Nonprofit Financial Management – Page 2

Nonprofit Financial Management Topics: Choosing Retirement Plans for Your Employees

As the CFO of a nonprofit organization, you may be tasked with choosing the right retirement plan for your employees. Nonprofit financial management may also take into consideration helping employees plan for their financial future through sound investment strategies that capitalize on the time of the investment to grow their nest egg.

There are many solutions available today to help people plan and prepare for retirement. Let’s take a look at the pros and cons of several solutions to help you choose the right one for your workforce.

Nonprofit Financial Management Tips: Examining Retirement Planning

According to Time magazine, 1 in 3 Americans has nothing saved for retirement. Let that sink in for a minute: fully one-third of our workforce hasn’t saved anything for their retirement years!

This is a brewing crisis that, when it finally erupts, will have ramifications throughout the workforce. All of those who are entering retirement age need food, clothing, shelter, and medical care. Without savings or a retirement plan, these people will end up spending their golden years poorer than when they were working without hope of relief.

Types of Savings Plans: Simplified Employer Plans (SEP)

SEP plans can be used by an organization of any size. Employers can contribute up to the lesser of 25% of each qualified employee’s compensation or $55,000 for 2018. These contributions are tax-deductible as a business expense.

SEP plans are simple for companies to administer. There are no formal IRS forms needed after adopting such a plan, and administrative costs are minimal. To begin a SEP Plan, you must:

Provide a written agreement to provide benefits to all eligible employees;
Offer employees specific information about the agreement;
Establish an IRA account for each employee.

The IRS has a model SEP plan document, Form 5305-SEP, Simplified Employee Pension — Individual Retirement Accounts Contribution Agreement. However, not all employers can use Form 5305-SEP, and instead, some must use a prototype document. Speak with a nonprofit financial advisor if you are interested in starting a SEP for your organization.

Simplified IRAS

Another retirement plan you can offer your organization’s employees is an IRA. A SIMPLE (Savings Incentive Matching Plan for Employees) IRA requires that organizations choose a financial institution to manage and maintain their plan. Alternatively, you can let your employees choose the financial institution they wish to manage their account, but a third party, an accredited financial institution must be part of the account management strategy.

With a simple IRA, employees can defer a portion of their income into the IRA to save for retirement. These plans also require a smaller contribution on the part of the employer. By reducing their pre-taxable income, employees may receive additional benefits too from saving in a simple IRA.

IRS form 5304-SIMPLE and its accompanying instructions can guide you through this process.

403B Plans

403B plans offer several other additional methods of saving for retirement. Employees of schools, ministers, and certain tax-exempt institutions can offer 403 plans. These plans are tax-sheltered annuities (TSAs). Employee salary contributions are made pre-tax, so there are additional tax benefits from 403B plans analogous to some 401K plans in the for-profit sector. Income is taxed when it is withdrawn from the plan. Matching programs, in which an organization matches a percent of the money paid into the 403B plan by the employer, enables employees to grow their nest eggs faster towards retirement goals.

As you can see from this very brief nonprofit financial management guide to retirement plans, there’s no one size fits all solution to help your employees plan and save for retirement. Once you’ve chosen a plan and set it up to adhere with all pertinent IRS regulations, you’ll need to have a strong internal communications plan in place to help spread the word about the new retirement programs. The more publicity you can give to your organization’s retirement benefits, the greater the buy-in will be from the employees and the participation, too. You’ll help your organization attract and retain better employees by offering a valuable benefit while simultaneously helping more people prepare for their retirement. It’s a worthy endeavor and a worthwhile goal for any nonprofit organization.

Beck & Company

At Beck & Company, we work with many nonprofits to help them improve their operations, accounting, and overall management. We are Washington DC nonprofit advisors with a tradition of creative thinking, technical expertise, and a collaborative spirit that can help your nonprofit achieve its goals. Whether you want to increase donor confidence and support through transparent accounting practices or find a partner for your annual audit, we can help. Contact us today or call 703-834-0776.

Find Me the Money: Nonprofit Financial Management and Technology Projects

Part of nonprofit financial management is managing existing resources to accomplish more work on behalf of members, donors, and the constituents you serve. When it comes to technology, it can be challenging to leverage existing resources when you’re looking to expand. Hiring a new employee? She’ll need a computer, access to software, and much more. Where are you going to find the resources?

There are several ways you can leverage existing resources or find the cash needed for vital technology upgrades. Whether you need new equipment to replace aging technology or you’re hiring and need to add hardware, these ideas can help you obtain the technology you need.

Ask Large Local Companies for Donated Equipment

Even if you prefer not to receive donated hardware from the general public, asking large, local companies to donate their old equipment may be worthwhile. Some nonprofits choose not to accept donated hardware because of issues pertaining to security, viruses, and the amount of work needed to refurbish used equipment. However, many of these concerns are mitigated with donations from large companies.

Many companies replace their existing equipment on a rotating schedule and so their donated equipment may be great compared to used equipment you can afford on your own. Because large companies have dedicated IT resources, chances are good that the machines and other equipment will be scrubbed clean of software and data before handed over to you, another plus.

If you don’t mind equipment that’s a little out of date, try forming alliances with large local companies to obtain their used equipment.

Hold a Special Donation Campaign

Often donors will give more money when they know where their money is being spent. By running a special computer equipment campaign and asking for specific donation amounts, you stand a better chance of achieving donation goals.

Consider a special email blast to your donors requesting $5 from each for new computer equipment or letting them know about a special need. Allocate donations so that they do not fall into the general donation category but are instead earmarked for a special campaign.

Ask Current Donors

In addition to a general fundraising campaign, you may wish to identify large donors from your current list of all donors and send a personal appeal to them for donations to support computer equipment campaigns. If you can tie in the need for new computers with how the equipment supports your organization’s mission, the appeal to your large donors will be stronger.

Look for Specials and Discounts

We know it sounds corny and trite: look for specials and discounts. Coupons? Really? Yes, really. They can make even the costly software more affordable.

Sign up for specials at office supply stores and websites. Comparison shop among both large retailers and small, local stores. Look for discounts on items if purchased in bulk, for example, if you buy several computers together from one vendor.

Nonprofit Financial Management Tips from Beck & Company

Where there’s a will, there’s a way, and when it comes to finding affordable computer equipment and software, nonprofits find many creative ways to provide their employees with the technology they need to get the job done.

Capital campaigns, special purchase campaigns, large donors, and even coupons and discounts can help you provide your workers with better hardware and software. Most people recognize that with the right tools, you can do so much more. That includes the right hardware and software, which can help your nonprofit serve its constituents and achieve its mission.

At Beck & Company, we work with many nonprofits to help them achieve their goals. We offer support and advice to nonprofits including nonprofit financial management, nonprofit accounting audits, and much more. Contact us today or call 703-834-0776.

Nonprofit Financial Management Resources: 10 Things You Must Know about Internal Controls

No one likes to think about internal controls, but an important component of nonprofit financial management is developing and implementing a strong set of such controls to mitigate risk and prevent fraud.

Make internal control processes easier with Beck & Company’s client accounting services. Contact Beck and Company online or by phone at (703) 834-0776 to learn how quickly you can improve your internal controls.

Nonprofit theft is shockingly common, according to the Boston Globe. Over 1,100 charities reported theft, embezzlement, or another major diversion of assets, according to an IRS report cited in the Globe article. At one nonprofit serving the homeless, the COO brazenly added funds to his own paycheck. These and other examples of nonprofit fraud and theft are unfortunately common.

Why so many problems in the nonprofit world? After all, one would think that people dedicated to serving a particular mission or vision would be scrupulously honest. Every dollar embezzled by the COO previously cited could have been spent to feed, clothe and house homeless families. So why the embezzlement?

People can be tempted to steal no matter where they work. And, unfortunately, nonprofits can be more trusting than other organizations.

The answer for good nonprofit financial management lies in having strong internal controls. Internal controls are the measures you take to ensure rigorous honestly in all your financial dealings. With good internal controls in place, you’ll have a series of checks and balances to protect financial assets.

The 10 Things Nonprofits Should Know About Internal Controls

1. Why are internal controls necessary? Internal controls are more than rules and regulations. They are guidelines for how funds are handled throughout your organization. By establishing a set of clear, unambiguous internal controls, nonprofit financial management is easier for all.
2. Assess your current internal controls and update as necessary. There’s no one-size-fits-all set of internal controls you can put in place that will answer all of your organization’s needs. Instead, assess your current internal controls and note any gaps. Compare them to the three COSO objectives (below) and see how yours measure up. Adjust as necessary.
3. Review internal controls against the three COSO objectives. There are actually five COSO objectives, but three stand out and apply directly to our discussion of internal controls. These include:
1. Risk assessment, especially risk identification and challenges.
2. Control activities, including policies and procedures as well as outsourcing risks, backups and more.
3. Monitoring, which includes both ongoing and periodic monitoring and assessment of internal controls.
4. Evaluate organization level controls. Organization or entity-level controls refer to the most basic level of controls in place to safeguard financial assets. Many organizations have internal controls in place, but are they being followed? An example of an internal control at the organizational level may be a blanket policy that all expense reimbursement requests must be accompanied by an original receipt. This may seem like a simple control, but it can prevent a great deal of fraud across the organization if the policy is carried out.
5. Determine information technology controls. Another area of potential fraud is through information technology resources. The IT department collects and maintains a great deal of valuable data at a typical nonprofit. Donor and member credit card information, for example, can be used to perpetuate fraud. Controls over who can access data are important to safeguard it.
6. Build controls around segregation of duties. It’s unhealthy to have all of the access to financial information in the hands of one or two people. Make sure your internal controls include segregation of duties. For example, the person who reconciles the bank statement isn’t the same person who deposits the money.
7. Put in place fraud prevention controls – and follow them. Fraud prevention controls include things like internal audits, a good component of any nonprofit financial management plan. Other fraud prevention controls include simple things like having someone double-count the cash, ensuring that the bank statements are reconciled promptly and similar actions. But perhaps more important than even having fraud prevention controls is actually following them. Don’t just pay lip service to fraud prevention, but make sure that fraud prevention controls are documented in writing, the staff is taught how to adhere to them, and there’s follow up and accountability to ensure compliance.
8. Document all policies and procedures. It’s easy to talk about fraud prevention and internal controls and then forget about them when you get busy. It’s harder to forget about them when you have everything documented in writing. Write down the policies and ensures the entire team, not just accounting and finance, attends training sessions to understand and follow them.
9. Recognize common procedural gaps. Be sure to look across all areas of your organization so that best practices cover both people at the top and those at the entry-level positions. It’s obvious that controls need to be in place within the finance and accounting department, but often companies forget that other workers have access to sensitive information or financial documents. Annual reviews of existing processes, external audits, and working with a nonprofit accounting audit services can help you recognize and close any gaps in your processes.
10. Address gaps immediately. There are always going to be gaps in any policy – that’s human nature. But don’t let those gaps in your policies remain open. Instead, update policies to ensure gaps are closed as soon as possible.

Need more details on implementing Internal Controls for your nonprofit? Download our whitepaper, “A Nonprofit’s Guide to Internal Controls.”
Nonprofit financial management includes strong internal controls that prevent theft, fraud, and embezzlement. With these best practices and diligent training on procedures, you’ll be in a much better position to safeguard your organization against problems.

Beck & Company

At Beck & Company, we work with many nonprofits to help them improve their internal controls. We have extensive experience and a tradition of creative thinking, technical expertise, and a collaborative spirit that can help your nonprofit achieve its goals. Whether you want to increase donor confidence and support through transparent accounting practices or find a partner for your annual audit, we can help. Contact us today or call 703-834-0776.

Is It Time for Nonprofits to Accept Cryptocurrencies Like Bitcoin for Donation and Payments?

Traditional nonprofit financial management may look askance at Bitcoin, Ethereum, LiteCoin, Dash and other cryptocurrencies, but love them or hate them, crypto is here to stay. It provides a secure alternative to traditional currency and can be tracked and monitored in a public, transparent way.

What Is Cryptocurrency?

Cryptocurrency began in 2009 with the release of a white paper that outlined Bitcoin, the very first cryptocurrency. Bitcoin is now just one of hundreds, perhaps thousands, of blockchain-based ‘coins’ that transmit value through proof of work, proof of stake, or other forms of blockchain mining.

Blockchain technology itself is more than cryptocurrency. Blockchain is a continually growing record that consists of blocks of code. Each block, once confirmed, is permanent and unalterable. It is a decentralized record in that the code that powers a blockchain is held on multiple computers worldwide. Most blockchains are public and open for verification and build-outs. One of the most famous blockchains aside from the one that powers Bitcoin is Ethereum. The Ethereum blockchain is used to build something called smart contracts, which are contracts that eliminate the need for third party verification.

If you think this is all just a passing fad, think again. While the run up of Bitcoin prices is reminiscent of other financial bubbles in the past such as the real estate or internet stock bubble, blockchain technology is now being used to test recording real estate deeds and records in Sweden, secure email communications through a company called Envilope, and enable secure, transparent records in many areas including healthcare, real estate, and more.

Cryptocurrencies and Nonprofits: Expanding Donations

Nonprofits can expand their donation avenues by accepting Bitcoin and other cryptocurrencies. To do so, you’ll need to open an account on a recognized cryptocurrency exchange. Since there is no official registration of exchanges akin to the stock exchange, you will need to do additional due diligence to find some of the better-known exchanges.

Legitimate cryptocurrency exchanges have a KYC or know your customer process in place to verify identification. Expect it to take 7 to 10 days to complete the KYC process.

Once your nonprofit is registered with an exchange, it has a wallet address. Wallet addresses are the public code, usually in the form of a QR code graphic or a long string of letters and numbers, that funds are transferred into. Once transferred, the transfer cannot be reversed. The exchange will deduct a percentage of the overall fee once the currency is in your virtual wallet. You can then exchange cryptocurrencies into dollars or other currencies and transfer that amount into your bank account.

For nonprofit financial management, be sure to keep accurate track of all financial transactions on cryptocurrency exchanges. Taxation laws and reporting laws around cryptocurrencies are constantly changing and evolving, and you may need your records handy to comply with the law when it comes time to reporting income. As of 2014, the IRS considered cryptocurrencies as property for tax purposes, but recent statements make it sound as if they are leaning towards regulating it like a security. Clear guidance is still lacking.

Using Cryptocurrency as a Marketing Tactic

Lastly, consider targeting specific individuals or groups who may wish to donate using Bitcoin. Fortunes have been made over the past decade thanks to the stratospheric rise in BTC value and other currency values. Create and build a list of cryptocurrency leaders and solicit donations through direct, personal outreach.

Millennials and Generation Y and Z individuals are all more comfortable using cryptocurrencies than their older counterparts. These young people may already own Bitcoin or other coins and wish to use them for donations. If your nonprofit accepts cryptocurrencies as donations, you can send specific promotions to this demographic and include that QR code to make donating easy and fast for them.

Accepting cryptocurrency as a donation may seem far-fetched but many nonprofits are experiencing the benefits of this new technology-facilitated money. It’s secure, irreversible from the donor’s side, and fairly easy to set up to accept. Why not give it a try?

Beck & Company

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.

Cultural Intelligence, the New Frontier in Nonprofit Financial Management

First there was intelligence quotient (IQ) then emotional intelligence. Now, there’s cultural intelligence. Nonprofit financial management success must include all three in today’s connected world to be successful.

Different Types of Intelligence

The original IQ tests or intelligence quotient was derived as a test for army soldiers in the early 20^th century. The same pioneers who brought you IQ tests developed things like the SAT test and other aptitude tests. These early data scientists believed that nearly every personal characteristic could be measured and quantified.

Peter Salovey and John D. Mayer coined the term ‘emotional intelligence’ in 1990 to describe an individual’s ability to “monitor one’s own and others’ feelings and emotions, to discriminate among them, and to use this information to guide one’s thinking and action”. David Goleman, a writer for The New York Times, popularized their work in a book released in the 1990s, and the term became common parlance or shorthand for the ability to read and utilize emotional information in conversation.

Today, add to that a new term: cultural intelligence. Cultural intelligence refers to an individual’s ability to recognize, interact with, and respond appropriately to people of other cultures.

In the world of nonprofit financial management, cultural intelligence is rapidly becoming as important as emotional intelligence. While intellectual giftedness and intelligence is widely recognized as a desirable attribute, without emotional and cultural intelligence, those with high IQs tend to be like Sheldon Cooper on the television show “The Big Bang Theory” – smart, able to do their work easily, but difficult to live, work, and interact with on a daily basis without wanting to tear your hair out.

Examples and Benefits of Cultural Intelligence

Every one of us hails from a unique culture. That culture may be white, suburban, and middle class, Jewish and upper class, or Chinese immigrant. Each culture brings with it a series of cultural norms in dress, behavior and attitude that when understood and respected, can serve as an icebreaker in the business world.

Take the example of two job candidates for a position in nonprofit financial management. Both candidates are white women who hail from middle class backgrounds. But Candidate A has traveled widely during and after her college years, spending time working on volunteer projects in Haiti, the Dominican Republic, and Thailand. Candidate B does not have that richness of cultural exposure or interaction. Which candidate is better for nonprofit financial management in an organization that interacts on a global basis?

If your staff consists primarily of people from a homogenous culture and interacts only with people of the same culture, Candidate B may be perfectly suitable. Candidate B, to be fair, may have a deep and abiding respect and admiration for other cultures, too. But Candidate A has actually lived, worked, and spent time in other cultures, immersing herself in their traditions and norms. She may more easily fit in a meeting with people from Caribbean, Central American and Asian cultures.

All people can learn to be aware of other cultures and respect their norms. Most people know, for example, that in Jewish culture, men wear yarmulkes inside the synagogue and that Amish people prefer not to have their pictures taken. Respect for each culture means wearing appropriate clothing when entering a house of worship and adhering to the ‘no picture’ rule if you happen to drive by an Amish barn raising on your next trip through Pennsylvania, Indiana, New York or Virginia Amish country.

Practical Application of Cultural Intelligence

Respect is fine and a welcome attribute. But what is the practical application of cultural intelligence?

In some instances, it creates bonds of respect between individuals. Those who demonstrate respect for other cultures, such as dressing conservatively when visiting Middle Eastern countries or not making eye contact in an Asian business meeting, may bridge the gap more easily between colleagues. This creates common ground, shared understanding, and the basis of trust for future business dealings.

Inside your nonprofit organization, you are likely to encounter people from many, diverse cultures. We live in a world where cultural identity and embracement is the norm rather than the exception; we live and work in the United States in an immigrant culture, one that is more likely to find a place for those who dress, look, or behave differently than the standard culture.

Those who possess cultural intelligence will be far better equipped to make business connections and handle themselves gracefully across all cultures. Combine that with high IQ and strong EQ, and you’ve got a winning combination for success.

Beck & Company

Nonprofit Financial Management: Segmentation for Smarter Marketing

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.

Nonprofit Financial Management Tips for Buying Software

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.

Nonprofit Financial Management and Blockchain: How Blockchain Is Impacting the Nonprofit Sector

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.

Nonprofit Financial Management: Choosing an Online Donation Processing System

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.

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.
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.
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.
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.
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.

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

Nonprofit Financial Management: An Update on Accounting Standards FASB ASU 2016-14

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:

Net assets with donor restrictions
Net assets without donor restrictions

These two categories replace the current three categories:

Unrestricted
Temporarily restricted
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:

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.