Nonprofits: A Profitable and Rewarding Niche
Nonprofits can be intimating for and unappealing to accounting professionals because of three misunderstandings: Nonprofits cannot afford to pay my fees, nonprofits have highly complex reporting needs that my firm cannot handle well, and annual audits are problematic due to underpaid and understaffed accounting departments within the organization. As an extension of the latter, many accounting practices incorrectly conclude they must have an audit practice to support nonprofits in any meaningful or profitable way.
During this episode Joe Woodard and Gregg Bossen, one the nation’s leading advisors to nonprofit organizations, discuss the opportunity and address the challenges around working with nonprofits to give you renewed confidence in the niche and to provide some practical tips and best practices reaching nonprofit organizations as clients.
Link to the full library – http://scalingnewheights.libsyn.com/
Link to Joe and Gregg's episode – http://scalingnewheights.libsyn.com/episode-07-gregg-bossen
Full Transcript of the Episode Follows:
Thank you for tuning in to this episode of the Scaling New Heights Podcast.
During this episode, we will talk with Gregg Bossen. Gregg is a practicing CPA with a full service accounting firm located in Atlanta, Georgia. His firm specializes in tax and accounting for nonprofits, and it is nonprofits that we will discuss today.
Since 2000, Gregg has been teaching QuickBooks seminars around the country for various groups and is considered to be an expert in the program, QuickBooks. But he's also an expert on nonprofits and he does this incredible job fusing those two expertises to the benefit of these organizations. Including the instruction work Gregg has done through his firm and as a contractor for Intuit, it he has taught over 1,500 seminars to more than 35,000 accountants, small business owners, and nonprofit organizations.
Joe: Gregg, welcome to the podcast.
Gregg: Well, thank you, thank you! I love that, I feel great already. I’m even better than I thought I was.
Joe: It is quite a resume, Gregg, it’s quite a resume. I’m so glad you're here, because nonprofits can be intimidating for some accounting professionals. They have a very different way of managing their financials, especially their equity, and it could be sort of a “Dorothy not in Kansas anymore” scenario if you're not used to it. Then, some people have just kind of given up on the whole sector because they say, “Even if I understand how to manage it, even if I can maintain audit ready financials, my clients never can.” And then I think the third is a misunderstanding that because they're nonprofit, they don't have the money to pay the fees. What you’ve proven out, what so many of proven out, is these myths aren't true. There are processes that you can deploy to support nonprofits effectively and profitably, right?
Gregg: Definitely, definitely.
Joe: How is it that you chose this sector? You're immersed in it. How did you get there?
Gregg: I didn't choose it; it chose me. Really, it's kind of funny. When I got out of college in 1988, I went to work for Pete, Marwick and I was in the audit department. They had a whole group of us first years and they had a giant board with the names along the side and then the dates across. Whatever audit jobs you got put on was purely happenstance. The managers stuck the name of the job on your row - they didn't know who I was - and they stuck me on an audit for a nonprofit, Alpha Delta Pi, which is located here in Atlanta where I where I live. So, the manager liked me, it was my very first audit, and, as you said, nonprofits are extremely unique (and quite weird) to many accountants. There's a lot more that you need to know that you don't usually have to worry about when it comes to regular businesses. The manager liked me and so I was forever pegged “the nonprofit guy.” So that's how it started; it chose me.
When I went on my own years later, I developed a niche. One of the things that you were saying, which is there's so few accountants out there that really understand how to work with nonprofits and what the reporting requirements are, that allowed me to develop a niche and be able to grow my practice, because the field was wide open. The thing is I love it, because the people that I meet that are working with the nonprofits are people that are there because they care about the mission. The other thing that's really cool about working with nonprofits is that, unlike regular businesses where the business owners don't usually look at the financial statements that we’re preparing, nonprofits are all over the reports. You know, they want the P&L compared to budget. They have all kinds of reports that they need to look at - reports for grants, reports for special events - and so it's really a lot more rewarding.
So that's how I got into it and I've grown to love it.
Joe: I love what you said about you know what their mission is. In Woodard Institute, we walk accountants through the process of creating three statements - a vision statement, a mission statement, and a purpose statement. I can't get into it today, but those are not the same thing. And then I tell people, “Now that you understand that, walk your clients through it, and help them to discover, if they don't know what it is, what their vision, mission, and purpose is. Then help them to be energized around it, work-life harmonized around it.”
But you're absolutely right. Nonprofit organizations have already established a mission statement and a lot of times that mission statement has very visionary, far-reaching impact, change the world stuff, and there is no guessing game. You don’t have to walk the clients through it and you don't have to instill passion in them for their cause. The thing you just have to do is learn it, appropriate it, and get on board with them. Share their passion and see what you're doing is helping them to be agents of world change. In the few nonprofits I’ve have had the privilege of working with, it was exhilarating. I felt during the entire of the engagement - even as I was making money, providing for my family, keeping my firm thriving - I felt like I was part of their organization and I was working alongside them for their cause.
But Gregg, there are challenges. You mentioned the complexity of the financials. What are some of the other challenges?
Gregg: It's an irony because even though a nonprofit has many more reporting requirements than regular businesses do… Nonprofits, for example, have to report their expenses on a by-program basis - how much does each program cost as opposed to how much does their fundraising cost as opposed to admin. Regular businesses don't really have to think about that. Nonprofits will typically get restricted grants and they need to be able to report on how grant dollars are being spent. Regular businesses don't need that. The irony is there's all these specialized reporting requirements, which means that whoever is doing the bookkeeping for a nonprofit actually has to be more schooled than you would normally be schooled if you were a bookkeeper working for a regular business. The irony is the people that are doing the bookkeeping for nonprofits, they are less schooled, not more schooled, than the people that are doing bookkeeping for regular businesses, because most of these nonprofits, they don't have the resources (fancy way of saying money) to pay somebody who really knows what they're doing. Many times it'll be the executive director, either that or an administrative person who has to do all kinds of things and wear all kinds of hats. One of those things is doing the accounting; and they don't have the knowledge, but yet they need more than your typical bookkeeper.
That's where I've really been able to provide a niche. In addition to that challenge, that they don't necessarily have the resources. Even if they did, finding somebody who understands how to utilize QuickBooks to get the kind of reports that they need is very difficult. That's why the classes that I've taught at Scaling New Heights, I think, have been so well attended, because there are so many accountants out there that really don't understand how can I get QuickBooks to track grants or how do I get QuickBooks to track programs or track my volunteers.
Joe: And I've got another big one - how can I clean up after the nonprofit organization who has an understaffed bookkeeping department and I know that there are some special troubleshooting steps involved in maintaining the financials for nonprofits in unique ways.
Now Gregg, you developed a process for working with nonprofits in QuickBooks specifically that simplifies… I mean, you audit. By the time that the audit comes around, your firm produces the actual report, you provide assurance services, and you do it in complete compliance with generally accepted accounting principles and all the standards of reporting for nonprofit organizations, but you do not believe that the typical nonprofit should maintain audit ready financials throughout the year, meaning GAAP financials throughout the year. So where's the balance and can you briefly talk about the two methodologies.
Gregg: Sure, that's really an interesting point. If you were really going to do this, if you're really going to keep your books all year long on GAAP based, and you alluded to it, the equity section is broken into unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Now QuickBooks closes everything to an account called retained earnings. You can add additional equity accounts, but it's not going to close to those accounts. Yet for GAAP based balance sheets, technically you should be making some sort of entries to move the temporarily restricted dollars into that section, and really every single time you enter a transaction, if you spent money that's restricted, you need to also do an entry in equity to move it out of temporarily restricted and into unrestricted in order to satisfy GAAP. I know I'm getting into the weeds a little bit here.
Joe: But that’s my point - you have just caused the complete glass-over for Betty Bookkeeper in that back office.
Gregg: Right, and the other thing is that the board doesn't know or care about keeping track of that. Now, is it important to track restricted grants? Absolutely. And so I've developed a technique where you can get a memorized report that will show you exactly what's happening with your restricted grants, not only how much you got in, how much you spent by what category, you can compare it to a budget, but you can look at it at a glance and see what that number needs to be at any given point in time without actually putting it into the financials. Then, at the end of the year, I can give that report to the auditor; or if I'm the auditor, I can just take that report and then I'll just make that adjustment for reporting purposes.
You know, you see the board twelve times a year, if you're a nonprofit; you only see the auditor once a year. It’s kind of weird for me to say because I'm an auditor, but I'm actually more interested in pleasing this group twelve times a year and we can give the number to the auditor at the end of the year. So, my technique involves using the customer job field, pointing transactions that are paid for out of a grant to that field. Then you'll be able to run basically a P&L for a customer and you'll get the number you need without messing with retained earnings or equity, because that's going to require a lot of manual journal entries that these people just don't have the ability to do.
Joe: And it’s just a pain in the neck to do, even if they understood the process. So, I like the way yours is more fluid, it uses the data dynamically, it provides the management reports they and the board need. Then, you just do your journal entries once a year.
Now, you teach this whole methodology in a two-part series at Scaling, that’s a four-hour series, that’s extremely in-depth. If anybody has been intrigued by the methodology, just know that Gregg will be back…. You're going to be back with us, right Gregg?
Gregg: I hope so!
Joe: Fantastic, fantastic! I’m going to just speak in the positive and say that Gregg’s going to be back with us teaching nonprofits coming up at Scaling New Heights 2017 in Orlando and you can get the four-hour version of what Gregg just ran through verbally here in the podcast.
Gregg: Now, I'm going to say one more thing too about the class that I thought was really cool this year. One of the things we talked about was how to track pledges and tracking pledges. There's not really a perfect way of doing it in QuickBooks, but there are multiple choices. This past year, I went through four different ways of tracking pledges. One of them was involving invoices, one of them was involving pending sales, one of them was involving estimates, and another one was involving sales orders. So, even if you're not a nonprofit person, through the process we explored different aspects of QuickBooks that most of the people in the room didn't know, because there's so many things to track in the world of nonprofits that you learn about the cracks and crevices and the corners of QuickBooks that you may not have explored.
Joe: And tips and tricks become ever important. But at some point, you need to attach some software. Getting to pledges, you developed a solution that will track those pledges that talks to QuickBooks can you tell us briefly about that?
Gregg: Sure. The app is called Pledgify and it's an app that works with the online edition of QuickBooks as well as the desktop. Basically, the problem is that when it comes to tracking donations and pledges, that's something that nonprofits need, but it’s really hard to do it within QuickBooks. One of the examples is you can't really enter a pledge into QuickBooks easily if you don't want it to show on the financial statements, and most nonprofits don't - they don't want to count their chickens before they hatch. That was one need. The other thing is if you want to get a year-end thank you letter out of QuickBooks that lists the donations, you can't really do that in QuickBooks. For those two main reasons I developed the app and it actually won the Hackathon at the QB Connect National Conference.
Gregg: It was a group of five of us that did it. But what the app does is it basically is a cloud based application, it costs $35 a month, it allows unlimited tracking of donations, unlimited tracking of pledges. It basically takes you from the beginning of the process all the way to the end automatically. A person can enter a pledge and make a payment against a pledge on your website. That transaction gets processed, gets entered in the donor database. Thank you letters go out and it automatically syncs with QuickBooks real time, so there's no double entry. There are tons of nonprofit donor databases out there but none of them sync; many of them have an import feature but it doesn't work very well or not at all.
Joe: And that’s always amazed me that in the world of thousands of QuickBooks and QuickBooks Online integrated applications, for some reason the applications that service the nonprofit sector have not been as ambitious, as intentional, about integrating with QuickBooks as the for-profit sector’s been. It’s been a long time frustration for me, so I'm glad you built this.
To the core product, is there really a compelling reason for nonprofit organizations to get QuickBooks Premier Nonprofit Edition or is QuickBooks Pro fine, especially if I know how to build the reports I need?
Gregg: QuickBooks Pro is fine. I will say it this way, there's not a lot of extra bells and whistles that you get with a Nonprofit Edition, so QuickBooks Pro is fine. However, having said that, it's actually cheaper - even though the retail price of Premier Nonprofit is more expensive than Pro - it's actually cheaper for a nonprofit to get the Premier Nonprofit Edition and this is because Intuit offers this product on a website called TechSoup. If you've not heard of it, you need to write it down. It’s a nonprofit organization whose members are nonprofits and there's 250,000 nonprofits that are members. Your clients that are nonprofits will have heard of it and you can buy hardware and software there. You can get the Premier Nonprofit Edition, one user license, for $50 as opposed to $450 which is what the retail price is. So even though Pro is fine, go ahead and go to TechSoup.org and your client will be able to purchase it for $50, the Premier Nonprofit.
Joe: All nonprofit organizations qualify for that price?
Gregg: I think that you have to have a budget of less than five million or something like that I'd have to look at the TechSoup website, but I've not run across very many that don't qualify. And libraries qualify as well. Just go to TechSoup.org and type in QuickBooks in the search and you'll see all the products that are there. You can also get the Online Edition there for $50 a year. Not a month, a year! They just added that a few months ago.
Joe: So that's probably worth… people who are tuned to the podcast right there. If you have any clients or nonprofit organizations - there's your nugget for the whole thirty minutes that you’ve spent with us, but there so much more here. I want to continue by saying, if someone's listening to the podcast, how can they effectively engage nonprofits? What are the best entry points? What do they realize their primary needs are? How can I package my services where it will be appealing to them? And, am I really walking into a pro bono situation every time?
Can you just tell us a little bit about the nature of your engagements with your clients?
Gregg: It’s interesting. How I got involved with that is just because it was a niche of mine. Most nonprofits out there are going to require an audit and they certainly all have to do a 990, and because of what you had alluded to earlier, Joe, there is an idea out there that not only is it hard to do nonprofit accounting, but it's not very cost beneficial, because they don't have the money to pay you. Well, that's not necessarily the case at all, because as a result of those two ideas out there that are incorrect, there's not very much competition. I almost don't want to tell you this, but if you decided that you were going to start going for nonprofits, you would find it extremely easy to get clients.
Now where to go to do that is you start by volunteering at a nonprofit, to be honest with you. And you're an accountant; they love accountants on their board. So find an organization that you're interested in and sign up and volunteer and start getting involved with that one organization. Let me tell you something, the nonprofit communities in the various cities across the country are very tight and very close. Everything I get, I get through word of mouth. So once you start doing some work for one nonprofit, if somebody will tell somebody else, and it grows from there.
You can also go to the state associations of nonprofit organizations. Most states have a state association, and you can sign up to become an affiliate member. They usually have some sort of membership. You could offer to give a class for free. Many community colleges have a nonprofit arm, that's another place to go to. I just kind of threw that out, giving a class. I don't know that that's something that you'd want to do or not. It's been wonderful for me, but I would say that finding a nonprofit that you feel good about is probably the best start.
Joe: Now, we've been talking about nonprofits as a sort of macro-category, a macro-niche. Can you give us a very quick bulleted rundown of some of the micro-niches that exist within the category?
Gregg: That's interesting. All right, so… There are performing arts organizations, this is one area. Then there are schools, usually private schools (tuition). There are membership associations, that’s another one. Regular 501(c)3 charities, that's going to be your regular charity and that's another one. Then the last one are houses of worship. Each one has their own particular needs and requirements. Houses of worship are particularly unique in that they have fund tracking that nobody else has. If you go to a church or you go to a house of worship, a lot of times you can put money in an envelope, but you can check - this goes to the building fund, this goes to the choir fund and somebody wants to know how much money is in that fund in any given point in time. That is very unique; it's a niche within a niche. I thought about doing a webinar across country just for houses of worship to show them how to track funds.
Joe: Can you give it to us really quickly? How do you track funds?
Gregg: You use the class feature to track a fund. Classes for a regular nonprofit are used to track program versus admin versus fundraising. The reason why for a regular nonprofit that's what classes are for is because regular nonprofits have to do a 990 and they have to do an audit and the expenses have to be shown like that Excel spreadsheet, where the rows are the natural categories and then the classes are a column for program, a column for fundraising, and a column for admin. It’s perfect.
Churches and houses of worship in general they don't have to do an audit, they don't have to do a 990, they can do anything. We always joke about it in the classes, I mean they could be running a gambling ring, nobody would care. That’s not true.
Joe: The members might care!
Gregg: Yeah, their members definitely would care! The point is they don't need classes for program, admin, fundraising, so it frees the class list up, and you use the classes to track the funds. Every transaction gets pointed to a fund, all the income and the expenses. Then you build a report, which is fairly complicated to build and once you build it, you memorize it. It's a custom report where the rows - it's a custom summary report, if you really know this stuff - where the rows are the classes and the columns are the total. Then you basically end up with a report where for every fund, how much money is in that fund is at the very bottom of it and when it totals, that total equals the balance of the bank account. You can pop that report up at a moment's notice and it makes churches and houses of worship so happy. It’s crazy. You can’t, by the way, get that report in the Online Edition; you have to have the Desktop for it.
Joe: There’ something there. Maybe it would be a good idea to have you on a webinar at some point. So, if you’re a podcast listener, stay tuned for news on our webinar series. I will see if I can get Gregg back to show us some of these tricks, because I think we've got a mental image of it, if we’re a very savvy QuickBooks consultant or QuickBooks ProAdvisor here in the audience. But for those that couldn't visualize that out, I'm sure they'd love to see it in action.
I have one more question before we wrap up. And I'm hoping you answer it in a certain way. If not, I'm going to steer you to a certain answer. You have broken into the national training space as a nationally renowned trainer and you don't just speak at Scaling New Heights, you speak all over the country. And many, I mean we're talking tens of thousands, of your peers look to you as one of the definitive sources for servicing nonprofits, especially with technology and QuickBooks. How did you break into this space and how has it affected your practice?
Gregg: I always did public speaking before when I was in high school and college. I actually wanted to be an actor, so of course I became an accountant. Kind of ridiculous, but I missed being in front of people. In the year 2000, people started coming to me with this accounting package called QuickBooks and saying, “Hey, you don't need to charge me for anything anymore except the tax return, because I've got everything in Quick Books.” So, I bought QuickBooks not knowing much about it so that I could see their data file, and of course it was a big mess - office supplies were listed as a bank account, nothing was reconciled. In those days, accountants were really upset with QuickBooks, because the clients would show up with this big mess. So I decided to take a class. I took a class offered - a two-day class in QuickBooks - and I sat in the back of the room and I'm like, “I want to do that. That's what I want to do.” And so I ended up teaching for that company and I taught for two years. I kept my accounting firm; and let me tell you something, if you want to understand something, stand up in front of a room and try to teach it for eight hours a day. You will learn.
Joe: And if you do have a gap in your knowledge, that audience is going to filter out that gap and then you're going to fill it because of embarrassment. You’re going to make sure you fill it and then you’re going to be fine.
OK, can I pick up the story from here? This is where it gets really good. So I went to one of those classes by one of those companies. It wasn't because I didn't understand QuickBooks, I was actually already myself a national trainer to accounting professionals and an author for McGraw Hill on QuickBooks. I came, to be honest, because there were a lot of small business owners in the room and it was in Atlanta and I knew that I could meet people and get clients. So I paid for my registration and I sat in this room full of about, I think, about 100 small business owners or so and you were up there. You were knocking it out of the park and I thought, “This guy's really, really good. He knows his stuff.” You were messing with the audience and picking at people and we were just having a great time. I got to meet you; I stayed afterward and shook your hand, we were both from Atlanta. We got to talking and everything.
So, I don't, gosh, what was about a year later, two years later, something?
Joe: I was teaching for Intuit and we had just launched this big national tour. We had an event in Chicago with something like 300 people in it. The day before that event happened, whoever was supposed to teach got terribly sick and couldn't come. I couldn't come because I was speaking in Mountain View on the Intuit campus and Intuit had nobody to send. They were going to cancel this event on the new features of QuickBooks or something. By sheer coincidence, I had just taught for Intuit at some Sheraton or something in the San Francisco area and you were there for that company, complete coincidence, teaching on QuickBooks to small business owners. I turned to the guy at Intuit and I said, “I know this sounds crazy, but this guy in here teaching this QuickBooks class…. If you fly him on a red eye to Chicago, he could do it.” And you had no idea this hallway conversation is going on. And you would have been the first one to go, “With no preparation?? No, I can’t!”
Gregg: Let me just say, you came in and you told me, “We need you to teach, if you could teach this class for us just this one time.” And I'm thinking to myself, “OK. Well, you know I need about a month or so to prepare, a couple… Where is this class?” It’s in Chicago and here we were in California. “When is it?” They were like, “Tomorrow, 8:30 am.” I thought, “Are you crazy?”
Joe: And this is where it gets really cool, because in this moment of insanity, Gregg says yes and then it's my job…
Gregg: You have to, you have to!
Joe: You have to, right, when something like that falls in your lap. My job now is to get Gregg ready to teach in Chicago the following morning before his red eye leaves at ten o'clock that night. So we holed up in my hotel room and I've got about four hours to prepare you to teach for four hours. Fortunately, you were a quick study, but this is my favorite part of the story. Right as you were about to jump in the cab for what's probably going to be like ten o'clock…
Gregg: Yeah, ten o’clock.
Joe: Just before you’re going to jump in the cab to go take this red eye so you'll land just in time to go teach with no sleep and never having taught it before and four hours of prep you go, “I don't have a shirt,” because Intuit made their instructors where a special shirt. So I grabbed the shirt I've been wearing all day off my back and I threw it at you. So you also taught it in a dirty shirt.
I will tell you, and I'm going to aggravate you for life, but I never got that shirt back.
Gregg: I still have the shirt! You’re not getting that shirt back. That really changed things for me, that really did. And that’s why you're still one of the most important people in my professional life definitely.
Joe: Well, thank you, Gregg. Well, you saved our necks that day, too.
I will wrap it up by saying this.
Embracing your full potential involves a measure of risk and courage. The theme of Scaling New Heights 2017 is “Face the Yeti,” because we are fully convinced if you're going to scale new heights, there are things on that mountain you have to overcome or you're simply going to stop climbing or even start descending the mountain. You overcame a couple of Yetis there - there was the courage factor, the risk factor, the exhaustion factor. But mostly the risk and the courage. And the payoff for you has now been an established career as a national trainer.
I’m not going to tell you that risk always pays off, folks. But I'm going to tell you that if you don't swing, you’ll never hit.
Gregg: Well, and it continues.... That is what life is all about.
Joe: You know, it really is.
Gregg, thank you so much for being here. We look forward to continuing to use you and work with you as an instructor in our various offerings, especially Scaling New Heights. I know you knocked it out of the part at 2016. The reviews were fantastic. And I appreciate you for being on the Podcast.
Thank you for tuning in today and our conversation with Gregg Bossen. For more information about today's episode, to explore other episodes in this podcast series, or to learn more about our annual conference, visit Woodard.com. As always, we encourage you to stay tuned, stay connected, never stop learning, and scale new heights!