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Chartered Accountants &
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WELLINGTON

How to Operate Your Non-profit Like a Business

22 Jul 2022 | Biz Strategy, Non-profit

 

Whether it’s to help autistic children have access to tutoring or to provide affordable housing for the elderly, the mission of your non-profit organisation is the focus, and requires innovation and business savvy to make an impact.

We reviewed some of the unique distinctions of non-profits in our blog, Non-Profit Accounting and Tax Tips 101. But when it comes to similarities, the parallel between them and conventional business is the approach in which they are managed to provide value. This approach is what we want to focus on in this blog.

Whether a new organisation or well established, there’s plenty of tips here for all stages of a non-profit, so let’s go!

 

Why You Should Follow a Business Approach

There’s no getting around the fact that providing value, in whatever form or desired outcome, requires the same level of operational proficiency as a conventional business.

However, what is perceived as ‘value’ differs. A non-profit solves a problem with either a product or service, but the value it brings is providing a solution to a societal problem. Whether to feed the hungry or preserve wildlife, a donor’s gratification comes from knowing their investment is supporting the greater good.

In order to realise the greatest societal impact, non-profits must invest in their organisations, as any business would – if not more!

“Everyone wants charities to spend as little as possible on overhead. That’s backwards. Overhead is what drives growth. If charities can’t grow, they can’t solve problems. So overhead is a good thing. And I’m overhead.” – Dan Pallotta, author

 

Key Components of a Business Approach

In our blog What You Should Know Before Starting a Non-profit in New Zealand, we emphasized that a ‘not for profit’ doesn’t mean ‘for loss’, and explained why you need to put your entrepreneur hat on. We said, “just like a regular business, if you run an efficient operation, you’ll be able to provide a much better service to the people or cause you’re trying to serve.”

A non-profit has accountability to both the community and donors, to operate in a way that meets revenue goals each year, without making unnecessary expenditures.

The following tips will ensure the best chance of making the greatest societal impact.

Act, Speak, and Perform Like a Business

It might seem obvious, but your attitude matters, and will determine your behaviour, choices and habits. Have a look at our blog, Ten Tips to Improve Your Habits and Business on how to disrupt and reboot behavioural patterns that might be holding your non-profit back. Operating it like a business will help cultivate relationships in your community, and develop win-win collaborations with donors or members.

Create Models of Sustainable Income

Donations are fabulous, until they stop. Investing in building stable revenue generating programs or services will ensure you’re not reliant on donor dollars or government grants alone. By making the mission profitable with revenue-generating services at the core of your organisation, you’ll have less dependency on philanthropy.

Understand the ROI

Track, analyse, pivot. Focus on short and long-term returns on investment to ensure your strategy and efforts are bringing in the greatest bang for your buck. Effectively working with the proceeds you have while maintaining expenditures within your budget is a result of responding to positive or negative ROI outcomes. Similar to conventional businesses, doing a costs and benefits analysis could help you to make better decisions on which activities and strategies to pursue.

Take Innovative Risks

Non-profit organisations are in the business of disrupting what is currently the norm, but also a problem to solve, and filling the role as ‘change agents’ to bring improvement to social issues. Making an impact will sometimes require taking calculated risks, which like any business, is necessary for making progress. Seek new ideas and opportunities, and assess short and long-term opportunities to scale.

Keep a Steady Eye on Expenses

Stay vigilant about what funds are not used efficiently. No matter what your income is, it won’t result in much impact if money is going down the drain. What could be trimmed, or donated? For example, evaluate what expense could be procured with a gift-in-kind campaign, to not only cut costs, but attract practical support and involvement from the community.

Invest Smartly

While monitoring expenses and the ROI as mentioned above, put your revenue to its best possible investment in the following areas.

  • Your Team. High quality staff results in a high quality organisation. Onboard the best talent for key positions, providing competitive benefits, salaries or hourly wages. Build a company culture that they love to work with, and take care of your people so they are invested in the success of your non-profit. Commit to building your leadership and teambuilding skills. You can learn how active listening can make a big improvement in this area by reading our blog, When Great Minds Don’t Think Alike, Exceptional Things Happen.
  • Marketing. It goes without saying that a polished presentation is a deal-breaker in todays’ society. The top necessities are a modern website that is easy to navigate, a solid brand that is unique and recognisable, local advertising, and social media presence. Newsletters, social media with engaged membership groups, and video marketing with a YouTube channel provide limitless opportunities for free marketing and visibility, so don’t skimp on keeping up with any of these activities in one form or another.
  • Technology and Equipment. Whether from donations, grants or raised funds, your technology and operational equipment needs to drive the engine of your non-profit. Make the most of free tools and software, but also have the mindset for growth and staying current.

Invest in the Right Accountant

We know that successful non-profits require a unified approach of building a solid foundation, measuring performance, having confidence in your decisions, and evolving strategically in the direction you want. Contact the team at BW Miller Dean to see how we can help your non-profit thrive.

How a Business Mentor Can Help You Achieve the Impossible

8 Jul 2022 | Biz Strategy

 “Show me a successful individual and I’ll show you someone who had real positive influences in his or her life. I don’t care what you do for a living—if you do it well I’m sure there was someone cheering you on or showing the way. A mentor.” – Denzel Washington

Without mentoring, many great accomplishments that shaped our world would never have happened. Without mentors, we would not know of the successful artists and industry leaders that we look up to today.

As a business owner with so much to stay on top of, understanding the complexities of finances is often at the bottom of the list. This is why a business mentor is the missing link if you’re struggling, because very often, the only way to achieve your goals is to learn directly from someone with expertise in the area which you lack.

Even well-established businesses could benefit from a fresh strategy that mentors can provide, so read on to learn why it’s worth considering teaming up with one.

 

Every Business Needs a Mentor

“A great mentor helps you to achieve what seems impossible.” – Mariela Dabbah

You’re the expert in your business. The expertise of a business advisor is to help you succeed on your terms, by designing your business as a tool to achieve your goals.

Business mentors can look at your business with a fresh and neutral perspective, which on its own is advantageous in many ways. They can tell you what you might not want to hear, but need to, for making the necessary changes to move forward. Sure, co-workers, friends and family can offer moral support or advice, but a mentor can offer the benefits of their professional experience and knowledge.

Do Your Numbers Stack Up?

Numbers tell the story of your business – but knowing how to read that story and change the plot when needed, that is where a qualified business mentor comes in. They can help you understand whether or not your numbers support your goals, and empower you by teaching you how to read the story of your business through numbers. How?

By first getting a clear understanding of your lifestyle goals and the financial story required to make that happen. Another way to put it is, knowing how you want the story to ‘end’ and working backwards to adjust the storyline to reach that conclusion.

Ready to get excited about your numbers? You will be when you tie them to your goals and the dream lifestyle you want to achieve.

Working Backwards to Move Forward

What do you need to earn in order to live, pay the bills, or put the kids through college? What are your goals? How many hours do you want to work, versus free time for family, hobbies or travelling?

Answers to these questions can determine what numbers you need to support that, and how much you need to earn per year.

With a solid grasp of how much your monthly or annual income should be, you can work out the appropriate price to sell your product(s) for, or how much to charge for your service(s).

Determining how many hours a week you currently work (or want to work), versus how much money you actually make, is another important key to understanding your numbers. If after breaking it all down, you’re only making $5 per hour, something’s gotta change!

For example, if you charge by the hour, and want to only work 25 hours a week, then your hourly rate needs to be ‘x’. However, if that rate is unrealistically high, cost-cutting is necessary elsewhere, in a strategic way that won’t hinder performance and efficiency. Helping you streamline expenditures and trim the fat in your business without taking it out of your pocket is where business mentors shine.

Ready to Make Your Numbers Stack Up?

The team at BWMD has the expertise to support the dreams and challenges of business owners like you. We bring clarity to your vision and goals, and help design your business to achieve them. Our collaboration will set your business on the right path. Contact us today to get started! 

Non-Profit Accounting and Tax Tips 101

24 Jun 2022 | Biz Finances, Non-profit

People are yearning to be asked to use the full measure of their potential for something they care about. – Dan Pallotta, author

We continue our series on non-profit organisations, with tips to help you navigate the rewarding venture of running a charitable operation for a cause you’re passionate about. If your non-profit is still new, or you’re still considering whether to start one, read What You Should Know Before Starting a Non-Profit in New Zealand first. 

Now let’s look at the accounting and tax-related aspects that are unique to non-profits. Since the purpose, goals and needs of non-profits are different from those of conventional businesses, there are some aspects of their accounting that are handled differently too.  

Because the purpose of non-profits is to serve their cause, they are accountable to their supporters and contributors. The most important bit to understand is that there should be a money trail for all money that comes in and flows out of the bank account.  

Here are a few more tips that will help you run your organisation smoothly, and legally. 

Record All Your Income

You need to keep different sources of revenue separate in your accounts, because not only will it be easier to track and report on, but some income could be taxable.

Types of Revenue:

  • Donations – People donating to your organisation can get a tax deduction, so it’s both important to keep a proper record, and you need to send donees a receipt which they can include in their tax return.
  • Pledges – Some pledges could be conditional, like matching a future pledge from another donor, so track these accordingly.
  • Membership Dues – Subscriptions could be recurring monthly or annually and are usually for some type of service in return, like educational material in the form of magazines, webinars, or other events.
  • Special Events – These could include entrance fees to attend fundraisers or other occasions.
  • Grants or Other Lump Sums – There may be grants available from local or federal government agencies or from the private sector for your industry.
  • Volunteer Time and In-Kind Contributions – The donation of time and non-monetary services or goods also needs to be accounted for. This could be services from skilled professionals such as counsellors, tradesmen, marketers or bookkeepers, or someone gifting your organisation with a free piece of equipment such as a new computer.

Choose the Right Accounting Software

We don’t recommend you compromise when it comes to the engine that drives your accounting. Look for these must-have features:

  • Designed for Non-profit Organisations – Choose a package that features this customisation to handle the unique features that charities need, and even better, was developed with the input and recommendations of other non-profit entities.
  • Robust Reporting – Don’t settle for minimal features here, but look for the ability to track and report on multiple statistics that you can customise, such as debtor days, asset to debt ratio, expense cover trends, and liquidity graphs.
  • Supports Your Growth – Choose software that can grow with you and can be scaled up for extra add-on apps, additional users, or other features at a higher level of usage than what you might first start out with.
  • Other Handy Features – These could include donation tracking, donor management, third-party app integrations, and easily accessible customer support or FAQ forums.

We recommend using Xero for your accounting, with Spotlight Reporting for creating your monthly or quarterly reports. Xero has a great function to track different types of income and expenses with tracking codes, so you can report on each individual income stream separately. You need to set it up correctly from the start, so make sure you get in touch so we can help you with that. Spotlight Reporting has great reporting functions and a template specific to non-profit organisations, which we find useful.

 

What About Tax?

One of the great advantages of having non-profit status is that you don’t generally have to pay tax on your income, which will leave more money in your accounts to put towards running your organisation and providing a better service to your cause.

However, some forms of income are taxable. These include:

  • Business-related revenue, such as income from op shops (e.g. Salvation Army);
  • Investment income, such as interest on a term deposit, shares or real estate transactions.

Some non-profits could qualify for an exemption on the first $1,000 of taxable income from business activities or investments, so make sure you get in touch with us for more guidance.

Even if you have no taxable income, you will still have to file a tax return each year with the IRD, and you still need to deduct PAYE from your employees’ salaries as with any other job.

 

Do I Need to Register for GST?

As with for-profit businesses, if the income is above the GST threshold – if turnover is/or expected to be more than $60,000 in 12 months – you will need to register.

If you’re unsure whether you should register, or if you need help with registering and completing your GST returns, get in touch with us.

 

Partner With the Right Accountant

Operating a successful non-profit organisation requires professional support, as the reporting is distinct from conventional businesses. It’s vital to hire an accountant who not only understands your vision and goals and can give unbiased advice, but also understands the compliance and legal obligations specific to non-profits. Contact the team at BW Miller Dean to see how we can keep you on top of the finances in your non-profit.

When Great Minds Don’t Think Alike, Exceptional Things Happen

14 Jun 2022 | Team

Although single-minded determination and laser-like focus may be necessary to drive towards an outcome, dismissing other perspectives and ideas from your team can block your success in more ways than one. Not only could it prevent your business from moving forward, it shuts down dialogue, creativity and trust; the things your team needs so that they can voice their opinions even when they’re different from yours.

What makes a great leader? Among the well documented attributes we’re all familiar with is the one skill that trumps them all: knowing how to listen.

“Most of the successful people I’ve known are the ones who do more listening than talking.” -Bernard Baruch

 

Embracing Different Opinions Brings New Opportunities

Doors you didn’t know existed can open to new possibilities when diverse viewpoints can flourish. You and your team won’t always agree, and that’s okay. What matters is that they feel their opinions are valued and heard. Besides, by not considering their opinion, you’re negating why you hired them in the first place – for their skillset which inevitably includes innovative and fresh ideas.

During the pandemic, business owners have endured the stress of adapting to sudden changes out of their control. Disagreements with your team, business advisor, family and friends are inevitable, but conflict resolution starts with you. If you do that, you can build a strong team and innovative team who will keep fresh ideas and creativity flowing.

 

Lead By Listening

“Most people do not listen with the intent to understand; they listen with the intent to reply.” -Stephen R. Covey

The first step to managing conflict effectively and building trust is, you guessed it, to actively listen. But what does that mean?

  • Not interrupting. Although it may be tempting, take a deep breath instead and allow the other person to finish what they’re saying. This benefits both of you, as it shows them respect, and you might just learn something.
  • Demonstrating that you’re listening. Small gestures go a long way, such as nodding, or saying “yes” and “I understand” to let them know you’re paying attention and what they’re saying is really landing.
  • Reiterating the gist of what they said. Repeat it back by paraphrasing in your own words, to show you understand their message.
  • Asking open-ended questions. Put aside ‘yes’ or ‘no’ type-questions for another time. Instead, your constructive inquiry reassures that you’ve been hearing them, and open-ended questions that invite a more thoughtful answer moves the dialogue forward.
  • Acknowledging their emotions. Identify with their feelings such as “You sound understandably frustrated”, or “I realise how you must have felt upset about that.” Giving their feelings a name, whether you think they’re valid or not, helps bridge an understanding and releases tension.

 

The Benefits for All Involved

“The aim of argument, or of discussion, should not be victory, but progress.” – Joseph Joubert

Modifying your own behaviour in even the smallest way with active listening can make a giant leap of improvement in your leadership and business. It creates:

  • Positive Change: The trust that is built means you’ll both be less defensive and can work together to come to an agreement on what has to be done.
  • Stronger Influence: Once there’s trust, you’ve earned the right to work on solving the problem alongside them, with your input welcomed – not resented.
  • More Empathy: By really listening, you’ll get an understanding of where they’re coming from and how they feel. You’ll know them better and have more appreciation for their point of view.
  • Better Rapport: A connection occurs when the other person feels your understanding and empathy. It creates a momentum to continue building affinity and trust.

Ready to move your business forward?

 

We’re Here to Listen

Every business needs a confidant, and the ‘great minds’ at BWMD are a sounding board for your ideas and concerns. We take effective communication with you seriously, and utilise the Disc Profile personality framework as a tool to help us best match your communication style. Contact us today to help us to help you achieve success on your terms.

What You Should Know Before Starting a Non-profit in New Zealand

27 May 2022 | Biz Strategy, Non-profit

The entrepreneurial spirit of business ownership goes hand-in-hand with the desire for making an impact on the world. What better way than launching a non-profit organisation?

Although getting started might seem overwhelming, it doesn’t have to be. If you want to start a non-profit, this post will guide you in what you should consider when creating your plan, with links to support your research. 

 

Step 1: Know Your Legal Obligations

A good starting place is to understand the legalities for non-profit entities and how that differs from conventional businesses.

Who Can Qualify? 

Whether or not your organisation will be granted non-profit status depends on a number of factors. Ask yourself:  

  • Purpose – what is its motive and purpose? For instance, do you want to relieve poverty, advance education or health, protect the environment, or something else? Learn more about determining your organisation’s purpose here.
  • Revenue – where will it come from? Will income be sourced from donations, membership fees, fundraising, grants or investment income?
  • Similar Organisation to Model After – are there other non-profits with a similar structure as an example to help your process? 

Documents and Structures

When applying for registration, the government assesses your organisation’s rules document.  The rules should satisfy the following criteria: 

  • they should be the legally binding rules for your organisation
  • they should clearly set out the charitable purpose
  • they should not assign powers that further non-charitable purposes, or profit any private or individual cause.

Continue learning more here.

Choosing an Appropriate Legal Structure

Incorporated or unincorporated? Accountable to many people or to a few? Whether social, charitable, sporting or otherwise, you’ll need to consider which legal structure will be most suitable. 

There are a number of different legal structures to choose from, and first you’ll need to determine what your organisation’s role in the community will be and how you intend to operate. Also, you need to consider the requirements in several key areas such as its size, culture and values, activities and other operational factors. Learn more about choosing the right legal structure for your non-profit here.

Register with the Companies Office

With no national association that governs non-profit organisations in New Zealand, your registration requirements will depend on the legal structure you choose. For example, organisations that qualify for registration under the Charities Act need to register with Charities Services. 

If you incorporate a company, society or charitable trust board, you need to register with the Companies Office. 

Register with IRD and Apply for Tax Exemption

As part of your setup process, you need to get an IRD number. From the 2020-2021 year, any person or organisation that wants to get or keep an income tax exemption must be registered with Charities Services. This tax-exempt status applies to business income used for charitable purposes in New Zealand. 

 

Step 2: Prepare to Launch

What’s next? Once you have your legal obligations sorted, you can start preparing for launch. Here’s where your vision, creative inspiration, and a bit of realism are needed for crafting solid plans.

Create a Business Plan

Without a well-thought-out business plan, you could have a harder time obtaining loans and grants, attracting corporate donors, or keeping your organisation on track. Even a simple one-page business plan helps you to polish your message. Also create a forecast, with a few different scenarios, to explore whether your plan is feasible. There are non-profit accounting programs available that can help you with this, and always seek help from your accountant at this stage to test your numbers and assumptions.

Create a Fundraising Plan

Get a clear plan of action for how you’ll raise money. This may include memberships, sponsorships, grants, or even selling products or services. A solid fundraising plan will get cash flowing in.

Explore Financing Options

As a non-profit, you may be able to apply for government and other types of grants. Explore the Charities Service’s Community Resource Kit for more information on raising and applying for funds.

Structure Your Expenditures

You’ll need a budget to determine what you can afford to spend, and to ensure your outgoings don’t exceed income. This is where accounting software or the guidance from an accountant can help you to create a solid and realistic budget.

 

Step 3: Put On Your Entrepreneur Hat

‘Not for profit’ doesn’t mean ‘for loss’, and just like a regular business, if you run an efficient operation, you’ll be able to provide a much better service to the people or cause you’re trying to serve. Here are a few tips: 

  • Hire the right staff. Your team can make the difference between failing and thriving in business, so make sure you hire well. Check out our blog Rockstars vs. Superstars: Get the Right Bums in the Right Seats for insight on building a great team.
  • Spend less than you earn. Although a profit isn’t technically what you’re striving for, if you make a surplus, you can reinvest that into the organisation or allocate to a new project.
  • Network. Making connections and setting up partnerships with the right people can help the organisation to raise more money, increase exposure, or improve your operations.
  • Know your ‘customers’. Just like with a for-profit business, you need to understand the members of your club or the people you’re providing charitable services to, so that you can tailor your organisation to meet their needs.
  • Get professional support. As with any other business, a non-profit is most successful  when you have an accountant to keep you on track and compliant with tax obligations. Partner with one that has experience with and a passion for helping non-profit organisations, like BW Miller Dean. 

We understand the unique challenges non-profit organisations face and can help you to put a business plan in place that supports your vision. We’re also good at being a sounding board for your ideas and give you unbiased advice. Contact us to see how we can help you make your vision a reality.