Easy Office Blog

Capacity building is front and center in my mind, after just attending the Alliance for Nonprofit Management conference (solid organization by the way.)  There are 100 definitions of capacity building and a fair bit of discussion around what it exactly is.  Strategic planning, executive coaching, financial training, and program evaluation all typically fall under the capacity building umbrella.

During the conference, we hosted a discussion on "Financial Capacity Building - the Pieces of the Puzzle."  Historically funders and organizations that seek to help non-profits have focused training efforts on how to do accounting.  We believe that capacity building efforts should be focused on how to use accounting, not do accounting.  Financial capacity building has 3 stool legs- a provider to do the work, an ED who can use the info, and a Board / CFO / Treasurer / Consultant who can monitor the process.

Can you imagine the Maryland Association of Bricklayers hosting 1/2 day Finance 101 workshops teaching folks how to use Quickbooks, teaching them the nuances of cost accounting, explaining debits and credits and then releasing them to go do all the work?  Instead, realistically, they would teach them how to use financial information to determine their pricing, monitor cash flow, and budget for the future.  They would teach them how to use the information and suggest to them they they hire a bookkeeper or accountant to do the work.

Paul Light's 5-page article on the Four Futures facing the non-profit sector is worth a read.  http://tiny.cc/d06xa  On the heels of my post about "Small is Beautiful" this article highlights the challenges small organizations face.  He talks about all the buzzwords of collaboration, efficiency, and scale.  Whether you agree with his assessment or not of the potential four futures for the sector, his article is one more piece of evidence that the need for flexibility and unique collaborative business models - like ours - are continuing to gain traction.

We are seeing mergers among our client base and a continued push to find efficiencies in the face of funding cuts.  I believe this is making the sector stronger and much more focused.

American's tend to be optimists and I'm excited to see how our sector steps up and responds collectively to the challenges all around.  We have a great future ahead of us.

Of the 1.1 million non-profits in the US, 90+% have an annual budget of under $1M.  A very high percentage of those have an annual budget of under $100,000.  There is frequent talk of the need for non-profits to merge.  The conventional wisdom goes that there are too many small non-profits, performing uncoordinated redundant tasks.  Conventional wisdom also states that because they are small, they can never attain the scale to run efficiently, i.e. the small folks spend too much on administrative costs.

While much of this is true, I have a different philosophy.  I feel that one of the key roles that non-profits play in society is as niche-fillers.  Societies major institutions are governments, educational institutions, corporations, and religious institutions.  I believe that non-profits, in part, exist to fill the cracks between these major building blocks.  In essence, non-profits pick up where others fail.  If you agree that this is a primary role of non-profits, then small is beautiful.  A smaller, more nimble, organization can more readily fill those cracks in society.

As to mergers or shared cooperatives, the primary issue tends to be around people.  Who is going to lead the merger?  What is the new name going to be?  Who will be the Executive Director and who will be the Assistant?  As to cooperatives, like the hen baking bread, everyone wants the benefits but no one wants to organize them.  This is part of the reason why we created Easy Office.  We can deliver the scale, access to technology, and expertise that no single organization can reasonably afford on their own.  We enable the non-profit sector to stay relatively small and nimble.  And our shared service approach allows the service to be affordable and accessible for even the smallest of non-profits. 

Cash is king.  Make sure to take the time to monitor your cash flow.  In these times it is especially important to stay on top of your finances monthly, if not weekly.  Don’t let cash shortages sneak up on you.

Closing the books.  It can be a really helpful discipline to “close the books” once they are reconciled for a period, for example at the end of the month.  After a period is closed, most accounting software, including Quickbooks, can be set up to require a password or provide users with an alert before editing ‘closed’ transactions.  This may help prevent inadvertent changes to your past which can throw off reconciliations, financial statements and more.  Just the simple act of closing your books regularly can help keep them nice and clean.

Wlecome to the Easy Office blog, your center for tips and trends on non-profit finance, accounting, and bookkeeping.  We'll keep you up to date on capacity building trends, changes to IRS 990 laws, and more.