It has been such a pleasure to be involved in the community foundation space throughout my career. First as an auditor, next as a controller, and now as a tech partner, I’ve watched rapid growth in the sector. That growth is noticeable in asset size and community foundations’ awareness of their opportunity for impact with an increased focus on accessible grantmaking and community outcomes. Improving the efficiency of everyday tasks is critical in this new environment. Technology solutions help support the evolving operational needs connected to this growth.
The following are three of my favorite software features that can help community foundations increase their efficiency and effectiveness, freeing up more time and energy to pursue their missions:
1. Investment/Treasury Management
This is my personal showstopper. The organization I previously worked for initiated money moves daily for any posted transactions. A batch of donations meant exporting a report, manually assigning the correct investment account to each donation, running totals, and moving money from deposit accounts to investment accounts. It’s great to get those charitable dollars earning money in a portfolio as soon as possible! When looking at grants going out the door, this level of precision meant leaving money in the investment pool until it was absolutely necessary to cover checks paid out of the checking accounts. Again, moving the correct amounts required exporting a report of grants, manually assigning investment accounts to each item, and calculating totals to swap through online banking.
Opportunities for increased efficiencies in this area were limited to turning exports into working documents or adding fields to records that might reduce time spent making manual edits. But what if a software solution could streamline this process? For example, Foundant’s CommunitySuite can recommend all transfers between bank and investment accounts to maximize investment balances. This can be tailored to your organization’s cadence for initiating online transfers between accounts. As transactions are posted, recommendations for money transfers accumulate and are ready for staff at any point. Here is an example of what CommunitySuite tracks:
- Fund A receives a donation of $1,000 that is deposited into the checking account. Fund A’s assets live in the investment account.
- Fund B receives a donation of $1,500 that is deposited into the checking account. Fund B’s assets live in the money market savings.
- Fund C gives a grant for $2,000, and the check is cut from the checking account. Fund C’s assets live in the investment account.
- CommunitySuite’s Balance Swap will suggest the following transfers:
- Fund A: Move $1,000 in Fund A from the checking account to the investment account.
- Fund B: Move $1,500 in Fund B from the checking account to the money market savings.
- Fund C: Move $2,000 in Fund C from the investment account to the checking account.
- CommunitySuite will then net those transactions and recommend the following physical transfers between bank and investment accounts:
- Move $1,000 from the investment account to the checking account.
- Move $1,500 from the checking account to the money market savings.
Applying these concepts to actual transaction volumes makes it clear that software with this accounting functionality can save big on staff time. It also helps align funds’ investment balances to exactly what is happening in investment accounts. That leads me to another favorite…
2. Investment Income Allocations
Your donors have trusted you to invest charitable dollars and watch them grow in the market. Usually, this means investment managers, an investment policy statement, a board committee, and your team are working together to maximize gains. A common investment model is the pooled approach, where all funds can participate in the same high-yield investment portfolio. How do we make sure each dollar of earnings is accurately allocated back to our funds?
I’ve seen a lot of complicated spreadsheets accomplish allocations, but donation and grant activity may not be reflected on a daily basis. For example, a $1,000 donation coming in on the second day of a month may not be allocated earnings as though it was invested nearly the entire period. In other scenarios, software systems can run allocations, but a backup for those calculations doesn’t exist.
As the needs in this area have become increasingly prevalent, it’s great to see software solutions that aid organizations and give fundholders peace of mind. Average daily balances are considered when allocating investment earnings from a pool to all the funds invested. This gives the most precise allocation based on all the ins and outs that may have occurred during a period. As a bonus, backup data of the average daily balance calculation and allocation percentages can live in the software and be available at any time for staff and auditors.
3. Fund Statements
Let's talk about fund statements. Most organizations have a difficult time regularly producing these for all fundholders. It's a heavy lift for staff! It can be daunting to consider the number of business days it takes to finalize the books for any period, not to mention the time needed to publish and deliver fund statements. Will statements even be relevant by the time fundholders receive them?
- The good news is that efficiencies exist here, too. The right software solution can help your foundation to deliver timely fund statements to your fundholders in many ways:
- Create a dedicated fund statement format for each audience type to reduce the time spent tweaking individual statements.
- Run all fund statements in a single batch and share them with staff members to review all at once.
- Publish fund statements instantly, without upload, to a fund advisor portal.
- Send email notifications to fundholders to let them know their statement is available online.
- Batch email statements to fundholders who prefer to receive a PDF document via email.
- Batch print statements and envelopes in order by fund advisor for quick mailings to fund advisors who prefer paper statements.
- Run year-to-date statements according to the fundholder's fiscal or calendar year instead of your organization’s schedule.
The growth of community foundations and the increasing complexity of fund accounting can quickly overwhelm your financial team. The good news is that there are easy-to-use, innovative technology solutions built specifically for community foundations that can help manage your accounting activities more efficiently.