As smart nonprofit accounting leaders and advisors prepare for 2016, I wanted to take the time to share some trends that I believe will have the biggest impact on nonprofit accounting in 2016.
A Focus on Growth vs. Sustainability
In our recent Nonprofit Finance & Accounting Study, we found that more than 70 percent of nonprofit accounting professionals say they expect their organizations to grow in the next three years. This shift will have major impacts on strategic planning, budgeting, and decision-making at nonprofits.
When organizational leaders make the strategic decision to grow, it affects all aspects of the organization â from programs to personnel, and even the technology infrastructure. In 2016, progressive nonprofit accountants will take the lead to help determine how the organization wants to grow and make sure they are set up to support that growth.
One interesting growth strategy that is becoming increasingly common is the number of nonprofits that are consolidating with other nonprofits that have similar missions and serve like demographics. This move not only stimulates growth, but it also facilitates the pooling of monies and other resources.
Increase in For-Profit Partnerships
As nonprofits are looking for new and alternative revenue streams to support their growth strategy, we will see an increase in partnerships with for-profit entities. Partnering with for-profits can be a win-win. Nonprofits benefit from the additional funds and access to resources they wouldn't have otherwise. For-profit companies gain tax incentives, and their brand benefits from being associated with a worthy social cause.
An area where this has seen great success is in the nonprofit housing sector where for-profits can invest in tax credits to help fund nonprofits. This gives capital to the nonprofits to build affordable housing and helps offset costs to for-profits.
Another program that may be more broadly explored by nonprofits is the Pay for Success program, where investors front money to a nonprofit organization for a particular initiative and are repaid by the US government if the initiative is deemed a success.
Collaboration Will be Key
One area where most organizations can look to improve is the collaboration between departments, specifically between fundraising and accounting. Collaboration between departments will be essential in 2016 to help organizations get beyond day-to-day, tactical thinking into a more strategic frame of mind to ensure growth and stability for years.
Often, these two groups are siloed, working toward a different set of priorities and using different terminology. I challenge accounting leaders to take the first step. Include the fundraising leadership in your strategic planning and budgeting meetings. It can have a positive impact on the direction of the organization and ensure a more unified message is communicated to board members and other stakeholders.
Nonprofit Accounting Workforce Will Start Transforming
According to a recent Wolters Kluwer CCH Preparedness Survey, three-quarters of AICPA members will be eligible to retire by 2020. The nonprofit accounting workforce will not be immune to this anticipated turnover. If anything, we might see more of an impact on the smaller, leaner finance teams become more common at nonprofits.
As seasoned individuals retire and teams are pared down, it is imperative to have solid succession plans in place, particularly for high-level finance team members. Most of the knowledge is probably stored in the brains of your senior accounting leaders who have been with the organization for 15 to 20-plus years. To safeguard smooth transitions, plans, processes, procedures, and internal controls should be established, well-documented, and stored somewhere easily accessible to new team members.
2016 will be a crucial time for many organizations to solidify their growth and personnel strategies. Nonprofits that can find the right balance of collaboration, growth, and personnel are going to be well-positioned for success now and in the future.