How Investing In Technology Could Benefit Your Nonprofit’s Financial Health
Financial health is important to every organization, but nonprofits face unique challenges due to their funding, operations, and purpose. Yet, those who focus on their financial wellness are looking ahead to ensure they can continue their critical work and improve efficiency. How can you improve your nonprofit's financial health? Consider investing in technology. With the right systems in place, you may find ways to transform operations and allocate more funds toward program-related activities. Start with the foundation of your nonprofit – financials. Is your accounting software supporting your goals? Is it giving you the data you need to make decisions? Do you struggle to access key reports? [zone_spacer spacer="lg"]
Common nonprofit financial reporting problems
- Financial reports are historic and focused on the past. Systems are unable to show accurate, current financials.[zone_spacer spacer="sm"]
- Ad-hoc reporting requests take time to build and deliver, posing a challenge for quick decisions based on current financials.[zone_spacer spacer="sm"]
- Key systems and applications struggle to - or don’t - integrate, which may lead to duplicate data entry and errors. Team members may spend too much time pulling reports from multiple systems, then gathering and structuring the data in Excel to compile presentable financials. Preparing for board meetings may be stressful.[zone_spacer spacer="sm"]
- Reporting challenges and poor internal controls prevent organizations from showing the beneficial impact of grants and donations. These limitations may negatively impact future funding.[zone_spacer spacer="sm"]
- Department or program managers create their own reports outside the financial system. Employees don’t have a clear picture of their programs or initiatives, nor the organization’s overall financials.
These reporting issues pose serious problems to your organization. How can you adjust if you can't detect problems as they happen? How can you validate community, donor, and volunteer support? How can you make the right decisions with gaps in your financials or months-old reports? How do you ensure the nonprofit is financially healthy and sustainable? In addition to reporting limitations, the not-for-profit industry is battling variability in revenue/funding, staff retention, regulation and legislation, donor engagement, rising overhead costs, and decreasing margins. Investing in modern accounting or ERP software could provide the infrastructure and information to overcome and address those challenges.
Benefits of investing in your financial infrastructure:
- Understand your nonprofit’s existing operating reserves and better position the organization for any economic downturns. Prepare to meet increased need amidst financial stressors.[zone_spacer spacer="sm"]
- Confidently report on how grants and donations are allocated back to donors. Demonstrate the outcomes of their contributions. This feedback may strengthen donor relations and increase future funding.[zone_spacer spacer="sm"]
- Access current financial reports, enabling executives and key stakeholders to make informed decisions when it matters most.[zone_spacer spacer="sm"]
- Improve operational efficiency and maintain adequate funding. Dedicate more resources toward program-related activities.[zone_spacer spacer="sm"]
- Increase financial literacy among staff. Allow your internal leaders to view financials for their programs/departments and understand how it impacts the entire organization.[zone_spacer spacer="sm"]
As you begin to think about the technological improvements you could make, the list may become lengthy and span many departments. However, it’s a worthwhile endeavor that could lead to a significant return on investment. Prioritizing technology investments to improve operational efficiency, enhance the delivery of programs and services and strengthen your financial health could mean longevity for your organization. After all, you’re in business to solve problems and deliver much-needed services to your community. Focusing on your organization’s financial health allows you to do this critical work today and well into the future.
Have questions about technology and the potential impacts on your nonprofit's financial health? Let's talk!