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It’s no secret that non-profits are typically operating on limited budgets since they frequently rely on donors to fund their various programs and services. In fact, 66.3 percent of non-profits have a budget of less than $1 million. For this reason alone, many non-profit businesses are cognizant of their spend and try to eliminate as many overhead costs as possible to ensure that a high percentage of donations are put toward core programs and high demand services. This is where effective spend management software comes into play.

For non-profits, it’s vital to success that spend visibility is in place so donations can be utilized effectively. A comprehensive trail of spend is not only desired for better results, but required by law. Donors want to know where their money is going, regulatory committees have policies in place to ensure various degrees of compliance and leadership wants a comprehensive view of budgets. Let’s dive into these top three reasons for spend visibility in the non-profit space:

Ensure regulatory compliance and donor spending transparency

Nearly every business deals with some form of government regulation or other compliance standards, and non-profits are no exception. non-profit businesses often face 501(c)(3) IRS code rules along with other regulations from state governments. In order to ensure compliance with these standards, reports are submitted and all donations must be accounted for. Spend management software solutions allow non-profits visibility from the moment a donation is collected to when it is allocated in a specific fund and eventually used. This information not only provides proof of compliance and effective use of donor funds, but also encourages repeat donations since the business has demonstrated that there are controls in place and donations will go to the proper programs.

Real-time budget and spend visibility

Sixty-nine percent of the population donates to non-profit or charitable organizations. That’s a lot of money coming in and out and a lot of donors who want to know where their donation is spent. Procurement software provides not only the non-profits and regulatory bodies with visibility, but also gives funders information on exactly how donations are being spent. This helps build trust and foster long-term relationships with those who give. Also, since non-profits have such tight budgets, real-time visibility and remote access improves the overall management of funds — for example, if a percentage of a donation is allocated to a different fund due to an increased demand for that service. Through the use of spend management software, employees would be able to access the system from any location and not only view the shift, but also approve the distribution.

Optimization of funds through valuable insights

Many non-profit businesses have multiple programs that operate on donations and grants. For example, the United Way has seven different core programs that cover everything from education to relationship building. Each program has a different budget. Spend management solutions help non-profits effectively allocate donations and create realistic budgets for each individual program. These systems also provide valuable insights into budgets in order to help optimize funds. In the case of United Way, if the education fund only used half its allocated budget in the month of May, but the relationship building program was strapped for donations, then executives could look to redistribute funding to create the most effective balance for their non-profit.

Non-profit organizations face a variety of challenges that traditional businesses never deal with. From limited budgets to relying on donations and grants for funding, spend visibility is key for success. Luckily, spend management solutions can ease concern by upholding regulations, optimizing funding and providing real-time access to budgets.

Stanton Jandrell, CEO of Fraxion

Last modified on Monday, 24 June 2019
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