Accounting Challenges in Not-For-Profit Organizations
The primary objective of a Not-For-Profit organization is to achieve a mission beneficial to the public. Therefore, Not-For-Profits are guided by a higher standard of accountability and transparency than For-Profit organizations. When it comes to spending public funds, each expenditure must be carefully approved, accounted for and reported.
Most receipts are earmarked for a specific campaign, event or project. Funders expect a thorough accounting of how and where these funds have been spent. Since these events may last a day, a month or several years, the ERP software must include a project management module and accommodate a segmented chart of accounts.
Perhaps the most important component of a Not-For-Profit ERP system is the ability to maintain and report on organizational budgets. Actual to Budget reporting must be available on demand at virtually every level right up to a consolidated view for the entire organization.
Expenditure authorization takes on added importance in a Not-For-Profit organization. This demands that approval workflows be implemented to control the purchasing function. Workflows ensure that:
- Requisitions are created only by individuals with that authority
- Individuals can only requisition purchases for departments to which they have authority
- Approvers are alerted to any requisitions made by departments or projects within their jurisdiction
- Requisitions are restricted to projects that have available remaining funds
- A complete log of the approval process for each requisition is maintained for audit purposes
Stringent reporting guidelines must be adhered to in order to maintain the special privileges that come with the Not-For-Profit or Charitable status. In Canada, these would include monthly or quarterly submissions to various federal and provincial government ministries. The ERP software must be able to generate these submissions automatically without the need for significant manual data manipulation.
Payroll and Human Resource (HR) Management
Staffing is a key component of any Not-For-Profit simply because it is one of the largest, if not the largest expense of the organization. For government reporting purposes, it is often necessary to track hours worked by each job classification on each project. An integrated HR application will add the following benefits:
- Manage all your employee-related information and processes in a single solution
- Make stronger decisions faster with improved access to workforce analytics
- Ensure government compliance to avoid company risk in meeting federal and provincial rules, regulations, and reporting requirements
- Allow employees to access information and complete vacation and other training requests over the web using Employee Self Service(ESS)
- Closely monitor employee records and personnel actions, including recruitment, HR compliance, benefits administration, and absence management
Cash Flow Management
Cash flow is a challenge for many Not-For-Profit organizations. Not-For-Profits not only need to produce financial statements based on Generally Accepted Accounting Principles (GAAP) for external purposes but also need to generate cash flow statements for internal usage. The amount of cash inflows and outflows directly affects the organization’s programs as well as he board’s ability to manage it effectively.