Nonprofits Turn to Technology.
There are approximately 1.3 million 501(c)3 organizations based in the United States, according to the National Council of Nonprofits1, and they reported a staggering $2.48 trillion in expenses between 1998 and 2016.2 Since they rely on outside funding to operate, these organizations commonly deal with very tight budget constraints.
Ideally, nonprofits would have the funding to be able to help an infinite amount of people through their missions. Realistically, it’s much harder, so it’s critical for nonprofits to invest in efficiency whenever possible. While all businesses strive to have fewer expenses, it’s especially important for nonprofits.
So, what can nonprofits do to lower their expenses?
While there are many ways to do this, we recommend starting by removing time-consuming tasks from your day-to-day work. Adding digital tools will allow you to streamline tasks and, in some cases, gain new revenue. Many of Commerce Bank’s nonprofit customers have seen success by implementing a couple of key solutions.
Look where the money is
The best place to look for extra money in your nonprofit is to look where the money already is – like the accounts payable department.
Every organization has bills. And while card and online payments are commonplace throughout the world, many organizations (especially nonprofits) still rely on checks. Checks in the mail, no less! This requires staff to manually get approval to make payments, then cut checks, stuff and mail envelopes, reconcile transactions at a later date, and keep stores and stores of paper records. This never-ending cycle happens every day!
Accounts Payable (AP) departments can see vast improvements with “payment hub” solutions that organize vendor information and their preferred payment method, facilitate payments, and reduce check expenses with revenue-generation payment types. Solutions like CommercePayments™ Payment Hub even allows AP departments to make all of their approved payments with one payment file. By removing manual processes typically exercised in most AP departments, payment hub solutions transform hours of work every day into a process that can be completed in a matter of minutes.
Many nonprofits have also opted to integrating digital payment types, like virtual credit cards, to pay their vendors in lieu of paper checks due to benefits not found in traditional payment rails. Nonprofits that use virtual credit cards get money back when they use virtual credit cards to pay bills — almost like cash back rewards commonly found with personal credit cards. This presents unlimited earning potential for cash-strapped nonprofits. Why not make money on the bills you’re already paying?
The benefits of a virtual card program differ, depending on the provider you choose to work with. Some providers may offer you a higher revenue return on paid bills at the cost of having a “hands-off” approach to building your program. The more vendors you can pay using a virtual card, the more yearly revenue you’ll receive. But vendors need convincing when it comes to accepting new payment types. If your staff is underequipped to call every vendor you work with and ask if their will accept a virtual credit card as a payment type, or deal with the questions and payment discrepancies they may have, you’re better off working with a provider that can handle vendor enrollment and questions on your behalf.
Virtual card solutions like the CommercePayments™ AP Card take the vendor enrollment and maintenance off of your shoulders for payments within the program. This saves your staff from answering calls, researching answers and troubleshooting payment issues.
Eliminate cash at work
Other outdated processes typically revolve around per diems, petty cash and other employee expenses. Instead of relying on cash or checks, you can replace them with prepaid cards in a variety of ways.
Prepaid Card solutions like the CommercePayments™ Prepaid Expense Card allows staff to easily access funds from the organization. It can be used to purchase goods and services and even get access to cash. You can easily load and unload funds, choose where the card can be used and view cardholder transactions for complete spending control.
This is especially useful for supply purchases and automatic expense tracking. Using prepaid expense cards instead of cash simplifies receipt reconciliation, eliminates check reimbursements, and can help organizations monitor their spending in real-time. Plus, depending on your card program provider, a bank account may not even be required for the cards.
Take it step further by using prepaid cards for your nonprofit’s beneficiaries, like The Harlem Children’s Zone (HCZ) did. As part of its educational program, about 2,000 students in grades 9–12 receive a stipend issued to them via a CommercePayments™ Prepaid Expense Card from Visa®. They receive these biweekly stipends for meeting certain goals such as class participation, attendance and grade achievement.
Since introducing the card program in 2019, HCZ has seen a decrease in check fraud and an increase in efficiency behind-the-scenes. And more importantly, the cards serve their participants better than the previous program — no bank accounts are required in order to get funds, funds can be recouped if the card is lost or stolen, and cards allow participants to pay for items online.
Be aware that not all prepaid card programs on the market are the same. Personal prepaid card programs are often confused with business prepaid card programs and act more like gift cards than fully functional expense management cards. Personal prepaid cards are often inflexible for users and back offices alike. Employers cannot unload balances on cards, track transactions, or restrict specific merchant codes. Alongside being rife with hidden fees, the funds loaded onto personal prepaid cards technically belong to the cardholder (your employee), not the employer — further complicating processes that can be easily alleviated with a business prepaid card run by your back office.
On top of all that, not all business prepaid card programs are the same! When searching for a new program provider, be sure to ask if a provider charges your nonprofit for loading or unloading funds onto cards. Depending on how many cardholders you have, the fee cans really stack up unless you find a provider who allows your back office to load/unload funds free of charge. Other red flags include the length of time your cardholders can access their funds once money has been loaded onto a card, as well as if the card provider requires you to make a large deposit up front before implementing a card program.
Get help staying focused on your mission
A nonprofit's finances can be complex — you are challenged to pursue and fund your mission while keeping a positive cash flow. By choosing Commerce Bank as your financial partner, you work with experienced professionals who specialize in nonprofit finances. Gain peace-of-mind by placing your nonprofit agency's banking and financial needs in the hands of Commerce Bank.
We can help you find banking, asset management and technology solutions that will streamline your office work, opening up hours for other work and funding for your mission. Our personal service model helps you implement new tools and stay up-to-date on trends and technology for nonprofits. Visit our website to get started.
CommercePayments™ solutions are provided by Commerce Bank.
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