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Nonprofits Struggle To Embrace Treasury Innovation

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Facebook is expanding its services for the nonprofit sector. The social media platform now allows its nonprofit users to include a Donate button on their pages, meaning anyone using Facebook can pay that company with the fundraising tool.

Reports Wednesday (Nov. 18) said that while Facebook has had this service for several years, it has only just now revamped the payment tool in an effort to fuel unplanned contributions to these businesses. It’s currently running in beta for a few dozen nonprofits, but Facebook said it hopes to expand the service to others next year.

Some analysts are looking at the tool as a signal of new trends in business finance. And while reports said Facebook’s funding button may soon expand to for-profit firms, meaning it would compete with the likes of Kickstarter, the nonprofit sector is likely to see a different path than other businesses when it comes to cash flow management.

[bctt tweet=”Nonprofits will see a different path when it comes to cash flow management”]

New research has recently emerged that examines some of the money management needs and challenges unique to nonprofits.

Earlier this month, AccuFund published its 2015-2016 Nonprofit Accounting Insights & Analytics Survey; just one day later, Abila released its own findings from its Nonprofit Finance & Accounting Study. Both uncover new insight into the financial needs of this industry that have been brought to light from Facebook’s updated service.

According to AccuFund, the majority of nonprofit organizations feel they do not have enough automated services when it comes to their financial reporting tasks, with nearly three-quarters (73 percent) reporting that they spend upwards of five hours every week manually working with financial data.

Part of this struggle may be due to a lack of resources. A whopping 95 percent said that they have fewer than five accounting staff members, and that “the reporting bottleneck can’t be solved by manual intervention,” according to researchers.

AccuFund also found that nonprofit organizations are not sufficiently taking advantage of more advanced technologies that can help them manage their cash flow.

The survey found that 60 percent of nonprofits agreed that the existing financial software in use at their firms cannot store or analyze non-financial performance data, for example. More than half (55 percent) said their financial software platforms aren’t customizable. Just slightly less report that their software tools don’t provide visual, graphical analysis of their financial data.

Abila similarly found struggles experienced by nonprofits with their accounting processes today.

Overall, analysts concluded that “interruptions are common,” with nonprofit accounting officials reporting that their most common challenge is being interrupted by other departments. Reporting challenges were also commonly cited.

While researchers did find evidence that nonprofits, especially larger ones, are embracing cloud technology, accountants and treasurers at these companies are spending the majority of their time planning and preparing reports and presentations when they would instead prefer to dedicate their time to strategic planning.

The trends and conclusions from both research reports could have implications for any company struggling to increase efficiency in their accounting departments. But with nonprofits so dependent upon donations, their cash flow can be less predictable, adding an extra strain on financial departments.

According to Abila director of product marketing and the co-author of the study Erika McNichol, the analysis suggests greater need for collaboration within nonprofits.

“Finance and accounting at a nonprofit organization has many different layers of complexity and nuance not often found in the for-profit world,” she said in a statement.

“There appears to be a missed opportunity or missed connection between the finance and fundraising departments,” McNichol added. “Closer collaboration between the two departments will likely increase finance’s strategic involvement in the organization, and help develop a clearer vision of how, when, and where dollars are used to fulfill the mission.”

It has yet to be seen whether Facebook’s Donate button for nonprofits will have a tangible effect on nonprofit cash flow. But with researchers finding that nonprofits are not quickly enough adopting sophisticated finance tools, and are struggling to streamline accounting procedures, a financial service through a platform as well-known as Facebook may draw further attention to the money management needs of this sector.

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