Study Finds Finance Departments Have it Tough
Managing an association’s finances can be a complicated job, as a recent study shows. How can associations stay on top of all the complexities, compliance issues, and potential staff turnover that can often characterize the job?
An association’s finance department has a heavy task. Not only is there revenue flooding in from different channels—membership dues, meeting registration fees, publication royalties, and more—but because of an association’s nonprofit status, there are conditions placed on each of these revenue streams.
Abila recently released its 2016 Nonprofit Finance Study, in which 31 percent of association respondents identified that managing the complexity of multiple revenue sources was their biggest hurdle when it came to managing the finances at their organizations. And it’s not just small financial departments—who perhaps feel burdened by the immensity and intricacy of the task—responding in this way. The study actually suggests that the larger the financial department, the greater the concern over managing the complexities.
Compliance with rules and regulations is another stumbling block for associations. And it’s understandable, since they can have huge ramifications. For instance, the overtime rule has the potential to change the way salaried employees making less than $47,476 annually are paid come December 1 if ongoing endeavors to reform it don’t pan out.
What’s interesting is that the study found that respondents are apprehensive about complying with new rules and regulations, even if they like the new regs.
“When it comes to rules and regulations, many nonprofit finance professionals—even those who support the rules and regulations—dread the implementation and effect on their organization,” the study said. “About three-in-four worry that new changes might increase costs for their organization. Only one-in-five believes that regulations do more good than harm.”
Another interesting piece was concern over staff turnover. In fact, 46 percent of respondents identified that they would be somewhat or completely unprepared if an important finance person left the association suddenly.
In light of these findings, I reached out to Rick Cohen, director of communications and operations at the National Council of Nonprofits, and asked him to share some of his thoughts on how finance departments can mitigate the stress and anxiety that they face.
Ask if the revenue source is appropriate for your organization. “If there are reporting requirements that would create new expenses in terms of new systems or too much additional staff time to comply, it may be in that organization’s best interest to decline the revenue,” Cohen says. “Another option is to work with whatever entity is providing the revenue, explain the current systems, and see if any flexibility in their requirements can be negotiated. You never know what can be accomplished unless you ask!”
Consider if the bark is perhaps worse than the bite. “Get a good understanding of what the changes mean before diving into changing any internal processes or systems,” Cohen says. “State associations often provide trainings on changes, like the recent overtime rule, and can be a good source of information about the real-world effects of a change.”
Cohen also recommends getting involved with a strong network. “Hearing what your peers are doing is helpful in two big ways,” Cohen says. “It can provide comfort in that you aren’t alone, and seeing what others are doing can help you double-check the changes you are making and avoid missing some nuance.”
Staff Member Turnover
Think about hiring a virtual financial service or hiring another staff member—or even overlapping job responsibilities. Cohen suggests investing in a virtual bookkeeping or financial service, saying that they help mitigate any potential transition issues by filling the role at a similar cost as having dedicated finance staff. They also help by keeping up the best practices and developments in the field, especially if your organization doesn’t have the bandwidth to keep up with them itself.
“For groups fortunate enough to have finance departments, rather than just a finance person, some overlap in responsibilities is a good idea,” Cohen says. “Duplication is bad, but some overlap provides both a good ongoing ‘check and balance’ to avoid potential fraud and it provides a way to have multiple people familiar with key systems, which helps avoid too much of a loss of institutional knowledge in case someone leaves.”
What sorts of processes does your association have in place to manage the complexity, compliance, and financial department turnover? Please share in the comments below.