In a tight economy, the right tech mix helps nonprofits retain income levels, services

No one had to tell the nonprofit sector that the world economy was slipping deeper into recession. Relying largely on donors, memberships and conferences to maintain their budgets, nonprofits usually feel the pinch first and are the sector of the economy that is last to recover.

But when the task of soliciting funds and materials is at its most difficult, not-for-profit organizations become more innovative in the ways they work - including the use of advanced technologies.

"It's a case where desperation breeds innovation," said Don Kent, a former telecom executive who serves as chairman of Net Liter­acy, a community-based nonprofit digital inclusion initiative that has operated in the U.S. since 2003 and was selected by the European Union Study on Digital Inclusion as one of the 91 most promising good-practice initiatives worldwide. "Because a recession creates greater need among individuals and families, nonprofits are called on to do more at exactly the time when their donations and resources are at their least. Keeping pace in this environment means tightening belts, doing more with less, and the use of technology both to reach out to new sources of revenue and to maintain support from the ones you have."

What technologies work best depends on the type of nonprofit involved - the Internal Revenue Service counts 28 different types of tax-exempt organizations - and how they gather resources. But there is general agreement on five technologies that are driving the NFP sector today.

THE WEB

A study released this year by Target Analytics, a unit of Blackbaud Inc., shows that nonprofits received more than 10 percent of their donations from online giving last year, and notes that it is a rapidly growing venue for giving. It projects that Web sites will be the major venue for giving by 2020. The research firm also noted that the level of giving is higher online than off, and that the profiles of those who give are more attractive - better educated and younger with higher incomes.

The right Web site is critical, whether it is intended for public access through the Internet or private use on an intranet, and Target Analytics noted that Web sites should also clearly state what the organization is about and how donations are used.

Jack Deeds, chief financial officer for Search For Common Ground, a nonprofit that seeks to reduce conflict worldwide, said that the use of an intranet is mission-critical: "Our intranet site is accessed by 400 members worldwide every day, and is a primary means of sharing financial data in an organization that spans 18 countries. In the finance area, we have tried to bring financial data out into the ecosystem, combining financial and non-financial data so that non-financial people can grow to understand financial data and concepts." SFCG also makes extensive use of services such as Skype, which provides low-cost teleconferencing.

E-MAIL

No single technology has impacted organizations - both for-profit and NFP - as greatly as e-mail. Evolving out of the Massachusetts Institute of Technology in 1965, e-mail was instrumental in the creation and explosive growth of the Internet.

"E-mail is mission-critical for us," revealed Deeds. "It's how we communicate. Staff members will often use e-mail rather than walk down the hall to talk to each other, because it provides a paper trail of the discussion. What we have done here at Search is to integrate e-mail with our reports, accounting software, documents and other tasks to create our own workflow system."

"Another area that is growing in importance is e-mail marketing by nonprofits," reported Laura Messerschmitt, a senior manager for Intuit's QuickBooks. "List management and e-mail marketing services count nonprofits as their biggest customers, and we are seeing a notable increase in their use. QuickBooks has even created a new marketing center that will take QuickBooks customer data, identify donors (e.g., those who have not donated in six months) and enable direct e-mail solicitations."

"We see this not only as a growth area, but as extensions of e-mail as well," she added. "Blogging and 'tweeting' on Twitter are seeing increased use, and solicitations on cell phones using text messaging are a growth area as well."

DATABASES

For a nonprofit, the database is easily the single most important piece of software - though it needs to have a direct and effective integration with the accounting software.

"The database has to be set up in such a way that it enforces internal controls, reporting requirements and restrictions attached to donor income" said Liz Marenakos, director of core CRM solutions at Blackbaud Inc. "While off-the-shelf software meets some of these back-office requirements, as the organization grows these generic solutions will struggle to meet these requirements."

In the mid-1990s the NFP sector saw a dramatic shift in customized database applications, moving from flat file to relational databases. The emphasis shifted from proprietary platforms to more open, customizable data management engines such as Microsoft Access and SQL. At the same time, better ties were established with the accounting software to enable better processing of routine entries.

In the next few years, the emphasis will be on process-enabling for routing entries and other moves to reduce entry errors, and faster closing of books each month. NFPs want preventative measures taken throughout the month so that they do not spend a lot of time reclassifying at the end of the month.

ACCOUNTING SOFTWARE

While there are any number of accounting programs currently in use within the NFP sector - including Blackbaud, Serenic, Cougar Mountain, Sage, Microsoft Dynamics and AccuFund - the single most widely used accounting package is QuickBooks.

"We see the strongest use of our NFP version among educational and religious organizations, though nonprofits of every size use it for its strong budgeting and reporting capabilities," said Messerschmitt. "We have several additional products targeted to the NFP market, including a new Apps Center with extensions to QuickBooks designed for NFPs and our Donor Perfect database management software."

"Too many NFPs are still trying to manage their donor accounting with an Excel spreadsheet," noted Blackbaud's Marenakos. "But this doesn't provide proper support for transactions like booking contributed income transactions. In a tough economy, nonprofits need a strong accounting solution with capabilities to support business intelligence and management decisions."

"Executives of nonprofits must have the ability to easily extract data out of the accounting system and the donor management system, and then configure that data in a good generalization layer that makes the aggregate information easier to understand and use," says Marenakos. "Today, the emphasis is on building and refining the business intelligence capabilities in the NFP. Going forward, this emphasis will evolve to using the data to create on-the-fly snapshots of the nonprofit."

"The return on investment for this technology is huge," SFGC's Deeds explained. "We work in an international environment, where much of the money we spend is in undeveloped areas, but we receive donations from corporations with very specific documentation procedures."

"Technology has made it possible to reconcile the donations against our costs for programs, and to allow people with the right privileges to see this at the most granular level," he explained. "Being able to quickly and efficiently, with very little human input, capture that data in a third world country to generate the appropriate data to our donors is essential for us."

SOCIAL MEDIA

Social media are technologies that help to disseminate information through social interaction on the Internet. Virtually unknown five years ago, these media forms today include blogs, social sites like Facebook and MySpace, and business social media sites such as LinkedIn and Plaxo. And, of course, the new kid on the block, Twitter.

Though still in a relatively fledgling stage, social media is in the process of transforming the business of nonprofits. Already an estimated 44 percent of all donors use the Internet to make decisions about the organizations they donate to. Now the process involves individuals engaging other individuals in their causes.

"Fundraising has always relied on viral marketing techniques - engaging your donors to solicit other donors," said Net Literacy's Kent. "But the social media are driving this to a different level. Facebook, for example, allowed us to create an advocacy group within their system where potential supporters and donors are able to see us easily. More to the point, each of these people can promote our cause on their personal Facebook page and solicit their friends to also become supporters. This is 21st century viral marketing for nonprofits."

Dave McClure is the president of Kent Associates, in Alexandria, Va., an independent testing laboratory and evaluation service.

(c) 2009 Accounting Today and SourceMedia, Inc. All Rights Reserved.

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