Do you have a non-profit organization or aspiring to start one?
I remember when I started my non-profit, X-pressions, Inc. in 1998. I had the vision and the mission however, I didn’t know much about what it took to financially operate a non-profit.
One of the first steps to becoming a non-profit is applying for your 501c3. I hired a coach to help me through that process and in 2002, after a few additions, corrections, and adjustments; I received my 501c3 determination letter.
Now fast forward to 2020, Covid hit and the finances stopped. Loan programs were available, yet many non-profits were unsure if we had the proper paperwork to apply for the loans. My concern led to an informational conversation with Robert E. Williams about Accounting.
Every 3rd Monday of the month I host an Entrepreneur Talk titled @MotivationMondayMentors. My most recent interview was with Robert E. Williams, President of MBS Consultants. During that exchange, I found out how essential accounting is for the success of a non-profit organization and small business.
Robert E. Williams gave a breakdown of Accounting best practices for Nonprofits and Small Businesses. He addressed some of the common questions posed by the CEOs of nonprofits and the process for obtaining and keeping your non-profit.
• Can you get rich off a nonprofit organization?
• How do small nonprofits raise money?
• How do you fundraise for a nonprofit?
I know, I know, our missions are important; we have a purpose but whatever your mission, to achieve long-term success and to properly fulfill the purpose, reliable accounting practices are vital.
Shelly Shell: How do small nonprofits raise money?
MBS Consultants: One thing, as a whole, when you’re getting funding for your organization, you have got to find a way to self-fund. When you’re sending off for grants, and asking for any monies, it’s about your activities. Sometimes the cost of those activates may come out of your pocket, or the board’s pocket. You don’t need board members if they are not going to be financially committed. That’s very important. When you go to anyone for funding, they want to see what you’re doing on your own, so activities are important. People want to see what you’re going to put into it before they give.
Non-Profit Funding & Board Selection
• Organizations should find a way to self-fund
• Work on your activities to have proof to show funders your history and progress
When it comes to the paperwork the requirements of the grant are usually are spelled out by the agencies giving up the money. Take your time, read through it. Then do an evaluation: How many people are you reaching? How many people are you connecting with? You should have that in your records. Even before you get to non-profit status, you need to be raising money today, raise money today!
Information Some Funders Require
• Funders want to see if you’re reaching the community
• Funders want to see if your program is making an impact
• You don’t have to wait for the 501c3 to begin your activities
• Raise Money Today
Important Tips for Selecting Your Board
• Everyone on the board should have value. They should be able to contribute either financially, by providing services, recognition, popularity, or by selling tickets.
• Select board members who will be committed to the work. They should not be just a name on the board. They have to make a commitment.
Shelly Shell: After we’ve chosen our board, what type of records do we need to keep? Do we need an accountant? What if we don’t have a budget yet?
MBS Consultants: Believe it or not the most important person you need in your non-profit is a secretary. The secretary keeps track of the records. It’s a secretary taking minutes at the meeting. Just as the accountant keeps certain reports for the organization, technically the secretary should be the one with the books. The accountant comes in later. And it’s important to have a treasurer keeping track of the money raised and the money spent. The treasurer keeps track of the money coming in, makes copies of checks, and keeps them in a folder. Any monies raised should be deposited in the bank, ASAP even if you take it back out of the bank the next day. You want to keep tracking every penny that you raised.
Key Members of the Board and Functions
• The Secretary is the most important person you need on the board
• Select a trusted person to be the Treasurer
• Non-profits need to keep a Double Signature System on all transactions
IRS Filing for the non-profit
• 990s Need to Be filed First
• Under $50,000 Non-profits can file the 990N
• If you don’t file the 990 you may lose your non-profit status
Shelly Shell: Are non-profits allowed to write a book under the non-profit status?
MBS Consultants: Yes. As a category under the 501c3 is a section called intellectual property; review your paperwork and make sure there is a section on the nonprofit intellectual property. That’s what that falls under. Once the gross proceeds from the book have been determined, that amount minus expenses should be going to fund a program approved by the board of the organization.
Expense Considerations for Intellectual Property
• Payroll is considered an expense (within reason)
• Administration Expense
• Stipends
• Net profits should be to funding the programs.
Salary Restrictions and Legal Requirements
• Board Members cannot get a Salary (they can get a stipend)
• President, CEO, Chairman of the Board, Treasurer, Secretary Vice President, Board Member are not legally allowed to get a salary from the non-profit
• The Executive Director can get a salary
• Select someone you trust to be the Chairman of the Board (they have the power to vote you out)
Shelly Shell: If we need to change the structure what needs to happen?
MBS Consults: Have an official meeting with everyone. If you want to change people’s roles, write out the roles and change the bylaws.
Shelly Shell: Organizations like the YMCA and Boys & Girls Clubs non-profits all charge fees. Is that acceptable?
MGS Consultants: I’m glad you asked that question. It’s a misconception that nonprofits can’t make money. That’s not true; it’s that the net profits, go to fund other expenses or programs. Membership fees are not going into anyone’s pockets. They go to administrative expenses. All non-profits must document everything they are doing. As a non-profit, everyone grows their organization. A non-profit does not have to pay income taxes, but it will have to pay payroll taxes.
Membership Fees and Taxes
• Non-profits can charge membership fees (have to check their type of status )
• Non-profits can make money but it’s to fund the program and administrative expenses
• Non-profits must document everything
• Non-profits are responsible for paying Payroll Taxes
Thank you, Robert E. Williams, for your insight and for helping us to make sure that as Executive Directors, we get our paperwork properly to avoid legal problems in the future.
About Robert E. Williams
Robert E Williams is the President of MBS Consultants. They focus on – Budgeting, Management, Infrastructure & Taxation. MBS is an accounting service company. They specialize in providing all accounting needs and services for small businesses. This includes small business bookkeeping services, accounting, and tax services. The outsourced accounting services help their business clients cut costs, save time, and improve profits. Their accounting team practices a very ethical accounting system that is proven to help small businesses grow.
