By Jori Hamilton, freelance writer
Financial technology, or fintech, is a growing market. Today, the fintech industry is valued at more than $118 billion, a figure determined by the sector's ability to streamline the lives and workflows of every type of business imaginable. With most nonprofits operating with minimal budgets and staff, the fintech sector promises to change the game, enabling more automated processes that save time and money––processes which, in turn, can make all the difference in your organization's ability to make a difference.
The Importance of Assistive Fintech in the Nonprofit Sector
Nonprofits know better than most that lofty, world-changing goals take time, labour, and resources. Recent surveys reveal that the majority of North American adults expect a nonprofit to operate on less than 20% of its overall budget, which means that many organizations are stuck in a vicious cycle of attempting to meet impossible expectations while keeping their costs as low as possible. As a result, it becomes difficult for most nonprofits to develop the infrastructure they need to operate effectively and, in fact, many of them struggle to operate on their less than $1million budgets.
Stretching minimal resources to fund the staff and project needs of your organization is a difficult balancing act. After all, you need to consider expenses like worker salaries, overhead for fundraising events, employee health insurance, workspace needs like rent and utilities, and more. Juggling these line items while keeping a clear eye on your resources and donations can be a real managerial chore. In addition, to successfully maintain a balanced budget, there has to be clear communication from your fundraising team to your finance team. Depending on the size of your organization, these roles might even be handled by the same individual. It's no surprise, then, that budgeting processes can get real complicated real fast.
That’s where fintech comes in. Financial technology represents the suite of tools at your disposal for managing credits, debits, donations, payrolls, and even the structure of your organization wherever it happens to revolve around money. The right fintech platforms and dashboards can take your processes from unwieldy to mostly automated, allowing your finance team the space to focus on how to best grow your organization's resources. A host of benefits are available to nonprofits that effectively utilize these emerging tools. Here are some ways that fintech can help realize your nonprofit's potential:
How Fintech Can Help Nonprofits
The nonprofit sector frequently depends on the support of the general public in order to achieve its mission. Yet in order to leverage charitable donations, convenient methods to accept and process donations are now key. Fintech is paving the way to keep overhead costs low while creating greater convenience for donors and collaborators. Emerging artificial intelligence and cloud database trends across nonprofit accounting processes show how participating organizations are reaping the rewards. Here are some of the important assistive functions that modern tech is currently playing in the nonprofit world:
Accepting Donations: Today, cash is out. In fact, the younger you are, the less likely you are to carry cash with you. The same is now true for all of your donors. In the digital world of contactless payments—made all the more popular by the COVID-19 pandemic—donors want ease and convenience when giving. This means making your financial systems compatible with online and mobile applications for donating. From making use of payment software-as-a-service to partnering with virtual payment processors, you can provide convenience to donors of all ages and backgrounds. Doing so will help you appeal to a larger audience, make your nonprofit reachable across more platforms, and provide avenues for the easy automation of financial tracking.
Automating Processes: As cloud-based and decentralized data systems advance, so does the potential of nonprofits to automate the majority of their accounting processes. In fact, with financial data coming in through digital donations and payments, you can sync software with every transaction made to and from your organization. This is a great way to spend less time on administrative and accounting tasks all from the convenience of a single dashboard. Even auditing processes can be automated through new technology. Blockchain, for instance, can allow for triple-entry accounting procedures that store each transaction in three places at once, so that financial information can be checked and verified easily.
Enabling Microfinancing: Today, fintech companies are partnering with nonprofits to provide greater resources to communities in need. Microfinancing is one great example of what can be achieved when pairing the right tech-enhanced systems with nonprofit's daily operations. Through platforms like the award-winning Instafin, microfinancing institutions are reaching vulnerable families in rural areas to provide banking and lending solutions that can vastly improve their quality of life. As nonprofits look to provide help to communities in an increasingly digital world, these tech solutions will be invaluable in assisting both the organization and those it serves.
While fintech can streamline the financial processes of many nonprofit organizations, these tools cannot automate everything. Nonprofit accounting roles like accounting managers and grant accountants will always be key to the health of a well-structured team. At the same time, with the right tech tools and professionals in place, your organization can save significantly on both time and labour. If you are not sure where to begin, start by exploring and implementing systems like digital payment processing and cloud databases. From there, you will be able to determine what new technologies may help you improve the lives of the communities you serve.