Understanding the concept of the “business model” for your nonprofit has become a more integral component to maintaining organization sustainability within the nonprofit sector. Nonprofit leaders, grant makers and stakeholders want more insight behind the business and financial foundation of how a nonprofit organization is able to deliver according to their mission drive initiatives.
When discussing the nonprofit business model, often times it will include topics such as, cost to deliver services, mix of sources of funding, and key drives of financial results. Discussions around the financial stability and sustainability, more times than not, focus on the overall health of the balance sheet and operating results of a nonprofit. While each of these are essential components to have a better understanding of an organization’s finances and business model, these types of conversations can lose sight of a critical part of any business—the day-to-day operations. For example, the way a nonprofit organization does business can have a major impact on cash flow.
Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a nonprofit’s ability to create value for shareholders in determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow. Managing cash flow is primarily consisted of questions: when will we pay our staff; when is this bill due and when will this grant payment come in? While there are variety of nonprofit business models, each one has a particular bearing on these types of questions.
A nonprofit business model has two main components: what kinds of programs and services nonprofits deliver, and how they are funded. Each of these components have implications on organizational cash flow that should be understood in order to have effective financial planning.
Below are a few helpful strategies to use when addressing cash flow issues:
1) Understand where funding is coming from: Each type of income stream can have certain implications and challenges for cash flow, so if a business model is built primarily around one type of funding, you will need to understand and plan for those implications and challenges.
2) How to balance cash going in and out: In order to meet operating cash needs in the absence of adequate cash reserves, a nonprofit can turn to a line of credit to meet the temporary imbalance between available cash and expenses due. Credit lines, when used responsibility, can be a useful and vital tool for cash flow management.
3) How to manage cash across your organization: While it may be impossible to ensure that cash is coming into the organization exactly on time and on target to keep things on autopilot, it is possible to plan for those times when it isn’t, and make decisions to be sure that bills and staff are paid on time.
Being informed, strategic, and collaborative in cash flow management can help to ensure that a nonprofit’s long-term strategy isn’t hindered by avoidable and short-term obstacles.
For more information on this topic, please reference this article: https://www.propelnonprofits.org/resources/managing-cash-flow/
Last year, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) 2018-08, which clarifies the accounting guidelines for contributions received and contributions made—focusing on the grants and contracts awarded by the government and other entities to nonprofit organizations.
You can now listen to the webinar on-demand to learn how to determine if an asset received should be accounting as a contribution or as revenue from customers.
This on-demand webinar will explore how to:
This webinar is part of UST’s efforts to educate the nonprofit sector. For more learning opportunities, tips and legal updates just for nonprofits, sign up for our monthly e-News today!
Giving in the U.S. in 2020 will be different in many ways than previously—mainly because of campaigns, economic conditions, and tax law implications. Don’t miss this deep dive into the trends and forecasts of giving in the United States presented by Melissa S. Brown, Principal of Melissa S. Brown & Associates.
This on-demand webinar shares insights into how tracking these trends can help identify future opportunities as well as insights into:
For access to more learning opportunities, tips and legal updates just for nonprofits, sign up for our monthly eNews today!
What is an executive director? An executive director is “responsible for overseeing the administration, the program and the strategic plan of a nonprofit organization. Other key duties may include fundraising, marketing, community outreach, and this position reports directly to the board of directors.” As we all know, an executive director is required to wear many hats and needs to wear them all equally. Leadership styles have a huge impact on how well an executive director can carry out their duties—committed executive directors can set themselves apart when they’re able to evaluate their own leadership styles and seek input from others.
In this role, you’re tasked with the responsibility of both leadership and management and each duty requires a distinct skill level in order to be fulfilled properly. Leaders offer visionary qualities that can provide an overall scope to the organization’s specific problems and future planning. They tend to be a charismatic communicator and have the ability to motivate the team in anticipation of achieving future goals for the organization. Managers are very hands on—they make sure things get done. Not only do they manage people but they also manage property and assets helping to fulfill the goals that management and the board of directors have set before them. They are the busy bees of the organization, who control, organize and monitor day-to-day activities of the operation. Think of an executive director of a nonprofit organization as being the “jack of all trades”.
Along with managing and overseeing everyday tasks, an executive director is responsible for monitoring the finances for an organization—they oversee the development and on-going maintenance of the business model. This ensures the organization produces exceptional mission impact and sustains financial health. To make sure this is done successfully, the executive director has to be aware of the necessary business concepts.
Here are a few key business principles that could help guide financial leadership practice for your nonprofit:
1) Remain high-level and thoughtful with your board.
2) Make sure you’re managing your risks the right way.
3) Be sure to plan for your nonprofit’s reserves.
Executive directors learn that leading a nonprofit requires a constant balancing of current needs, external demands, and planning for the future. Financial leadership is crucial to the role and can not be fully delegated. Certain principles can help executive directors become accustom to the demands of the changing environment and maintain the balance needed for the organization.
Thousands of nonprofits have registered with their states in order to legally solicit donations… do you know what state requirements extend to your organization?
Presented by Affinity Fundraising Registration and hosted by Maia Lee, President of Relations, this on-demand webinar explains the essentials of fundraising registration and what you must do to ensure that you’re registered before filing your next Form 990. With over a decade in nonprofit marketing and development experience, Maia understands the challenges nonprofits face in fulfilling their missions with limited resources and is committed to educating nonprofits about charitable solicitation registration requirements.
You’ll learn crucial details needed to raise funds legally in any state with key information surrounding possible exemptions and how you may be subject to fines and penalties.
Watch the webinar recording today!
Want access to more learning opportunities, tips and legal updates just for nonprofits, sign up for our monthly eNews today!
This educational webinar recording outlines some of the top employee benefits trends shaping the sector this year and presents practical takeaways to inform strategy around:
For access to more learning opportunities, tips and legal updates just for nonprofits, sign up for our monthly eNews today!
Are you familiar with the Accounting Standards Update (ASU) 2016-14 issued by FASB? It’s a standard created to offer solutions to simplify and improve how a nonprofit organization is able to classify its net assets, financial statements, liquidity, financial performance, and cash flows. Now, that organizations have begun to apply this new standard, they are encountering implementation issues that were not anticipated.
When organizations are gathering and preparing their financial information, they’re being faced with making difficult decisions on how to best present this information. For example, an analysis of expenses by function and natural classifications can be presented in multiple ways however, what is the most efficient and most beneficial method to do so?
Tammy Ricciardello states “Our advice on the presentation? Keep it simple. Yes, the analysis of expenses by function and nature should show the natural expenses of the entity by program and supporting activities, but this doesn’t mean that every type of expense should be presented on its own line. A straightforward approach will prevent the presentation from becoming overly complex and unwieldy.”
It’s important to remain focused on the information that is most useful and make sure that the one reading your financial statements can clearly understand the costs of each activity and where that activity is being allocated to. Remember, keep it simple.
To learn more about the best practices for implementing ASU 2016-14 functional expenses be sure to read the full article here.
Article provided by Tammy Ricciardella, CPA, Technical Director at BDO.
With holidays on the horizon, this is the time for holiday shopping, family gatherings and ringing in the New Year. With so much on our plates, time can get away from us—causing us to miss important deadlines. As a 501 (c)(3) organization, November is the deadline month to exercise your state unemployment tax exemption for 2019. This means time is running out.
Unlike for-profit organizations, 501(c)(3) nonprofits have the unique opportunity – as allowed by Federal law – to opt-out of the state unemployment tax system and instead only reimburse the state, if and when they have an actual unemployment claim. It can be a savings opportunity for many nonprofits who have lower claims than what they pay in state unemployment taxes—which are often driven up by for-profit organizations and other companies that go out of business, as well as state fund deficits and improper payments made in error.
UST helps nonprofits to better manage their cash flow through proper claims administration and various funding options. With access to e-Filing capabilities, state-specific claims advice and a plethora of on-demand HR services, UST participants are able to streamline operations and reduce back-office paperwork burdens.
Last year alone, UST helped program participants save $26.2 million in unemployment claims costs. That’s millions of dollars more for the nonprofit sector and the communities they serve.
More than 2,200 of your nonprofit peers are already exercising their unique tax alternative with UST. In a time of such uncertainty and ongoing legal changes, shouldn’t you investigate whether UST can help your organization safeguard valuable time and funding?
Submit your FREE Cost Analysis Formno later than November 15th in order to meet the state deadline for 2019 enrollment – which for most states is December 1st. Unfortunately, if a nonprofit misses the state deadline, they have to wait until the following year to exercise their tax exemption and join the UST program.
For a limited time, UST opens up registration to 501(c)(3) nonprofits interested in learning about accreditation and its benefits for your organization.
UST, a program dedicated to providing nonprofits with dedicated HR support and educational tools, presents an exclusive 60-minute webinar that offers an overview of the major phases of the accreditation process and highlights the benefits of becoming accredited—including enhancing revenue opportunities.
Join UST and Jennifer Flowers, Founder & CEO of Accreditation Guru, Inc., to better understand the fundamental organizational requirements necessary for accreditation, key participants to include throughout the process and how to avoid the common pitfalls of accreditation preparation.
This educational webinar will teach attendees about:
If you’re a 501(c)(3) nonprofit executive with 10 or more full time employees, register for the February 13th webinar before space runs out!
UST is giving 532 nonprofits $3,869,249 in cash back for their ability to reduce their anticpiated unemployment claims within the year.
UST, a program dedicated to providing nonprofits with workforce solutions that help reduce costs so that they can focus more on their missions, announces that it will be dispersing $3,869,249.80 in cash back to more than 532 of their program participants. After accruing all of their claims savings, audited state returns and cash back throughout the last year, UST members will have $30.1 million filtered back into their nonprofits’ pockets.
UST aims to provide 501(c)(3) nonprofits with the latest HR training, outplacement resources and unemployment claims management tools they need to stay compliant with the state and federal laws, while also helping to reduce paperwork burdens.
One of UST’s most popular programs, UST Trust, helps reimbursing employers build a reserve—protecting their money on the front end—so they don’t experience the steep ups and downs in their cash flow due to unexpected unemployment claims. Unlike their for-profit counterparts, UST Trust participants can receive cash back through UST when their organization is able to reduce their unemployment claims and still maintain a healthy reserve balance for future claims.
“The $3.8 million we are returning to UST participants can offer their organizations the flexibility they need to execute additional mission-driven initiatives,” said Donna Groh, Executive Director of UST. “Here at UST, we are pleased to be able to continue returning funds to our members and further supporting the communities in which they serve.”
These refunds are just part of how UST serves its mission of “Providing nonprofits with workforce solutions that reduce costs and strengthen their missions.”
To learn more about the UST program for 501(c)(3) employers, visit www.ChooseUST.org. If you’re a reimbursing or tax-rated nonprofit, and looking for innovative ways to save money, fill out a free Unemployment Cost Analysis form.
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UST maintains a secure site. This means that information we obtain from you in the process of enrolling is protected and cannot be viewed by others. Information about your agency is provided to our various service providers once you enroll in UST for the purpose of providing you with the best possible service. Your information will never be sold or rented to other entities that are not affiliated with UST. Agencies that are actively enrolled in UST are listed for review by other agencies, UST’s sponsors and potential participants, but no information specific to your agency can be reviewed by anyone not affiliated with UST and not otherwise engaged in providing services to you except as required by law or valid legal process.
Your use of this site and the provision of basic information constitute your consent for UST to use the information supplied.
UST may collect generic information about overall website traffic, and use other analytical information and tools to help us improve our website and provide the best possible information and service. As you browse UST’s website, cookies may also be placed on your computer so that we can better understand what information our visitors are most interested in, and to help direct you to other relevant information. These cookies do not collect personal information such as your name, email, postal address or phone number. To opt out of some of these cookies, click here. If you are a Twitter user, and prefer not to have Twitter ad content tailored to you, learn more here.
Further, our website may contain links to other sites. Anytime you connect to another website, their respective privacy policy will apply and UST is not responsible for the privacy practices of others.
This Privacy Policy and the Terms of Use for our site is subject to change.
