How to Communicate Financial Information to the Board |
To properly manage and oversee a nonprofit organization, the board needs to receive timely and accurate financial information. Since every organization and every board is different, knowing the makeup of the board will provide insight into what is the best approach to providing financial information. Although not everyone on the board will have the financial expertise to decipher detailed financial reports, all board members need to have an understanding of the organization's financial situation to enable them to make informed decisions. The key is understanding what information will be most useful and how detailed it should be.
Determining What is Essential While some board members might want only limited financial information, others will want much more detailed information. To strike the right balance, it is important you ask for input from board members. There should be an agreed upon format, which can include budgeted amounts, prior year amounts and current year activity. Presenting total revenues and program expenses over a selected period of time, for example 5 years, might also be beneficial for analysis purposes. Providing information in graphic format (pie charts, bar charts or other visuals) can also make complex financial information easier to understand. Key Financial Ratios Depending on the wishes of the board, financial ratios could also be a component of the monthly or quarterly reports. For example, the current ratio (current assets/current liabilities) is a liquidity ratio which is one indicator of the organization's ability to pay its obligation on time. A ratio of 1:1 or more indicates that, at the measurement date, the organization has enough cash and other assets that can be converted to cash in the next 12 months to pay the obligations due in the next 12 months. Activity ratios can be used to see how total expenses in various categories (program services, management, general, and fundraising) compare to total support and revenue for the period. Tracking these and other ratios over time can highlight potential problem areas which may need to be addressed. Focusing on the Big Picture (the Mission of the Organization) Although detailed financial information, including the organization's financial statements, should always be available to board members, it is important that the board remains focused on the big picture. Using summarized financial information to help board members understand how the organization's financial operations fit together to achieve the organization's mission helps Board members tie everything together. It also may invite discussions on key items including major sources of revenue, needed capital investments, and reserves available for long-term sustainability. This discussion is beneficial for planning long-term viability of the organization. We Are Here to Help Communicating financial information that is both accurate and understandable allows board members to engage in meaningful discussions and make informed financial decisions. Please contact us if you need assistance in developing useful financial reports for your nonprofit organization.
 Author: Chuck Krueger, CPAContact: 920.684.2547 or ckrueger@hawkinsashcpas.com
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Filing Location for Form 990-N Is Changing
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Beginning February 29, 2016, the IRS will host the Form 990-N filing. Previously The Urban Institute was the host site for submitting this form. Note that all Form 990-N filers who file after February 28, 2016, must register before completing the Form 990-N. This is a one-time registration (and it includes filers previously registered with The Urban Institute).
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| Making Journal Entries to Accounts Receivable and Accounts Payable |
In order to complete your year-end activities, your accountant may propose that you record journal entries in QuickBooks. When making journal entries in QuickBooks, you need to know which account receives the debit and which account receives the credit side of the transaction. Detailed instructions: - Choose Company > Make General Journal Entries.
- In the Make General Journal Entries window, change the Date field to the date provided by your accountant.
- The Entry No. field is optional.
- Enter General Journal Entry details - distribution lines:
- In the Account column, enter the first account in your transaction. If you are using an accounts receivable or accounts payable account, the first account in the General Journal transaction should be the accounts receivable or accounts payable account.
- In the Debit or Credit columns, enter the debit or credit amount for the account you selected in the previous step.
- Enter the memo provided by your accountant in the Memo column. This memo will appear on reports.
- Enter or select the customer (for accounts receivable) or vendor (for accounts payable) - This is required.
- In the Account column, enter the next account in your transaction.
5. Click Save & Close to save the journal entry and close the window, or click Save & New to save the journal entry and open a blank general journal entry window. NOTE: You cannot have multiple customers and/or vendors in a single journal entry. If you have multiple accounts receivable or accounts payable balances to write off, each balance must be a separate general journal entry. If you have old accounts receivable or accounts payable in your aging reports, contact your accountant to determine the correct journal entry to eliminate them.
 Author: Debbie Denny, Certified QuickBooks ProAdvisor
Contact: 920.337.4558 or ddenny@hawkinsashcpas.com
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| A Look at Donor Retention |
A recent report suggests that retaining donors remains challenging for many organizations. The report examines the 2013 - 2014 fundraising results of 8,025 U.S. nonprofit organizations - most of them small to midsize organizations - averaging $833,475 in annual giving. Among the findings:
- The median donor retention rate in 2014 was 43% (meaning only 43% of 2013 donors made repeat gifts to participating nonprofits in 2014)
- Year over year, there was a 3% net loss in donors (3.615 million new and previously lapsed donors compared to 3.713 million lapsed donors)
Overall, gift dollars grew by $173 million. However, for every $100 gained in 2014, $95 was lost through attrition (i.e., reduced gifts and lapsed donors). For purposes of the analysis, funds raised include cash gifts, pledge payments, recurring gift payments, gifts of marketable securities, and the gift portion of special event income.
Keep Them Giving
Raising money from new donors is important. But turning those donors into repeat donors is also critical to the long-term success of an organization's fundraising efforts.
Typically, an organization spends more money to attract a new donor than to encourage an existing donor to give again. As a result, the positive financial impact of improving donor retention rates can be significant over time.
Strategies To Consider
Organizations that strive to build ongoing relationships with their donors are more likely to be rewarded with continued support. The suggestions that follow may prove helpful.
- Say thank you. Acknowledging each gift the organization receives with a personalized communication - and doing so promptly - gets the donor relationship off to a good start. In addition to sending written acknowledgments, organizations might consider phoning at least some of their donors to thank them for their contributions.
- Engage and inform. Opportunities to interact with donors and let them know about the organization's work and upcoming events have proliferated. Whether it's through social media, e-mail, traditional mailings, or a combination, organizations should have a plan to keep their name in front of donors and enhance engagement - without being viewed as intrusive.
- Watch timing. Along the same line, organizations should be cautious not to solicit contributions from past donors too often. Instead of motivating donors to give more, asking for money too frequently could have the opposite effect and only serve to alienate them.
- Encourage regular giving. Having a monthly giving program in place that interested donors can sign up for voluntarily helps avoid this problem. To help get the word out, an organization should highlight its giving program at every opportunity.
- Connect with younger adults. They may not be able to make big cash contributions now, but the millennials are a large generation with significant potential as a future funding source. Establishing a connection with them now can be a smart long-term strategy.
All In
Organizations that view fundraising in a positive light, as an opportunity to promote and support their mission, are likely to have more success than those that see fundraising as a drain on their time and resources. When mission and values come first, donor relationship building becomes a shared responsibility, involving everyone from executives and board members to staff and volunteers.
Organizations should identify a clear message they want to convey to donors about their mission and values. Taking steps to ensure that everyone involved in donor communications understands and is on board with that message can avoid any confusion in the minds of donors that might make them hesitant to commit more money to the organization.
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Sales and Use Tax: Thresholds for Nonprofit Occasional Sales Exemption Increased
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Wisconsin legislation increases the thresholds for the sales and use tax exemption for occasional sales made by nonprofit organizations. Beginning with sales made in 2017, occasional sales made by a nonprofit organization will be generally exempt if the sales occur no more than 75 days (currently, 20 days) during the year or the receipts from such sales do not exceed $50,000 (currently, $25,000). In addition, admissions to a nonprofit organization's entertainment event will be exempt if the total amount paid for the performance or paid to reimburse the expenses associated with the entertainment is no more than $10,000 (currently, $500).
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| Make Giving Easy |
The smartphone is one of the most commonly owned devices in America, which makes it an attractive fundraising tool. There are many mobile fundraising solutions available to nonprofits such as mobile websites, text-to-donate services and fundraising apps.
- A mobile website is a version of your HTML website that is easier to navigate from a small screen and offers you the most customizable approach to accepting donations via a mobile device. Donors would go to your mobile website and make donations via credit or debit card. As a caution, creating a customized mobile platform may become too expensive and time consuming as you would need to add software to track donations and manage the donations in-house.
- Text-to-donate services work by having a donor text a keyword to a number, such as "Donate" to 55555. The cell phone carrier adds the donation to the donor's phone bill and remits it to the text-to-donate service, which in turn remits it to the nonprofit after deducting processing fees. A text-to-donate service is easy to set up and is convenient for the donor because it doesn't usually require credit card information to be entered. Most services have tracking software and reports that can be integrated into the organization's controls.
- Fundraising apps work similar to the text-to-donate services but come with an interface that donors can use to track their donations. Some apps encourage donors by helping them make lifestyle changes, such as giving up a cup of coffee a day to donate the savings or running to donate $1 per mile ran. The apps can be customized with your logo and can have different campaigns and fundraising goals listed.
Organizations looking to connect with younger donors and make it quick and easy for them to donate should look into these mobile fundraising solutions.
 Author: Joe Nurmi, CPA
Contact: 507.252.6673 or jnurmi@hawkinsashcpas.com
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| ABLE, Inc. Builds New Facility to Meet Current Demands |
ABLE, Inc., is a nonprofit organization that provides residential care to those with developmental disabilities within the eastern Minnesota county of Houston. ABLE, Inc., which stands for "A Brighter Living Experience," was founded 35 years ago by parents who sought an alternative to sending their loved loves with disabilities to state institutions. Beginning with one group home, the organization now provides services to more than 110 individuals through its two intermediate care facilities, 15 single-family homes, community-based programs and teaching and recreation centers.
In addition to celebrating 35 years of service, last fall the organization held a groundbreaking ceremony for a new $2.4 million teaching and recreation center in Caledonia, MN.
Gail Meyer, Executive Director for ABLE, Inc. commented, "We are extremely excited to begin this project as ABLE celebrates 35 years of service. It is going to allow us to better fulfill our mission of providing A Brighter Living Experience for those with developmental disabilities."
Slated to be operational in June, the new center will replace the organization's current center, which is overcrowded and not handicapped-accessible. The center will serve as a training site for ABLE employees and the central office for the organizations Caledonia operations. To learn more about ABLE, Inc., visit www.able-inc.org |
60 Years and Counting: Tell Us How We're Doing
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This August, our firm is celebrating 60 years of business. We've achieved this success thanks to our clients that have trusted us along the way. We would like to know what you think of us. Throughout this year, we are using client feedback to promote employees, improve our performance, recognize clients and enhance communications. We'd love to include your thoughts and quotes. Please use the link below to submit your feedback.
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