Author: kathy-beck

Budgeting Tips for Special Events

Nonprofit special events, whether a black-tie gala, art festival, walk-a-thon, or neighborhood beautification day take time, planning and a budget. But who really owns the nonprofit budgeting process —the finance or development department?

For the finance office, it is as much about cash flow as it is about potential revenue. For the development office, it’s about soliciting underwriters and event sponsors, as well as having the money to secure the various pieces you need prior to the event. For both, it’s about planning.

Usually, things cost more than anticipated, and those sure-bet sponsors choose not to come on board—even though you have given them until the last minute. From event venues to catering, invitations to awards, all pricing varies according to the vendors and the demand. A detailed, comprehensive plan, including various scenarios, options and unexpected or hidden costs, will go a long way in determining the budget as well as the cash flow needs well in advance of the actual event.

In budgeting for an event, it is critical to have all the internal stakeholders, the finance and the development offices, brought together to collaborate on the budget. Some budgeting tips for special events include:

  • Review of last year’s event budget, if applicable
  • Review of potential sponsors, number of attendees, and other revenue generating opportunities, including a realistic goal of how much money is to be raised from the event (HINT: Be conservative – sometimes the best laid plans fail because of influences that are outside of the organization’s control.)
  • Review of anticipated costs associated with the event (HINT: Budget liberally – again, unplanned costs do arise, and sometimes changes need to be made that incur increased expense. When a planned expense is donated as in-kind, you can celebrate and put the allocated monies to the bottom line.)
  • Timing of payment for various vendors prior to and following the event
  • Expectation of revenue pre-event, event, and post-event
  • Determination of how the finance and development teams will communicate budget details and updates as well as manage this information.

Intuitively, both the finance and development offices need to track and record the financial details of the event. With fund accounting and fundraising systems that work together, information can be shared between the systems without the need for manual reconciliation. Flexibility within those systems allows you to customize fields specifically for the way your organization manages the event, and allows for comprehensive reporting once the event has taken place. With options for fund accounting Executive View Licensing, the financial office and the development office can collaborate real-time within the same financial budget, and update those shared budgets as expenses or revenue details change.

We hope these budgeting tips help your future special events go as smoothly as possible. Additionally, if you are interested in professional advice and assistance we offer multiple services to fill the gap between where you are and where you need to be with your financial accounting and back office processes.

List of services…

The Value of Effective Financial Reporting for Nonprofit Organizations

Being able to tell your organization’s story in a meaningful way can be done with effective financial reporting. Financial reporting for Nonprofit Organizations is similar to a story but is told with numbers. That being said, the financial statement author needs to think about their target audience when deciding what information should be conveyed. The type of audience should also help to determine the best formatting and display parameters that will provide the reader with the ability to quickly understand what message is being communicated through the financial report.

For example, a Finance Balance Sheet, often referred to as the Statement of Financial Position, will communicate information about the health of an organization at a fairly high level. The reader can see how much cash is on hand to pay bills in the near future or the total net assets that are available today. Without context this information is difficult to interpret. Nonprofits utilize the Statement of Financial Position to better communicate to their audience, whether that is their Board or even a prospective donor, by reporting their Net Assets by restrictions. The ideal Statement of Financial Position should be presented on one page. This allows the reader to easily identify the distribution of Net Assets by restriction, which is a key purpose for this report. Prior period information should always be included to provide trending statistics and allow the reader to see how your organization has changed over time. Has it grown? Has the total assets to liabilities improved? Has your organization invested in capital assets? This type of information should be clearly presented in the statement so the reader can quickly identify your organization’s financial story.

Now let’s look at a different audience – your internal report readers, otherwise known as program or department managers. The type of information they require is more granular yet must still be presented in a clear and concise fashion. The clearer the information the more meaningful the translation of the numbers will be for their purposes. How much budget remains as a percent to continue effective delivery of programs? Are personnel costs on track? Etc … Depending on the organization, managers may or may not have interest in and control over revenue information. Providing expenditure information to your managers with corresponding budget amounts and comparative data allows your team to make better decisions and therefore be more productive. One way to present expenditure and budget information is by categorizing expenditures and providing subtotals for the actual and budget. The manager can quickly determine their budget position by simply evaluating the data and forming their conclusion. The idea is to provide summary information in one page for quick reference or answers. By providing supplemental detail reports the manager can drill into variances if necessary. Financial statements should be thought of as chapters of a book, one chapter or statement does not tell the best story. Being able to provide a comprehensive report package comprised of cohesive cleanly prepared statements allows the reader to quickly read and understand the story being communicated.

Reporting Tips:
What to include in a Board Report Package:

  • Statement of Financial Position (one page with prior period amounts)
  • Statement of Revenue over Expenditures (combining by program or funding source, include ending net assets)
  • Functional expenditures: Programs, Fundraising, Management & General
  • Supporting Statements or schedule can include – Cash Flows Statements, charts and graphs, cash balances, top 10 expenditures, forecasts, financial notes or interpretation of the statements for the board

What to include in an Internal Manager Report Package:

  • Prepare all reports by Function, Department, Activity, Location, etc
  • Summary Expenditure Report – Current Period Actual, Current Period Budget, Percent Spent, Year to Date Actual, Year to Date Budget, Year to Date Percent Spent
  • Summarize Expenditure Report by Category – Personnel Expenditures, Direct Costs, Indirect Costs

More on how Beck & Company can help you with your reporting…

Increasing Accountability and Transparency through your Nonprofit Accounting Service

Trust is a precious commodity in the nonprofit sector—are you doing all you can to keep it?
Restrictions around the use of government grants continue to rise, and private foundations and corporations are asking organizations for specific measurable outcomes resulting from grant awards. Pressure is continually added by tightening federal regulations. There are talks of a possible requirement to add performance measures to the IRS Form 990, along with the chance of federal funding becoming subject to comply with OMB Circular A-133, thus requiring annual audits.

Compounded with stories of the misuse of funding grabbing headlines, the temperament of the donor community, although positive, is more cautious than in yester years. Not only is being accountable in aspects of your organization’s financial and program management an absolute necessity, but it is imperative now more than ever.

Accountability is not just the responsibility of the CFO or the Executive Director, but of all staff, your accounting services firm, board members who are involved in the financial management, fundraising, and program planning and implementation. Make sure money raised is being used for the purposes you outlined in your solicitations, and communicate it clearly and often to your donors. This can be as simple as sharing success stories in your donor newsletters or making your annual report available on your Web site, but also as complex as reporting on fulfi lling grant restrictions, program outcomes, matching requirements, and the impact or difference made by your organization. At the end of the day, however, tangible proof, such as clear tracking of donor restrictions and funds spent from the fi nance office, will underscore the organization’s accountability and transparency, and will help to build a case for continuing and future support.

Accountability also means keeping the lines of communication open with your supporters through the good and the bad. During an AFP Meet the Funders workshop, grant-makers and donors expressed the desire for communication—especially when plans go awry. “It’s not an opportunity to take the support away,” said one participant. “It is an opportunity to learn what roadblocks the program or project is facing, and figure out how we can work together to overcome it.”

It is no secret that donors and the grant-making community network and talk. Your actions and communications can reinforce their decision to give to your organization and may help them bring others to the table. On the other hand, your actions and communications, or lack thereof, can create a divide that is hard to overcome. A study published by the Public Agenda found “once an organization became tainted in [donors’] minds, they never gave to that particular organization again.”

Part of being accountable is also to have the right infrastructure in place to assist with the reporting, tracking, and communications. Annual audits are a must, and being able to give auditors, grantors, and stakeholders a clear trail to verify the accuracy of financial statements and donor intention is critical. As you look for ways to satisfy the demands of outcome measurements, be sure that your accounting system not only tracks and reports outcome measurements on financial statements, but that it can also be used to budget outcome measurements for accurate forecasting. In terms of your organization’s effectiveness, information on outcome measurements can be factored into financial data and presented to external and internal constituents, showing a powerful snapshot of your accountability and program performance with the funds you are receiving.

Likewise, keeping donor information in a comprehensive system allows for acknowledgement of donations in a timely manner, storage of communication histories, usage of donor profiling, creation of reminders for following-up, and the personalization of communications with the programs and projects that energize your giving community.

At the end of the day, it’s the people in your organization or the nonprofit accounting service firm you are using, who are dedicated to your mission, that use these tools to demonstrate the accountability, transparency, and stewardship needed to keep the organization’s integrity intact—and keep your donors and grantors contributing to your cause.

Non-profit Accounting Success Step 4

Resources and Skills Properly Leveraged to Economies of Scale

As previously mentioned in our blog, many smaller nonprofits don’t have access to a CFO or Controller. Furthermore, the requirements for someone with that level of talent might only demand 5-10 hours per month. Some nonprofits end up spreading these functions throughout the organization to either under or over qualified personnel, forcing the back-office to no longer leverage the appropriate economies of scale.

In order to justify having a full time Controller and CFO the nonprofit must be much larger. By partnering with an accounting firm to perform these functions your organization will be better positioned to access only the CFO and Controller-type skill sets you need, tailor fit specifically to your specialized needs. The third-party accounting firm can scale these functions across their business, passing on the value directly to the nonprofit.

Does your accounting need to be handled faster, cheaper and by a qualified person? Maybe it’s time to consider Beck & Company CPA’s. Contact us today for a free consultation.

Non-profit Accounting Success Step 3

When is Third-Party Accounting a Smart Move for Nonprofits?

As nonprofit organizations struggle to raise funds and are forced to operate on leaner budgets, some have found that engaging with an accounting service provide to complete certain back-office functions is a good way to keep costs down while maintaining support of their cause and/or community. Working with a service provider is not a new concept. For many years, both nonprofit and for-profit organizations have transferred projects such as accounting, finance and bookkeeping to third-party firms. Yet, a more recent trend has seen an increase in organizations partnering with third-parties to complete accounting processes. What used to be viewed as a strictly internal management function is now routinely performed by a outside CFO and accounting firm.

Working with a contracted CFO or accounting firm is much more than a preference for having someone else perform your detailed, routine tasks. It’s much more than saving money and cutting operating costs. It’s a strategic opportunity to save on overhead while increasing the amount you can spend on those you serve – something every nonprofit would find beneficial. According to analysts, nearly $4 billion will be spent on finance and accounting outsourcing this year as services spending reverts to pre-recession levels.

So, when should a nonprofit engage with an outside accounting partner? When accounting needs to be done better by qualified personnel, faster, and cheaper than the in-house staff resources can do it. Simply stated, it is vital for nonprofit organizations to have their accounting transactions processed correctly, quickly and within certain time constraints, all the time. Having an outsourced team dedicated solely to your accounting functions, rather than in-house staff that may have several duties competing for priority, increases the likelihood that your accounting will be done undistracted, and by people who are qualified to complete the transaction efficiently.

Non-profit Accounting Success Step 2

Reducing Costs with Back-Office Process Optimization (BPO)

The financial accounting outsourcing value proposition shifts with BPO. With a thorough assessment and analysis of your back-office operations and the reorganization of how processes are transacted, costs will be reduced. Additionally, service levels of your accounting functions will be increased by placing people with the appropriate level of expertise over each of your respective processes.

Working with an outside accounting partner will:

  • Significantly reduce overhead – The finance and accounting back-office is a cost center and does not generate income.
  • Optimize processes and improve workflow.
  • Allow management to spend more time and effort on your mission. 
  • Improve back-office operational efficiencies that impact your mission.
  • Re-direct Finance and Accounting expenses to pay for new programs and events.

Non-profit Accounting Success Step 1

Understanding Mission vs. Back Office

Your mission is the heart of your organization. Your focus should be on the cause you support, and your ability to evolve as needs change. However, you must at the same time manage your organization effectively.

Your organization is made up of two key areas, your mission and your back-office. Your mission is the fuel that propels your organization forward and it encompasses fundraising, community outreach, donor communication and messaging, not to mention meeting the needs of the cause and/or community you serve. While your back-office includes the stabilizing functions such as: HR, payroll, benefits, accounting, finance, grants, donation processing, regulations, IT, and tax. These supporting functions stabilize your vision and provide the resources necessary to support your mission.

Mission vs. Back-Office

Your purpose and first priority is your mission. The more time your staff and volunteers can spend on your mission the better. However the back-office supports the mission, and typically needs specialized expertise. The back-office can inhibit or enable growth, and is the primary place to look for accounting process improvements and cost reduction. The more streamlined and cost effective the process – the more time and money you can spend directly on your cause. This is where the option of using a third party comes in. Engaging with a high level accounting service provider to complete back-office processes can be a great way to reduce costs while at the same time improve both quality and efficiency.

Nonprofit executives acting as Controllers, CFOs acting as Bookkeeper, and Accountants acting as HR Managers, all create inefficiencies and risks.  All too often nonprofits are forced to hire over qualified people to handle basic needs which unnecessarily increases overhead costs.  Worse yet is asking under qualified staff to take on tasks which they are not trained to handle which increases liability and provides delayed, inadequate or inaccurate results.

Supporting Your Mission vs. Managing Processes

Many organizations do not need and/or cannot afford a full-time Chief Financial Officer (CFO) or Controller. What nonprofits often do is place the CFO/Controller responsibilities with the Director of Finance and Operations or with the most capable finance/accounting executive on staff. The problem with this approach is that the person placed in charge may not have the right skill set or experience to fulfill the role of CFO. Partner with a service provider to complete the accounting functions bridges the gap between the back-office and the mission without having to hire over or under qualified people.

4 Steps to Accounting Success

Accounting is a very broad topic, and organizations have many different options and services to complete these functions. Nonprofit organizations are constantly looking for ways to make their dollars go further and partnering with a third party that provides high level accounting and transactional services can be a great option to do just that. If you have considered working with an outside CFO or accounting firm as an option, but aren’t sure if it is right for your organization – this whitepaper will help you gain the insight you need in order to make the best decision for your organization.

Over the coming weeks, we will cover 4 steps to establish a successful accounting practices including:

Step 1: Understanding Mission vs. Back Office

Step 2: Reducing Costs with Back-Office Process Optimization

Step 3: When is Third-Party Accounting a Smart Move for Nonprofits?

Step 4: Resources and Skills Properly Leveraged to Economies of Scale

Business Tax-Time Problems Grow from Past Mistakes

Some of the biggest problems small business owners have during income tax filing season are the result of mistakes and oversights they made during the previous year.

Sloppy record-keeping, even when accounting software is used, is a big reason why owners struggle at tax time. Another problem is that owners often short-change themselves by not being sure they’re taking all the deductions they’re entitled to. That can also be the result of haphazard records, but it also may come from not knowing some tax law basics.

USE SOFTWARE TO HELP, NOT HURT

Many owners use software that’s designed to help small businesses keep their books easily. They run into problems when they don’t input their income and expense figures properly. Some businesses have not taken the time to really learn how to use a record-keeping program. They hand us a disk or thumb drive, and they’ve handed us a mess. It’s the high-tech equivalent of what accountants ruefully call shoebox or shopping bag clients, ones who show up with a chaotic pile of receipts that a CPA has to then sort through. When an accountant gets a disorganized disk or drive, it has to be straightened out before a return can be completed. The solution is to become more of an expert at using the software, or outsource accounting functions to input your numbers.

PAY ATTENTION TO WHAT YOU’RE PAYING

A common problem for business owners who use vehicles or homes for both business and personal reasons is they forget to keep track of what they spend for each. For example, an owner who gasses up his car may forget to reimburse himself for the portion of the purchase that should go toward personal use. The reverse can happen: An owner doesn’t think to take a tax deduction for the portion that should go toward the business.

Owners who use their cars partly for the business, or who have a home office, should go over all the expenses from the previous year and be sure that they don’t miss any chances for deductions. With a vehicle, insurance, gas, repairs and garage rental can all be deductible. An owner needs to determine the percentage that the vehicle was used for business and then multiply that by the expenses.

For example, if the car was used 60 percent for business, then 60 percent of deductible expenses can be listed on a tax return. It’s also possible to use the IRS’ mileage allowance to figure a deduction. With a house or apartment, there are similar rules for computing a deduction. In this case, square footage is used. Repairs, mortgage interest or rent, insurance, utilities and maintenance costs can all be deducted.

For more information, an owner should look at IRS Publication 587, Business Use of Your Home, or Publication 463, Travel, Entertainment, Gift and Car Expenses. You can find them on the IRS website, www.irs.gov.

PAY NOW OR PAY MORE LATER

If business owners are concerned about spending money during the recession, have shied away from consulting an accountant during the course of the year. Then, at tax time, their unanswered questions turn into problems. For example, if an owner didn’t ask a CPA for help in making decisions on big equipment purchases, the business could lose out on deductions designed to help small companies. The cost of a few hours with an accountant may be small in comparison to the amount the business ends up paying the government in taxes.

The solution is to get to an accountant or outsource accounting functions early, and get the books in order by a qualified professional.

The 1099 Repeal Amendment is Passed in Senate

The Senate approved an amendment on Wednesday, February 2 to repeal the expanded 1099 information reporting requirements in the health care reform law.

Two similar, but competing amendments were also introduced by Democratic and Republican lawmakers to be attached to a larger re-authorization bill for the Federal Aviation Administration. To view details about these amendments 1099 Repeal Amendments Proposed for Aviation Administration.

The two amendments mainly differed in a few words regarding the handling of administrative expenses at the Social Security Administration. To avoid adding to the budget deficit, the new amendment authorizes the director of the Office of Management and Budget to cut unnecessary unobligated spending, but exempts the Social Security Administration’s administrative expenses from being cut. There are also differences in the cost estimates of the two amendments and in how they would be offset.

The repeal of the 1099 reporting requirements enjoyed passed with an 81-to17 vote. The requirements, which were included in the Patient Protection and Affordable Care Act, would have required businesses to report to the Internal Revenue Service any purchases of goods and services over $600 a year from another business or individual. Eliminating these paperwork requirements lets small businesses focus on the critical work of growing their businesses and creating jobs.