alerts during your focused time periods.
• Use calendars and scheduling apps to manage your time.
• Automate whatever you can to enhance your time.
• Delegate any manual or routine tasks, when possible, to technology.

With a few adjustments such as these, you may feel less pressured and stressed and more in control of your time. Nonprofit financial management includes many days when unforeseen events, meetings, calls, or tasks take you away from your plan, but there are also days when working your productivity plan will help you do better work.

Beck & Company

Beck & Company is an independent certified accounting firm specializing in nonprofit organizations. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.