Giddy laughter pours from the mouths of Jacqueline Tiso and Kent Hollrah as two miniature horses greet them on a snowy February day at Green Chimneys Farm. Moments like these are what make the pair enamored with their careers as accounting software consultants.
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Tiso’s company, JMT Consulting Group, specializes in accounting and fundraising software written for nonprofits such as Green Chimneys, which utilizes those horses and other animals to teach emotionally disturbed children about patience and relationship building.
This particular farm is located in Brewster, N.Y., right down the road from Tiso’s main office, but Green Chimneys is a 60-year-old organization operating roughly two dozen programs in New York and Connecticut, just one of which has 20 funding sources with four fiscal years all requiring reports about how the company allocated their particular resources—functionality most simple accounting packages don’t provide out of the box.
Employees use Sage’s MIP Fund Accounting and Fundraising 50 products to keep track of complicated financial information, and JMT Consulting provides some extra support with staff members who know how to speak the language nonprofits do, as many of them came either from nonprofits, nonprofit software vendors or competitive resellers.
JMT teams with its customers’ CPA firms, other consultants and trusted advisors in hopes of developing long-term relationships and the consultancy plans to expand its services to provide help around operational issues.
Tiso ran her company from her dining room for nine years, starting in 1991. Today she serves more than 1,000 customers of all sizes—from $500,000 companies to $400 million ones, employees 28 people in seven offices and continues to grow revenue, reporting $4.1 million for 2007 and projecting $4.7 million for 2008. In 2007, JMT earned status as part of Sage’s Million Dollar Club for exceeding $1 million in sales of Sage products and in January was named to Sage’s Chairman’s Club whose members are the top-selling partners in North America.
In November, Tiso hired Hollrah to serve as president. Hollrah knows a thing or two about nonprofit software, having previously served as MIP’s CEO before it was sold to Best Software (what is now Sage Software), growing the company from $4.5 million to $11 million and then working as senior vice president and general manager of Best Software’s Nonprofit-Government Division. He left for the public sector as COO of Periscope software in 2004, but longed to return to the nonprofit world.
“We had a mission statement at MIP, ‘We help people that do good things do them even better.’ It’s rewarding to be able to look around here and know we’re contributing to the good of society. People want to feel like what they do matters. That’s why I came back,” Hollrah says.
Some Restrictions Apply
Most nonprofits, regardless of their size, concentrate so hard on fulfilling their missions that they struggle with tracking the business side of their organization and they need management assistance, Hollrah explains.
One of their biggest headaches is staying on top of restricted funds, those earmarked only for certain programs or items within a program at the request of individual donors.
Donations to The Citadel Foundation at The Citadel military college in Charleston, S.C., go to more than 500 unique funds, including academic scholarships, faculty support, athletic facilities, individual academic schools, program funds and other expenses not covered by tuition or fees, such as building maintenance.
Thomas E. Walker Jr., The Citadel Foundation’s director of accounting, uses Blackbaud’s The Financial Edge accounting system and The Raiser’s Edge fundraising management tools to report back to each of these donors and keep track of their giving history over the decades.
“People are still looking for a semblance of control to make sure their money is going for certain things,” Walker says. “We have our annual funding, which is unrestricted money, but we have to be very conscious of the cost of fundraising vs. what we’re getting back because a lot are small gifts, but that’s a feeder for a major gifts program.”
For example, an alumnus who donated in his 20s, 30s and 40s hits age 50 and wants to give back to the school and set up a scholarship, say, for engineers. “Each shareholder gets his or her unique PNL (sheet), you also pass through money for the university athletic foundation and alumni association. In the old school of accounting, some organizations used to have 20 to 30 different checking accounts, which made it a nightmare,” Walker says. “(Blackbaud) allows me to track four different organizations sharing the same database, but segments them.”
The software also provides controls to ensure the foundation is spending the money in the right place and reporting it to the right person when that person wants the report.
Aside from donations, nonprofits receive a few other revenue streams, including grants, fees for service and selling goods. But grants alone can have different reporting requirements depending on whether the money is coming from an individual, a community foundation or the government.
Keeping on top of this grows increasingly complicated for organizations that rely on a combination of funding types.
Jay Odell, vice president of product management for Blackbaud, provides the following example:
A local literacy organization receives a $500,000 donation from a wealthy local resident, a $500,000 grant from a community foundation and an agreement with the government to pay part of the fees to have a program in three cities. That organization must build its budget to be able to report to all three donors with three different types of restrictions at three different times of the year.
Nonprofits endure quite a bit of manual work pulling financial data into Excel and trying to figure out what’s reimbursable, though some grants allow them to get reimbursed for part of their overhead costs, like electricity, Odell says.
Most grants will allow commingling of funds as long as they have a system to see how much cash is on hand from all of the different sources, almost like having separate bank statements, which is especially important when it comes to federal monies, says Holly Scheuble, director of product management for Kintera’s nonprofit accounting products.
What’s not in the checkbook is equally important, however. Nonprofit companies concern themselves a lot more than for-profit businesses do with the money they are owed and owe, known as encumbrances. Products like Blackbaud’s The Financial Edge and Cougar Mountain’s FUND Suite contain encumbrance features to help set aside funds for future expenditures.
In a for-profit environment, when someone creates a purchase order, no accounting entries are made until an invoice is created, The Citadel Foundation’s Walker explains.
“With nonprofit (software) like The Financial Edge, I have a phantom accounting system that sits to the side and shows me actual expenses vs. encumbered, that I’m on the hook for X dollars,” he says. “It protects you (from) what your expected exposure is so you can get a better handle on your budget. If you get a government grant, you have to live by the rules of the grant, you can’t overspend.”
The bigger the organization is, the more it has to track and the more users it has who need access to the accounting system—important things to keep in mind when selecting a software vendor. VARs like Tiso, who was a Sage-only shop from 1998 to 2005, took on Microsoft Dynamics Navision-based Serenic Navigator as a result of larger global nonprofits seeking a Microsoft platform and multicurrency capabilities, although Sage has since added that feature to MIP Fund Accounting.
Linda O’Neal, manager at Shawnee, Okla.-based Finley & Cook, added Serenic to her toolbox, which previously included American FundWare and now also contains AccuFund and MIP.
“Serenic Navigator brought the high functionality of the corporate world into the nonprofit world, which is really needed for things like inventory and a strong billing system that larger companies need,” O’Neal says. “Now we have grant management, where before we did it through a strong general ledger.”
Serenic’s AwardVision provides the ability to track awards within the accounting package. Staff grant writers may submit 50 applications and only be successful with 25, O’Neal explains.
“Before, it was hard to tell which kinds of grants they were successful at, and it was all in one person’s brain. Now all the work is there (in Serenic), even the contact people. And if it’s successful, it all moves to the general ledger. You can see all the possible funding sources and how many potential funds/grants you can have.”
Can QuickBooks do that?
But are all these bells and whistles really necessary?