Don’t let the name fool you. “Nonprofit” does not mean “no money.” In truth, more than 1.5 million total nonprofits pay the salaries of one in 10 Americans while contributing more to the national GDP than arts and entertainment, construction, transportation, utilities and several other industries. (Find a host of general nonprofit stats here.)
Every day, nonprofits deal with a myriad of complex rules and regulations regarding how they can obtain, spend and report their funding. Kim Moyer, senior director of communications and public relations for the YWCA – Oklahoma City branch says most nonprofits can boil financial management down to three challenges.
1. Tight Budgets
“We’re dealing with many different categories when it comes to costs,” says Moyer. Some of these categories are obvious, like administration and overhead, but others are tied directly to the unique mission of each nonprofit. “We may need construction paper and craft supplies for children, then turn around and need to purchase a specialized piece of medical equipment for adults,” says Moyer. “We also contract with highly skilled professionals, and in the case of our mission of caring for victimized women, we never close our doors.” Every nonprofit has unique budgetary needs, including for some, middle-of-the-night expenses. Tools must be in place to keep operations and services running smoothly while keeping expenditures in line.
2. High Accountability
“Each individual in our organization needs the ability to spend appropriately for his or her unique area. They need accountability, but in a way that is specific to them,” says Moyer. This truth isn’t uncommon among nonprofits, notes Moyer. “Nonprofits are fulfilling a mission while constantly dealing with limited resources and overseeing a large group of people performing varied jobs.”
Nonprofits often get by on limited means when it comes to functions like administration. Many times, the need to spend money arises when managers or accountants – those that typically approve expenditures – aren’t readily available. Systems that give team members immediately available funds while maintaining strict controls are key.
3. Aligning Expenditures with Revenue
For branches of the YWCA, funding comes from many sources, including government agencies and established philanthropic organizations. This means multiple fiscal years are in play. Furthermore, many grants and donations come with specific restrictions attached. The money can only be used for certain expenses. “You’ve got all these employees running around, each operating under a different system of restrictions,” says Moyer. It’s vital to make sure people retain the ability to spend as needed, but also operate within specific parameters. “Anything that streamlines this process can be a valuable tool,” says Moyer.
Many nonprofits try to keep operating expenses to about a third of the total budget in order to get better ratings from watch groups. Often, technology and other basic tools become the first to be cut. Instead, nonprofits should look for opportunities to invest in appropriate tools and systems that help operations run effectively and efficiently. Movements like The Overhead Myth share this mindset. After all, a nonprofit is only as good as the impact it makes in the community. And, with the right tools, many lives can be changed.
PEX gives nonprofit employees and volunteers the ability to spend appropriately while providing nonprofit administrators the control needed to remain compliant with regulations. Cut administrative costs and increase efficiency and reporting accuracy with PEX. Learn more by requesting a demo of our platform.