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PEAK Grantmaking

Why Grantmakers Need a Purpose-Built Financial Management System

Sponsored by Blackbaud Foundation Solutions

Now, more than ever, foundations need to provide a clear view of their entire giving workflow. Having a holistic view of your financial process – in addition to your grantmaking process – is an essential to being accountable to your numerous stakeholders. And being able to provide them all with timely, actionable reports is critical to demonstrating fiscal responsibility as well as making sound, strategic decisions for your organization.

Consider the benefits of using a foundation accounting system that is designed from the ground up to meet the unique needs of social good organizations like yours. While grantmaking technology plays a central role in helping every foundation achieve its mission, managing the grant workflow is only one piece of what your team must do. As with any organization that manages cash inflows and outflows, you must track those expenditures, build budgets, and report your financial position to your key stakeholders.

While commercial accounting systems may be able to maintain separate revenue and expense accounts, they typically commingle balance sheet accounts, which is not ideal when an organization has a variety of funds with individual donor restrictions. Profitability is the key metric that these systems are designed for – to support the accounting requirements of “for profit” entities. In the nonprofit world, the emphasis is on accountability. Are we being good stewards of the resources entrusted to us, and can we provide proof of that stewardship to key stakeholders like our donors and the IRS? The best accounting systems are designed and “purpose-built” from the ground up to answer these questions.

What does this mean in practice? First, there are terminology differences. Revenue in the for-profit world that commercial accounting systems are architected for equates to donations and funds in our world. Cash outflows equate to grants, projects, and programs. And foundations and grantmaking organizations are subject to both restrictions regarding the disbursements of money in each fund, and to strict reporting requirements that can impact the taxable status of the organization.

This is where challenges can start to arise for many. When the foundation develops a grantmaking strategy designed to optimize the outcomes and impact of its grants that can’t be easily supported by the underlying accounting infrastructure, progress slows down – and this can result in serious ramifications for all of your key stakeholders.

Investing in a cloud-based fund accounting solution designed specifically and exclusively for grantmaking organizations also means that you and your team can have instant, secure access to crucial data – whenever and wherever you need it. Each user can populate his or her dashboard with the tasks, records, and reports that they access most often. Just imagine having action reminders for meetings, phone calls, and the ability to schedule reports to be emailed to the appropriate stakeholders and you might even find that you do have time to take that 5:30 yoga class!

I’ve touched on only a handful of the many benefits here of marrying the right financial technology with the right grantmaking technology, and there are literally dozens more. One “homework assignment” I encourage you to take away from this post is this: As you work on the second half of 2020, ask your grantmaking and financial colleagues team to keep track of the instances where you are forced to pause and duplicate efforts as you shift between your grants and financial management. Then, put a date on your calendar for later, or in early 2021, where you meet as a team and review this data. You’ll likely find a lot more occasions where you could have saved both hours of work and budget dollars, if you’d only had complementary grants and financial technology!

 

Blackbaud Foundation Solutions has over 34 years invested in the grantmaking solutions and we currently serve over 1,100 community, independent, and family foundations and other grantmaking organizations. Our anchor product – Blackbaud GrantmakingTM – is the leading solution in the market today; in 2019, over 600,000 applications were submitted and more than $12 billion in grants was awarded through Blackbaud Grantmaking.

Blackbaud Financial Edge NXTTM delivers unparalleled reporting, budgeting, and expense management in a modern, intuitive experience that will enable your finance office to improve efficiency and maximize its mission impact. More than three decades of research and development went into designing Blackbaud Financial Edge NXT – the most comprehensive, purpose-built fund accounting software for grantmaking organizations.