NONPROFITS’ MANY ROADS TO REVENUE GENERATION

Article by Stanford Social Innovation Review

As the boundaries between business and charity become increasingly blurred, many nonprofits are considering how to pursue their mission through revenue-generating activities rather than relying on philanthropic contributions alone. This trend toward commercialization was sparked by dwindling governmental and donor support in the 1980s and ’90s, which created mounting pressure on nonprofits to diversify their funding sources. More recently, starting in the early 2000s, new types of resource providers emerged seeking to support nonprofits that generate financially—not just social—returns. By the early 2010s, even traditional charitable foundations began pursuing impact-investment strategies. Encouraged by these opportunities, nonprofit leaders increasingly see commercialization not as a necessary evil, but as a promising way to enhance and expand their social mission.

Integrating revenue-generating activities within a nonprofit’s existing organizational model is not simple. To be effective in the long term, any shift toward commercialization must be consistent with the organization’s social mission and use its core capabilities. Yet nonprofits often struggle to find new approaches that enhance—rather than distract from—the social mission. Moreover, commercialization initiatives stretch already limited resources and often require new skills and expertise beyond the capacity of the current team. How, then, can nonprofit leaders identify a viable commercialization strategy?

Based on more than a decade of research on nonprofit organizations and social-business hybrids, including 1,200 that filed applications with Enterprising Nonprofits (ENP), a major Canadian grantmaking body, we have identified three approaches for integrating revenue generation within an organization’s social mission.4 They are the customer model, in which integration occurs through who is served; the employee model, in which integration occurs through who is hired; and the product model, in which integration occurs through what is sold. To inform the decision making of nonprofit leaders considering their first—or next—move toward commercialization, we developed a framework outlining these alternatives and an associated set of decision criteria. The core premise of our framework is that there are multiple ways in which a nonprofit can integrate revenue-generating activities with its social mission, and leaders should choose the approach, or combination of approaches, that best fits their organization’s mission, resources, and capabilities.

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How Skimping on Accounting Services Can Cost Nonprofits Thousands

Prevent Financial Ruin by Working with Accounting Professionals

Article by ​Insureon

Nonprofit directors often have big concerns about finances for their organization. Many nonprofits have to run on a barebones budget to dedicate most of their resources to the cause they serve. Unfortunately, this barebones approach can cause some nonprofits to skimp on professional services like accounting and bookkeeping in an effort save money. Here’s why that can end up costing you in the long run.

Prevent Financial Ruin by Working with Accounting Professionals

Many nonprofit directors assume their staff can handle the organization’s finances without any problems. Accounting is pretty much just plugging in numbers in a spreadsheet, right? Not exactly.

People take years of accounting classes in order to be good at their job. While software makes it easy for organizations to track the money that comes in and out of their accounts, good accounting is also about planning for risks, avoiding cash flow problems, and being prepared for financial shocks.

Furthermore, while it will cost you to hire an accountant, many times proper accounting can pay for itself by:

• Saving you time and stress.

• Preventing federal audits.

• Saving money on your tax returns.

• Helping you avoid cash-flow problems and financial mismanagement issues.

What Does Accounting Have to Do with Nonprofit D&O Liabilities?

Remember that directors and officers of a nonprofit can be sued for financial mismanagement. Say your organization runs out of cash and you aren’t able to throw your lavish annual fundraising dinner. The directors or officers of the organization can be sued if their decisions led to this oversight.

Managing business cash flow is hard work, especially at nonprofits, which often don’t have steady month-to-month sources of income. If you rely on a few major grants, donor drives, and other big-ticket fundraising events, your organization could find itself just trying to keep its head above water during lean months. The up-and-down nature of nonprofit funds means it’s crucial to have someone with experience watching over your finances.

Tips for Finding a Good Accountant for Your Nonprofit

What should you know about hiring an accountant for your nonprofit? Here are three things to keep in mind...

1. Accounting firms might do pro bono work​. While many businesses balk at donating money to nonprofits, a surprising number are willing to donate time to be involved in your project. Consider asking local accounting firms if they’d be willing to help your business. You might get turned down, but it never hurts to ask.

2. Look for accountants that have worked with nonprofits before.​ Because your tax returns are complex and quite different than those of for-profit companies, look for accountants who are familiar with ​IRS Form 990​ and other nonprofit-specific accounting issues.

3. Be careful to avoid conflicts of interest.​ Nonprofit directors might be tempted to hire friends and friends of associates who are willing to give them a discount on accounting services, but be careful to avoid any conflict of interests. Say you’ve got a board member whose sister-in-law is an accountant. Is it safe to hire her? Probably not. With your D&O liabilities, it’s best to avoid hiring anyone who has a personal or familial relationship with your board.

Cash flow forecasting is an invaluable tool in easing the financial anxiety of your nonprofit. Since nonprofit cash inflows can dramatically fluctuate throughout the year; cash flow forecasting becomes an essential element of your organization's financial health. Forecasting will allow your organization to be better equipped to manage and track your finances. Some benefits include, 

- Reliable Strategic Planning
- A Clearer Picture of Monitoring Expenses
- Creates Controls Over Spending and Receivable Collections
- Provides Alerts to Warning Signs with Real-Time Insights

If your nonprofit is struggling with cash flow or is in need of guidance, we're here to help!

Cash Flow in the Nonprofit Business Model Article

"Cash flow is simply the mix and timing of cash receipts into and cash payments out of an organization’s accounts. It is where the numbers on budget spreadsheets and financial reports translate into the reality of money changing hands. And as such, it is a very specific lens on the reality of a business model—one that takes into account not just what an organization’s revenues and expenses look like, but when they come and go." Read more