Is your nonprofit struggling with managing federal funding? I am here to let you know that you are not alone. Juggling different funding sources can be challenging, confusing, and go sideways quick! Managing government grants and contracts truly is an art and there is something unique about managing these types of funding that you may not necessarily experience in the same manner if you were dealing with the private sector.
There are a number of nonprofits where the majority of their funding comes from contracting with the government and falling out of compliance with these grants and contracts typically carry heavy consequences. Ensuring that you know the best practices and that you have a process for managing these funds is your best defense.
Let’s Start Here
I recently read that “Nonprofits often find that managing their government grants and contracts along with their reporting requirements is enormously time-consuming.”...
Relatable...I worked at a nonprofit that was managing at least 45 to 50 government contracts. Each contract came with its own set of reporting requirements, which added an additional layer when it came to managing the day-to-day finances of my organization. Let’s not mention that, while in the weeds, I still needed to make time for strategic financial planning. Queue the nonprofit “apocalyptic” four horsemen, Difficulty, Weariness, Exasperation, and Chaos!
This is the reason why there needs to be greater investment in fiscal management. And while you're not typically judged by your financial bottom line, having a good team, good financial management practices, and being able to show that you are financially fit, is what truly plays a role in being able to secure more funding; as well as being able to increase your impact and deliver on your mission. You may not be concerned with profitability necessarily, however, it is something to consider as it relates to being able to actually deliver on said programs and services based on the funding that you receive.
So How Do You Do It?
Thinking about all of the nuances, all the things that have to be done in order to ensure that you submit your invoices on time and your financial reporting on time is mind-blowing. What is the process to get you from point A to point B? From closing out the prior month’s books and gathering all of the information and the detail that you need to then supply it to your agency contacts. What can you automate or where in the process can you implement either a tool or resource to help do the work for you?
I want to provide you with three recommendations on how you can manage these grants and contracts. This is by no means the “end all be all”, this is difficult and something you need to have a process for. Someone has to be accountable for it and that someone is you, and you can do this!
Recommendation One: Invest in quality accounting software and in training your team
What I find is that while organizations may actually have invested in software, what they haven't invested in, is learning how to use that software and how to tailor that software to their organization.
Typical scenario and one I’ve gotten caught in myself - You have this accounting software, you're spending money on this software, whether monthly or annually, but yet you're still doing so many things outside of the software. Spreadsheets, schedules, to-do lists, reminders, etc. that you technically can automate and access within your accounting system. Ever found yourself paying for software, but continuing to manually write down a to-do list or next steps? You have a robust software system but you’re not working *from it*. Why?
I think it boils down to not knowing how to effectively use the system, simply doing what works at that moment because it’s what you’ve always done and because learning will take more time out of your day, time that you just don’t feel you have.
That's why I say to you, make the time, you’ve got to invest, make it a priority, we always make time for the things that are important to us right? Make learning a priority. Even if you take just 15 mins a day either by yourself or with your team, to learn something new about your software system and implement it. In the long run, investing the time will pay off in efficiency for you, your team, and your organization.
Recommendation Two: Create and execute a solid standard tracking process
This is something that I suggest managing outside of your software system because this really isn’t necessarily financing or accounting-related.
When I say create and execute a solid tracking process, I simply mean having a handle on the nuances of each individual contract or grant, i.e., what are the reporting requirements, what are the allowable expenses, what percentage of administrative costs are you allowed, what the cost allocation is, etc.
Most times you can use an Excel sheet for this and that works. But ensure that you create triggers for different items, such as upcoming deadlines and time estimates.
I know in the accounting space, we talk a lot about automation, however, I’m a firm believer that especially or at least in the nonprofit space, that there is a time and a place for automation.
There are simply some things that cannot be automated. It requires a human being. In that case, you need to make sure that you have a standard process and identify the responsible parties. It gets confusing - who's doing what. Every month we all know what has to be done and what needs to be delivered, and yet, we may end up in this chaos of who worked on this contract this past month, how much time was allocated, etc.
In my experience, especially if you have contract reimbursements, you usually have to invoice for these contracts and provide a lot of documentation to support what you're invoicing for. If you're not aware of the deadlines and how long it's going to take you, those deadlines will creep up on you, leaving you scrambling or missing those deadlines entirely. Many organizations/agencies will then make you wait until the next billing cycle, which means another 30 days. And if you're heavily dependent on government funds, you already know that there are many times when you have a bit of a lag in your cash flow and you need your funding on time.
Having a standard process in place that you follow each month, makes the end of the month that much smoother. Because the other piece of this is if you are not clear and concise in showing what you spent the money on, then you’re going to run into hiccups with receiving the funding.
When it comes time to deliver on said financial report or invoice, let’s avoid any unnecessary questions or concerns; create a standard process, execute it, and be clear on how these agencies operate and their expectations of you.
Recommendation Three: Streamline contract management.
In some organizations, contract management is an actual role within itself. That should give you an idea of how time-consuming it can be. Someone has to be responsible for knowing what's happening with each contract, and what will be required of you from an organizational and a fiscal standpoint to ensure you are compliant with managing that contract.
What I’ve found is that while the tracking piece can be managed outside of your software, if set up properly and accurately, when it comes to the requirements from a reporting standpoint, your accounting software can greatly assist.
For example, you have one contract and the billing is due monthly, but within that billing, there are certain guidelines. Financial reporting has to be submitted along with the invoice, such as timesheets and expense reports to support that invoice. This is where you can lean on your accounting software.
I personally have strong feelings around the cost and time that is required to comply with these different reporting requirements from various contracts and grants. And as contracts change, things that might’ve been okay one day or one year, are suddenly not okay the next. It’s important to keep a pulse on what’s happening at these agencies so you can remain in right relationship with them.
In the spirit of transparency, as someone who’s worked internally as a controller and now working in an outsource capacity and partnering with nonprofits to help them manage and streamline their day-to-day accounting operations, as regulations change, as we bring on more clients, especially those who are heavily operating with funds from government contracts, we too begin to run into hiccups and issues with being able to deliver timely reports; again, you are not alone.
Let’s Tie It All Together
The ultimate goal friends, to not get caught up in the weeds. It all boils down to, investing in quality accounting software and in training your team so that they can strategically support your day-to-day fiscal operations. Make time for those 15 mins to learn how to effectively use your software, work *from* your software, not for it.
Create and execute a solid standard tracking process. Ensure that you have a standard process and that it is followed each month. Avoid arousing questions and concerns from the funding agencies and be crystal clear in showing how and where the funding went to.
And lastly, if you’re dealing in multiple contracts and grants, dealing with multiple moving pieces, and you don't have a contract manager, then perhaps hiring a contract manager is something to consider; streamline your contract management.
If you’re reading this and you're simply mind blown, you’re juggling different funding streams, and you do not have a handle on your finances, or perhaps you don’t have any kind of fiscal operations in place, then I invite you to book a discovery call or send me a message. Let’s talk about your next steps.