For financial software and services company Blackbaud, nonprofits are a way of life. The sector, marked by more than 1.5 million organizations registered across the United States, according to the National Center for Charitable Statistics, runs the gamut from public charities to religious organizations to private foundations. And though the donors may be different and the causes served differ, the needs are the same: reliable information flow, via technology, that is mindful of (usually) limited budgets. PYMNTS caught up with Michael Blanton, of the company's product marketing division, to find out what nonprofits need to boost operational efficiencies and cash flows.
PYMNTS: We're sure you get this question often, but what is it about accounting and finance management in the nonprofit sector that is different from businesses not in that space?
MB: The accounting functions are not necessarily that different from for-profit from an administrative standpoint. But there is the fact that for nonprofits the needs are more nuanced. Nonprofits have to be extremely transparent, as they have a wider variety of stakeholders. And they also have a wide variety of people who may be looking at them, ranging from grant providers to donors to charities.
The revenue and earnings profile is different, too. With a for-profit company, when it comes to revenues, you can pretty much do what you want. But that is not the case with nonprofits, as, for example, with grants, there may be unique funding stipulations attached to what they bring.
PYMNTS: Nonprofits may not always have an overflow of cash and resources to invest in the latest technologies to manage their finances, but high-tech tools can help them better manage their cash flow. How does Blackbaud remedy this catch-22?
MB: There’s the understanding that there is a return on investment in technology, and with a tool like NXT [Blackbaud’s Financial Edge NXT accounting management software], there is understanding of the value overall and the financial value that software can bring. The key for technology, and for costs, especially for a company in the nonprofit sector, is the fact that software itself is scalable. And it allows some functions to be automated. The fact that it is subscription-based helps on the costs side.
PYMNTS: What can you tell us about the inroads you are making into the educational space, and why is that attractive? How do your recent acquisitions, such as the $190 million buy of Smart Tuition, complement the existing business model, and what are your current expansion plans into the educational arena?
MB: With the acquisitions we made, we found there were needs in the educational space, and especially for schools, to tell their stories. The need is there for enterprise suites in this industry and for schools to get the [students'] families involved, especially at the K–12 level.
PYMNTS: Financial Edge NXT is a second in the line of nonprofit software. How do the two (including the first offering) play off each other?
MB: With NXT, we’ve been able to piggyback and bring value to existing customers, with a base of 5,500 clients in place across a broad range of industries. These are small nonprofits still that have less than $1 million, and they’ve traditionally been using QuickBooks, or they’ve been a family office.
PYMNTS: What other industries can we expect to see the company branch into?
MB: There are a number of greenfield opportunities, with some verticals that are less penetrated than others in accounting software and also fundraising. These are core competencies for us, but there is room to grow. In the government or municipal space, we can focus there, and there is a little investment required today. There are requirements, to use an example, where services need to be reported, such as with utilities, for example. There are also countries in Europe or in Canada where fundraising is becoming more common even through governments.
The challenges we face are typically the cost for nonprofits in various subsectors in the adoption cycle to push against the status quo or, when funding is tight, with the adjustments that might come with making a switch.