| Give Something Back: Creating a Business-Charity Partnership

Posted in Non-Profit at 10:00 AM by Loftis Consulting

If you have set up a successful business and made some good money, you might be thinking that it’s time to give something back. A good way to do this is to set up a partnership between your business and a charity. It is also a very good way of getting publicity for your company, and improving public relations. Choosing the right charity is vital, as you need to choose something that you think is a worthy cause, and will also play well with your customers. If you are considering setting up a business-charity partnership, here are some key things to consider when choosing an organization to work alongside.










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What Are Your Values?

A good first step is to outline what your priorities and values as a business are. This will help you to find charities that have similar values to your own, and form a natural partnership. You need to be careful that any partnership does not contradict your own personal business goals, even if it is with a charity. Once you have outlined your main values, try thinking about which charities are in line with that.

Your Customers

The opinions of your customers are very important when trying to choose a charity to work with. Do some research into which charities they tend to donate to, and which causes are important to them. If you find any major trends, you can use these to your advantage. For example, if a lot of them are interested in donor brick paving, you could partner with a similar charity. This will benefit you because it will cement your image as a good company in your customer’s minds, and improve brand loyalty. Similarly, you need to make sure that you don’t partner with charities that your customers are not interested in, or don’t consider worthy. If they feel that your company is completely at odds with their priorities, they might think twice about giving you their business in future.

Your Employees

Finding a cause that your employees are passionate about as well is key to starting a business-charity partnership. If they are not invested in the cause, then participation will be low and you won’t get very good results. If you choose something that everybody cares about and is willing to get involved in, you will end up making a lot more money for your chosen charity.

Picking A Charity

Once you have considered all of these factors, you will probably have a shortlist of potential charities to work with. It is often best to choose a local charity, or at least one that has offices nearby, to make collaboration easier. But you need to balance this with the potential marketing benefits of the charity. Choosing a larger charity will get you much more publicity than a small local one that is unknown outside of your city.

It is also important to make sure that you have thoroughly researched the charity to ensure that it is properly registered, and that it is a legitimate charity.

By building a partnership with a good charity, you can give something back, whilst also improving your own business.

| IRS Form 990 Is Not Just a Financial Tool but a Promotional Tool for Your Non-Profit

Posted in Non-Profit at 9:00 AM by Loftis Consulting

What Is IRS Form 990?

It is an information return filed annually by most tax-exempt organizations.  Tax-exempt organizations may include charities and fundraising organizations.  IRS Form 990 not only includes financial information about the organization such as amounts raised, expenses and so on but also operational and programmatic information.  The inclusion of this non-financial information is an opportunity to further promote the mission and accomplishments of the organization.

What Are the Steps for Using IRS Form 990 as a Marketing Tool?

  1. Know your audience

Many different people read the IRS Form 990. They may include your clients, customers, members of the community, funders and potential donors.  The audience is reading the Form 990 to make sure that their money will be or currently is being put to the use that your brand stands for.

  1. Make sure your verbiage in Form 990 speaks to the brand

The first thing a reader of Form 990 will see about your organization is the written statement in Part I that describes the mission of the organization.  Make sure this mission statement is clear and speaks to the goals of the organization that is in line with the organization’s branding.

In addition, IRS Form 990 allows you to provide additional information regarding organizational programs that goes beyond dollars and cents. For example, Schedule M for Supplement Information and the Statement of Program Service Accomplishments in Part III, are free form sections that allow you provide additional details about changes in the operations of the organization as well as statistical information such as clients served, employment statistics and so on.

  1. Be consistent

The language that you use in your Form 990 needs to tell the same story as the rest of your organization’s marketing materials. In other words, keep on message.


By taking these tips into account, you will be able to use Form 990 to communicate the organization’s mission, inform your audience of its accomplishments and help the organization shine.

To learn more about Loftis Consulting or how it may be able to help your organization with part-time, project-based or interim CFO services, contacts us today at (312) 772-6105.

| Nonprofit Cash Management Toolkit

Posted in Non-Profit at 9:00 AM by Loftis Consulting

For a non-profit, understanding the health of its cash position is critical.  Many not-for-profit organizations are dependent on outside contributors and can’t control the use of monies coming in for various reasons:

  • Funds received are restricted to be used for only certain purposes
  • Fund received do not cover the indirect or administrative costs of programming
  • Significant payment delays from government agencies

In order to prevent your nonprofit from erroneously using restricted cash and/or running out of cash all together, I recommend using some financial management tools on a regular basis to keep track of your cash levels.  Catching cash issues early is critical to maintaining a financially viable organization.

Given that for most non-profits payroll is usually its biggest expense, the Executive Director and finance team should keep an eye on making sure there is enough unrestricted cash available to make payroll each month.  The Payroll Coverage Ratio should be calculated monthly.  A healthy Payroll Coverage Ratio will be higher than 2 to ensure payroll coverage for the entire month as well as coverage of non-payroll expenses.

Example of Payroll Coverage Ratio:

Monthly Gross Payroll Need = Next Month’s Gross Payroll/2 = $600,000/2 = $300,000

Unrestricted Cash In Bank = $650,000

Payroll Coverage Ratio = Unrestricted Cash In Bank/Monthly Gross Payroll Need = $650,000/$300,000 = 2.2

Please keep in mind for non-profits on bi-weekly payroll cycles, the Monthly Gross Payroll Need amount will be higher two months out of the year due to three payroll runs instead of two.

Another ratio that should be tracked is the Days Payable Outstanding (DPO).  This ratio will let you know if the organization has cash because it is delaying payments to vendors.  Normally, this ratio is tracked at least quarterly.  If the DPO increases significantly, then you know that payments are being delayed. If it stays flat quarter to quarter then vendor payments are not being delayed.

Days Payable Outstanding (DPO):

DPO = Ending Accounts Payable/(Vendor Purchases/Number of Days in Measurement Period)

The measurement period is based on how often you are tracking DPO. If it is quarterly it should be 90 days, if it is monthly then use 30 days.

By adding these metrics to your monthly financial review, you can make sure you keep on top of the financial health of your non-profit.  For more tips on managing non-profit cash check out “How Cash Forecasting Can Help Your Nonprofit Stay in Business“.




| Stiff Tax Penalties for Non-Profits for Late Filing of Form 990

Posted in Non-Profit at 9:00 AM by Loftis Consulting

Most non-profits rely on donations in order to fulfill their mission.  It would be a shame if monies raised went paying tax penalties rather than providing client services.  It is critical that Form 990 is filed annually with the IRS on a timely basis. This article, “Form 990, Late Penalty Abatement“, by the Journal of Accountancy highlights the penalties, ramifications and possible solutions to filing Form 990 late.


| Non-Profit Finance Toolkit: How to Calculate Break-Even

Posted in Non-Profit at 9:00 AM by Loftis Consulting

There are so many decisions that need to be made for a non-profit on a daily basis. Most of these decisions deal with the achievement of the mission of the non-profit; however, most decisions have some type of financial impact on the organization.

For financial impacting decisions, there needs to be some type of underlying analysis to understand the magnitude of the impact. Break-even analysis is one of the tools that can aid a non-profit executive or manager to assess their financial situation at the program level or organization level.


What Is Break-Even?

Break-even is the point where your costs equal your expenses.  In other words, the organization is not making money but is not losing money either.  Even though most not-for-profits do plan to break-even, the organization should plan for a surplus to help in times of economic crisis or unforeseen events.


Why Is Break-Even Important?

Break-even is critical to understanding what it takes for a non-profit to survive.  The higher the break-even point, the more risky the organization will be.  For example, if two non-profits are virtually the same in revenue but have different cost structures one non-profit will be more viable than the other.


How to Calculate Break-Even in Units and Sales Dollars?

An understanding of your business drivers and basic financials is needed to calculate break-even.  The steps are as follows:

1. Separate costs into two categories – – fixed costs and variable costs. Fixed costs are expenses that do not vary with the change in sales volume. Variable costs change in direct relation to the changes in sales volume.  An example of a fixed cost is office rent which does not change with sales volume; however, online storage usage charges increase in this example for every new customer acquired would be a variable cost.

2. Plug your information into the formula below to determine break-even in units.  Keep in mind that units for break-even do not have to be a physical product, it can be a customer conversion, a billable hour and so on.

Breakeven = Fixed Costs/Price per unit – Variable Cost per unit

3. Plug your information into the formula beloe to determine break-even in sales dollars:  Assumes there is not a lot of variability in revenue to costs.


Breakeven   = Fixed Costs/ 1-(Variable cost as a percent of revenues)


The break-even formula can easily be changed into a profit formula by adding your desired profit to fixed costs and calculating from there on a unit or sales dollar basis.  In addition, the same break-even formula can also be changed into a cash flow requirement formula by adding loan payments and such to fixed costs as well.

By knowing your break-even, you can confidentially understand what it takes to build a fiscally sound non-profit and make knowledgeable adjustments accordingly.  As your costs change, make sure to update the break-even point to ensure long-term success.


Loftis Consulting is a provider of CFO services for non-profit and for-profit businesses on an interim, project or part-time basis.  Outsourcing CFO services is one way to lower fixed costs and thus lower the break-even point.  To learn more visit our Non-Profit CFO Services page.

| Risk Management for Non-Profits Has Value

Posted in Non-Profit at 9:00 AM by Loftis Consulting

CGMA magazine recently published an article regarding non-profits and risk management.  Managing risk is a key component of a CFO’s role in ensuring the financial health of a nonprofit.

| IRS Making It Easier for Small Non-Profits to Apply for Tax-Exempt Status

Posted in Non-Profit at 9:00 AM by Loftis Consulting

Recently the IRS released a new process for small organizations to gain 501(c)(3) tax exempt status. In order to be eligible for this new process, an organization seeking this type of tax-exempt status must meet the following criteria:

  • Not have had annual gross receipts of more than $50,000 in the past three years
  • Not have had projected annual gross receipts of more than $50,000 in the current tax year and for the next two projected years
  • Not have total assets greater than $250,000
  • Not be a foreign entity, unincorporated association, trust, church or hospital

To be eligible for the streamlined application process, an organization must have not had gross receipts in excess of $50,000 in any of the past three years and have projected gross receipts of not more than $50,000 in the current tax year and the next two years. Also, the organization’s total assets must not exceed $250,000.

Various entities are ineligible for the streamlined application process, even if they meet the gross receipts and assets tests. These ineligible organizations include foreign entities; entities that are not corporations, unincorporated associations, or trusts; and churches, schools, and hospitals.

To learn more, visit the IRS site that specifically talks about the new process.

| How Cash Forecasting Can Help Your Non-Profit Stay in Business

Posted in Non-Profit at 9:00 AM by Loftis Consulting


A cash forecast is the number one priority for ensuring your non-profit becomes and remains financially healthy.  Without money, you cannot pay employees and vendors and will quickly find yourself out of business and unable to execute the organization’s mission. This seems obvious but lack of cash management is the main reason why most for-profit and non-for-profit businesses fail.  To prevent your non-profit from having the same fate you should know your cash position (i.e. the cash readily available and unrestricted) by reviewing regularly actual cash inflows and outflows as well as creating a projected monthly cash forecast for at least for the current fiscal year.

Reviewing Cash Inflows and Outflows

For organizations that historically have been tight on cash on a regular basis, cash inflows and outflows should be reviewed weekly.  This will ensure that the non-profit is operating in line with revenues and contributions and decisions can be made quickly and proactively.

A weekly cash forecast projects out cash receipts for such items as uncollected billings and sales as well as cash to be used such as outstanding invoices, payroll, employee benefits and any other cash payment.  The net result by week will highlight the time periods where you may be cash poor and need to do something to fill the gap.  Options include:

◾Reaching out to funders to advance contributions sooner

◾Using loans or lines of credit to cover payroll for example until outstanding accounts receivables are paid

◾Using credit cards to pay for office supplies for very short-term cash crunch needs

◾Delaying payments on non-urgent bills

In addition to a weekly forecast, a monthly cash forecast should be completed for the entire fiscal year that is updated each month based on new information.  By having a monthly cash forecast, you will be able to foresee times where there is not enough money on hand to cover all expenses when they are due.  Even when cash is not projected to be zero but is projected to be near zero there will be a need to get access to cash.  This forecast will allow you to anticipate cash needs and put plans in place proactively such as setting up or accessing a line of credit.

A cash forecast is not only valuable in helping you plan for times when cash is low but also when there is surplus cash.  The non-profit should already have plans for times when there are excess cash such as paying down debt or investing in facilities.  The executive management team and board of directors should never be surprised about the cash position of the non-profit, good or bad.

By using these tips and implementing a cash forecasting process you can prevent the stress of not having enough cash on hand to manage your operations day-to-day.  If your non-profit does not have the personnel in-house to produce a robust cash forecasting process, a project-based non-profit Controller or CFO may be the solution to create and execute this for your organization.  Contact Loftis Consulting for additional details.


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