Non-profits by design do not seek to produce profits, but that does not mean that their accounting operations are straightforward. On the contrary, being a non-profit means having to keep track of multiple funds (some of which may be restricted), manage complex allocation schemes and present their budgets to a variety of stakeholders, from their own boards of directors to relevant third parties.
The U.S. Internal Revenue Service has also stepped up its scrutiny of non-profit organizations over the past decade, raising the stakes for accurate budgeting, reporting and forecasting. This renewed attention, as well as ongoing industrywide reliance on Excel sheets to process increasingly complex finances, has put non-profits under growing pressure.
How the status quo complicates existing budgeting problems for non-profits
Budgeting is still a challenge for non-profits:
- Many of them must respond to unpredictable events such as natural disasters, which can take a toll on their previously projected budgets.
- Even with a balanced budget, shortfalls could happen due to money being received and spent at different times throughout the year.
- Indeed, non-profit cash balances have generally declined since the Great Recession, while fundraising mechanisms such as pledge drives often yield mixed results.
- Accordingly, it can be tough for non-profits to adequately project their available levels of funding, due to dynamic conditions and uneven cash flows.
These difficulties would be daunting on their own. However, they are in many cases exacerbated by the use of tons of spreadsheets, on-premises financial planning applications and associated manual processes.
"Teams may be wrangling with literally hundreds of forecasts and documents."
An accounting team at a non-profit firm may find itself wrangling with literally hundreds of forecasts and documents that have to be rolled up into a single high-level view. Crunching, copying and pasting numbers in Excel is a time-consuming and error-prone ordeal that is a poor fit for this task, for several reasons:
1) It is too easy to make a mistake
Excel is a familiar application that many people have access to. So its information could be changed or entered incorrectly; a simple missing minus sign or a cutoff number could have ripple effects across the entire organization's finances. Tracking changes is also difficult.
2) It is actually a really complicated tool
Excel is just a simple spreadsheet app, right? Wrong. Learning the ins and out of Excel can take valuable time away from non-profit teams, as they try to understand its distinctive "language" of operations and formulas. Non-financial employees may become discouraged.
Manual financial processes are very error-prone.
3) Reporting is a challenge
It takes too long to set up the exact right spreadsheet for creating a report, especially as organizational requirements continue to shift. Non-profits may have to introduce even more complexity by relying on SQL writers to come up with the reports they need.
4) Visibility is limited
In addition to the bad data that spreadsheets can feed into budgets via errors, they also limit overall visibility into financial performance. Granular details can be hard to find and projections may end up in one huge and unwieldy yearly budget, which is difficult to parse.
How can cloud budgeting and forecasting software address these shortcomings?
With cash at a premium for many non-profit organizations, a cost-effective platform is a must-have, and so SaaS becomes a sensible choice. However, a cloud budgeting and forecasting solution such as Adaptive Insights goes beyond just savings by also supplying the convenience and flexibility that non-profits need to create accurate budgets and reports. It provides advanced capabilities such as:
- Mechanisms for accurately planning revenues and expenses, even in a complex organization with many different dimensions (e.g., multiple funds and programs).
- Incorporation of profits and losses and cash flow planning to support trusted and accurate financial projections.
- Efficient report creation and distribution, with reports that can be made cross-fund and cross-department and sent out via email.
- A dashboard that allows for visual analysis of financial performance, and that can be used in conjunction with reports for insight into specific transactions and overall trends.
- Flexibility to perform additional re-forecast and what-if analyses as needed.
"With Adaptive Planning, we've dramatically improved our decision making capabilities," explained George DiFlavis, CFO at the Valley Sun YMCA. "We can now make quick adjustments to branch forecasts and analyze scenarios that enable us to see the potential impact of tactical and strategic actions across the total association."
Non-profits can get even more value out of the Adaptive Suite by seeking the help of a proven implementation partner like RKL. RKL will build a long-term relationship that accounts for your particular needs and draws up a plan that will help you reach your goals. Non-profit accounting, budgeting and planning isn't easy, but it can be greatly simplified by moving on from spreadsheets and legacy software and embracing the cloud.