As nonprofits know, managing expenses effectively is critical to staying afloat and maximizing impact within their respective communities. The COVID-19 pandemic and subsequent changes to how we work and engage with one another have permanently transformed how nonprofit organizations operate.
The paradigm shift to hybrid work along with decentralized spending patterns uncovered new challenges for nonprofits – the need to streamline the expense process and tailor expense management solutions to specific and unique needs became paramount. Compounding these challenges is a turbulent economy and the rise of inflation, demanding that nonprofits have more visibility into — and tighter control over — their bottom lines.
To meet these challenges and ensure dollars are spent effectively and within policy, there are guidelines to consider as a means to modernize the expense management process. Here are recommendations for nonprofits to maximize their budgets, give back to the bottom line and free up time for the mission-focused work that matters most.
Don’t Wait Until Month-End to Focus on Expense Control
The legacy approach to managing spend is primarily batch-based. Finance teams traditionally close their books once a month, and employees submit expenses once a month.
The problem with this approach is the lack of visibility; it will be month’s end before the team is able to see that spending is off track or over budget. A reactive versus proactive approach to managing expenses makes it difficult for the team to know exactly what their expenses were and how much additional funding might be needed for specific projects.
Do Enlist a Proactive Approach to Expense Management
Solutions that offer real-time visibility into expenses offer the benefit of knowing where budgets stand at any given time. Policy tools are available that can audit 100% of expenses automatically as they occur, shaving days off of month-end close, and giving valuable time back to both employees and finance teams.
Real-time visibility provides a way to glean actionable insights, and enables improved auditing accuracy, enhanced control, faster decision making and more time for higher-order work.
Don’t Settle for a One-Size-Fits-All Approach
Most legacy expense management solutions were built with large commercial enterprises in mind, and can lack the customization options needed to meet a nonprofit’s unique needs. The lack of configurability can lead small- to medium-sized nonprofits to try and improve operations with an array of tools, incurring multiple software and licensing fees that ultimately provide diminishing value with actual operations.
Do Leverage Digitization to Track and Report on What Matters Most
Choose an expense management solution that is configurable, and maps to existing business processes, workflows and accounting systems. Customizing an expense solution to the information that matters most, like location, grant or program, can make the entire process easier for nonprofit professionals with little extra time to spare.
With the most relevant information on hand, and no extraneous details to sort through, it’s easier to report on current program, grant, and fundraising spend with the board of directors, grantors and funders.
Don’t Think Laborious Expense Management Processes Are a ‘Necessary Evil’
Expense management tools have come a long way. With automation, configurability and real-time visibility options, expense processing can be streamlined significantly. Tedious expense processes make adherence to policy more challenging, and can take valuable time away from tasks that are critical to the organization’s mission.
Do Maximize Modern Solutions to Streamline Processes for Employees, Volunteers and Finance Teams
Consider adopting a digital expense management process that’s easy for employees to use, and eliminates the need for a lengthy reimbursement period. Modern digital systems allow employees to photograph receipts and upload them immediately, which minimizes errors and the occurrence of lost receipts.
Going digital has the added benefit of making audits easier — when auditors ask for documentation, it can easily be found without digging through boxes of paper receipts.
Don’t Wait to Update Expense Management Policies
The needs of nonprofits evolve frequently, creating some variation in what counts as a business expense. Review expense management policy at least twice a year to clarify areas of ambiguity and address any potential issues. Unclear policies will take up more of everyone’s time to figure out how to properly account for expenses and lead to potentially unwanted costs.
Do Adjust and Clarify Expense Management Policies and Processes
Giving specific examples is the best way to help employees understand what’s acceptable and what’s not. Include clear guidelines, preferred providers and suggested budgets for each expense category: business travel, accommodations, conferences, training, mileage, meals, office supplies and equipment, and so on. Be clear about what isn’t reimbursable, and what documentation is required for particular expenses.
It’s never too late to adjust expense management processes, or begin utilizing modern tools. As the economy continues to evolve, the best way to prepare your nonprofit organization for the inevitable ups and downs is to keep a close eye on the bottom line, and ensure dollars are maximized with the proper auditing tools and expense policies. Thinking ahead, nonprofits should consider seeking updated operating models to manage change effectively, be more agile, and gain vital insight on spending patterns.