Although it is too soon to see what the 2019 numbers will be, one thing is certain: if fewer people continue donating, Not-For-Profits (NFPs) will have to adjust and prepare for a new wave of trends in 2020 and beyond, opening the door for accountants to advise and direct.
Statistics show that charitable giving by individuals in America fell 1.1-percent to $292 billion in 2018 compared with 2017, according to Giving USA. One of the reasons this occurred was because the Tax Cuts and Jobs Act (TCJA) doubled the standard deduction for families to $24,000, meaning fewer households itemized and took a deduction for charity.
Here are 4 key trends that accountants who work with NFPs can expect and use to their advantage:
1. The Consolidation of Charities
With donations decreasing, it is harder for NFPs to find the funds they once had. According to the National Center for Charitable Statistics (NCCS), more than 1.5 million nonprofit organizations are registered in the U.S. These organizations comprise a diverse range of nonprofits, including advocacy, art, labor unions, education and health; however, the number only reflects registered nonprofit organizations and the total number of nonprofit organizations operating in the U.S. is currently unknown.
With only so many charitable dollars to go around, starting up a new NFP may not be the best approach. Some like-minded charities are even considering merging and joining forces. Many charities run into donation issues due to the large number of charities, and consolidation of these non-profit organizations could become more common in 2020.
2. Colocation Drives Collaboration and Economic Development
Another possible upcoming trend with NFPs is the concept of colocation. There are more opportunities for colocation than ever before and some commercial businesses are starting to take advantage of this.
Take the Cortex Innovation Community in St. Louis as an example. The Cortex is a 200-acre hub where companies that specialize in technology and biological science research, development and commercialization reside. Located in a formerly vacant area in midtown St. Louis, the Cortex has rejuvenated an area that once seemed almost helpless.
The same could be done through NFPs. A potential trend that could be happening in the near future is seeing NFPs joining together to purchase and rehab older buildings.
This leads to cost savings and shared administrative costs, which can only be beneficial to NFPs with donations going down. It also offers a convenience for clients since odds are high that they will likely need help from multiple NFPs.
Under this scenario, the organizations will be able to engage in conversations with likeminded individuals in the shared building. With similar people with common goals under the same roof, it is natural for dialogue to break out.
The redeveloping of old buildings or deserted areas is also beneficial to the economic development of the area. It can help with community development.
NFPs can work with a number of community redevelopers to help certain properties in a geographic region. This scenario has promise and other markets are starting to do this, even with NFPs. It’s a trend that other areas have done, and new regions will continue to continue to adopt in 2020 and in later years.
3. Metrics Make for a Competitive Edge
The seemingly inevitable consolidation of charities is forcing more competition. To maintain a competitive edge, it is crucial for NFPs to develop and implement performance metrics. This will be a continuing trend with more than one million NFPs going after limited dollars.
All NFPs need to identify their metrics and communicate them with their clients, donors and board of directors. This will give them the best chance with individual and corporate donations.
4. Catering to Generational Changes
As previously mentioned, charitable donations were down in 2018 as new tax laws impacted how much individuals gave. In 2020, NFPs will need to adapt to this. In order to do this, organizations must address any generational or cultural issues they have in order to be relevant to donors as well as their dollars. There are several steps NFPs can take to do this. First, consider developing marketing materials for different generations or age groups. This includes changing branding and the look and feel of communications tools depending on which demographic is being targeted. Having a diverse and multigenerational staff and board is imperative to the organization accomplishing this goal, as well as knowing how to relate to its entire donor base.
It is also important for NFPs to be more active on social media if their activity on digital platforms, such as Facebook, LinkedIn and Twitter, is inconsistent. Also, staying up with the digital world, some NFPs might want to consider adopting new technology to make donating more convenient.
Some of these will take years to accomplish, but it is important to keep in mind that marketing to millennials and the latest generation – Generation Z – is a lot different than marketing to baby boomers. They have different interests, ways to communicate and ideas of how they want to spend their time and money.
As the donation dollars continue to dwindle for NFPs, it is likely that some will start to merge or at least start sharing buildings and/or office space. These limited dollars make it crucial for organizations to implement performance metrics and change the way they communicate to their donors, based on their age, race and location. These are trends that will likely occur for NFPs in 2020 and in the years soon to follow.