Building and maintaining an effective budget is daunting no matter what industry you’re in — but financial planning for nonprofits is especially tough.
Finance professionals working in the nonprofit sector deal with unique industry challenges:
- Managing multiple stakeholders and funding sources
- Understanding compliance and reporting standards
- Creating financial processes to account for full-time, part-time, and volunteer staff.
The specific circumstances of how nonprofits operate and get funded adds a layer of complexity to their FP&A processes. When you add in more complexity multipliers, like nonprofits operating multiple locations or cost centers in different jurisdictions, nonprofit Finance teams can no longer afford to rely on spreadsheet-based financial planning.
Modern, automated FP&A software, fueled by data-driven insights, streamlines the time-consuming and error-prone processes such complexity creates. FP&A software for nonprofits empowers financial teams to focus on value-added services and help steer the organization to a healthy future rather than getting bogged down in budgeting details.
Here are three key benefits of adopting nonprofit budgeting and forecasting software.
1. Improve efficiencies & save time with formula-free budgeting
The last few years have proven that agility and efficiency are necessary to support long-term success in the midst of uncertainty and disruption. While spreadsheet-based financial planning has been the standard for a long time, there’s growing interest in FP&A software for nonprofits with the built-in business logic to easily create an accurate, dependable driver-based budget in days — if not hours.
No programming. No formulas. No links and logic to maintain. The best financial management software is totally automated and GAAP-compliant, and gets rid of the pain from errors cased by linking complex formulas and macros across spreadsheets.
Nonprofit FP&A software enables quick and simple driver-based budgeting, a process that ties resources and activities to the financials in the budgeting process, works to identify key business drivers, and creates models around them. These models link to the operating plan and can help predict how an organization would fare when faced with different variables. For nonprofits, this includes financial variables that are hard to plan around, like grants, donations, and whether funding is the same year over year, delayed, or deferred.
This level of insight and automation is crucial to ensure efficiency and sustainability, to eliminate the error-prone processes of the past and recoup valuable time for the finance team.
2. Reduce cost & minimize risk with improved scenario and personnel planning
Change is the one constant for any Finance office, whether you’re planning a simple office expansion or deciding how to act on emerging risks introduced by evolving market dynamics.
With a robust scenario planning tool in place, all key financial statements (profit & loss, balance sheet, cash flow) are dynamically linked, and all related reports can be created quickly and effortlessly. Finance (and the executive team) can immediately quantify assumptions and understand how they will affect the financial statements.
While updating numbers is easy enough in any budget, when you start modifying the structure of the model, things get ugly. Simply adding an account can cause the plan and budget to fall apart.
The detailed scenario planning analysis enabled by financial planning and analysis software empowers the finance team to create unlimited scenarios using different models, and to test the consequences of each without affecting the current budget or plan. It gives FP&A professionals the ability to quickly evaluate various what-if scenarios and stay ahead of risky situations.
FP&A software also makes planning for personnel expenses — the largest budget item at most nonprofits — possible at a granular level, providing visibility into workforce expenses from salaries to taxes to insurance, with the flexibility to account for seasonality that may require different staffing or resources. Armed with a more detailed personnel budget, finance professionals can better track performance, plan more accurately, and identify when changes are necessary to meet key organizational objectives.
3. Boost performance and make smarter decisions with data-driven insights
One factor that makes FP&A for nonprofits different is that nonprofit organizations are beholden to several stakeholders, and often manage multiple programs and funding sources simultaneously. This makes financial reporting complex, and often lengthens the time it takes to make strategic decisions.
Budgeting and planning software for nonprofits puts analytics-based, actionable reports and dashboards at every stakeholder’s fingertips. This in turn drives faster, more confident decision-making.
With just a few clicks, anyone with access to the platform can easily build financial reports to analyze, visualize, and present the information in any way they prefer. KPI analysis, data visualization, and slice-and-dice analytics enable a direct line of sight into the organization’s performance. This applies to the allocation of costs, resources, and staff across various programs and/or funds, at the high level, and to granular viewpoint by individual, group, program, or funding source.
The visibility enabled by nonprofit FP&A software fuels better strategic decisions to support both the long- and short-term goals of the organization.
Simplify & speed up your nonprofit FP&A processes
Formula-free FP&A software can provide a much needed boost to effective financial planning for nonprofits:
- Self-serve analytics promote self-sufficiency
- Variance reporting compares actuals to plan, allowing teams to course correct and reforecast regularly
- A powerful analytics engine provides drill-down visibility into the data, essential to effectively respond to opportunities and mitigate issues.
Financial planning for nonprofits doesn’t need to be cumbersome or stressful. The right tools can make all the difference. Empowering your finance team with innovative technology ensures they can focus on what matters most: helping those in need.
Centage simplifies the budgeting and forecasting process for nonprofits. Easily accommodate the unique aspects of your organization, like budgeting deferred revenue for services, budgeting payroll by individual, or allocating expenses/funding by project. Quickly generate reports for investors at whatever level of granularity they require. Book a demo today.