The Top 3 Expense Management Challenges for Non-Profits

For industry outsiders, the non-profit industry conjures up thoughts of fundraising, volunteering, and doing good in the community. And that’s all true. But like their for-profit counterparts, non-profits also operate in the real world – a world that includes competition, staffing challenges, stringent guidelines, and operating margins.

Keep reading to discover the top expense management challenges for non-profit organizations, and learn how your non-profit can transform these challenges into a competitive advantage that allows you to better fulfill your mission.  

Challenge #1: Meeting regulatory and compliance requirements

Non-profits are obligated to file balance sheets. They must also prepare reports on administrative expenses and fundraising, which are then analyzed by private groups that publicize their organizational efficiency findings. In many ways, managing a non-profit is no different than running a publicly traded company that must answer to shareholders, advisory boards, and the government. Oversights can be costly as failure to comply can put an organization’s non-profit status in jeopardy. In his recent guest post, Wrapping Up 2014 – A Review of Nonprofit Compliance, Harbor Compliance’s James Gilmer warns, “Failure to abide with these requirements can lead to a loss of good standing, revocation of 501(c)(3) status, fines, penalties, and more.”

Luckily, there’s a level of uniformity in many of these reports that allows non-profits to automate the process (which also reduces errors) with a capable expense management solution. Improved internal auditing capabilities allows organizational leaders to rest well knowing that items that may affect compliance or public perception can be addressed before they pose a larger problem.  

Challenge #2: Efficiency

Organizations in the non-profit sector have fewer paid, full-time employees – they mostly rely on contract workers and volunteers. While this arrangement can help to control costs, it’s hardly ideal for managing them. This scenario can cause late expense report submissions (which lead to inaccurate data), error-filled expense reports that slip by undertrained staff members (which lead to inaccurate data) and out-of-policy expenses (which lead to frighteningly accurate data) to occur.

Let’s face it; most non-profits don’t have the available resources to manually input expense reports, compile regulatory reports and issue financial statements whenever the need arises, though many scramble to do just that. Today, however, more non-profit organizations are investing in technology to improve efficiency from both a cost and resources standpoint. Expense management solutions can be simple to use as well, allowing staff to perform expense management roles with very little training. Mobile capabilities allow staff members to view insights and perform expense-related tasks by pressing their thumb against a smartphone screen a few times.  

Challenge #3: Aligning expenses with revenue

To a large extent, the viability of non-profit organizations depends on the prevailing economic climate and big donors, and revenue streams can fluctuate drastically throughout the year. For example, most organizations receive more grants and donations during the last quarter of the year on the back of tax exemptions and the holiday season. According to Blackbaud’s Charitable Giving Report, nearly one-fifth of overall donations in 2013 occurred in December alone.

While spikes in revenue are nice, the peak-and-valley nature presents a challenge. What might be acceptable one month (i.e. expenses tied to specific events or annual fundraising efforts) can create cash flow shortages the following month. To account for these variances, organizational leaders can use business intelligence reporting to analyze real-time costs. Using this data, leaders can alter policies, when necessary, and can also use historical data to improve forecasting accuracy.

Solving complex challenges is the mission for most non-profit organizations. By solving expense management challenges, non-profits can maximize resources and solve more challenges for the communities they serve.

Discover how your non-profit organization can do more with less. Check out How Non-Profits Can Do More Good with Enhanced Expense Management

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