5 Key Trends That Will Impact Nonprofits in 2019
By Steve Anseth, CPA
Our commitment to serving nonprofit organizations includes staying informed about developments that could impact the industry. This is why our CPAs and consultants serve as board members of local and national nonprofits, participate in professional industry associations, and engage with nonprofit leaders across the country. As a firm, we are constantly keeping our eyes on the proverbial horizon.
In doing so, we’ve sought to anticipate where the nonprofit industry is headed in the coming months. To help you plan ahead, here are five key trends that could impact your nonprofit in 2019.
1. Donor Advised Funds
One of the changes brought about by the Tax Cuts and Jobs Act was an increase in the standard deduction, which largely curtailed the tax benefits associated with annual charitable giving for small to mid-size donors. One strategy donors are using to overcome this is to “bunch” two to four years’ worth of contributions into one year.
As a result, donor-advised funds (DAFs) are experiencing a surge in popularity. These giving vehicles enable donors to receive the tax benefit of their contribution and then distribute grants from the fund over time to a nonprofit of their choice.
This means nonprofits must determine how to best work and communicate with donors who have a DAF. At a minimum, nonprofits should consider creating content—whether in the context of an appeal letter or development initiative—that speaks directly to these individuals. Nonprofits may also want to consider setting up their own DAF to give donors a tax-advantageous way to support their organization.
2. Flat or Decreased Government Funding
Nonprofits have long been asked to do more with less, particularly those that receive government funding on a fee-for-service model (e.g., a nonprofit that provides housing for people with disabilities). Unfortunately, we expect this trend to continue. Over the next year, government funding for nonprofits is not likely to increase. For some, it may even decrease.
In response, nonprofits that rely on government funding should consider launching their own development initiatives. This might include hiring a development director or engaging in direct fundraising for the first time in the history of the organization.
3. Technology to Increase Efficiency
Nonprofits are continuing to leverage technology in new ways. For some, it may be using social networking and mobile applications to attract a younger demographic. For others, it may be using digital tools to improve operations. On the accounting side of things, a digital tool we’ve seen more and more nonprofits adopt is cloud-based accounting solutions.
By storing financial information in the cloud instead of on a physical server, a cloud-based accounting solution offers several benefits. Organizations that opt for a cloud-based accounting solution are often able to reduce their IT infrastructure and costs. It also gives staff and board members easier access to financial information and could even allow certain employees to telecommute, reducing the organization’s need for office space.
The bottom line: Nonprofits that have been slow to adopt technology will not be able to keep the status quo much longer. Tip: Nonprofit-focused technology solution provider www.techsoup.org offers QuickBooks Online Plus, a cloud-based accounting solution, for five users at $50/year.
4. Mergers as a Solution
At this point in time, many nonprofits, particularly civic and social organizations, are concerned about declines in membership as well as the retirement of the baby boomers, many of whom hold executive or key positions. Some nonprofits see merging with a neighboring chapter or like-minded organization as a solution to these challenges.
First, the pros: The merged entity is likely to have more capabilities and cash flow than each nonprofit previously had on its own. And if one nonprofit was considerably weaker than the other, the merger may create an opportunity to improve processes and overall performance. The cons: In certain cases, a merger may precipitate a further decline in membership, as some members may not have confidence in the newly formed organization.
In any event, nonprofits that are considering a merger should be aware of potential impacts not only to their membership count but also to their overall revenue situation.
5. Creative Donor Engagement
Donor engagement is a critical aspect of any fundraising strategy. But for some nonprofits, it can feel like a tall order, especially considering the number of organizations competing for donors’ attention and funds.
In recent months, we’ve seen more and more nonprofits focus on creative ways to boost donor engagement. Some nonprofits have hosted special events, such as small, exclusive gatherings for donors held at board members’ residences or high-profile soirees designed to attract large givers. In the case of colleges and universities, many have tapped into their alumni network.
To better appeal to donors’ specific interests, organizations on the leading edge of donor engagement are spending more and more energy on segmenting their donor lists. Engagement-savvy organizations are also looking at monthly subscription models, which, thanks to Netflix, are familiar to donors. Some organizations have seen as much as a 40 percent increase in their recurring monthly donation revenue after adopting this model.
All nonprofits should consider this question: What will we do to further engage donors this year?
Is your nonprofit prepared for what’s next?
This list is but a sampling of the trends that could impact the nonprofit industry over the course of 2019 and beyond. As the dust continues to settle from the 2017 tax reform, we certainly expect others to emerge. We’re here to help you understand the unique effect each trend could have on your organization, so you can make well-informed decisions for the year ahead. If you’d like to explore how our nonprofit team could help your organization prepare for what’s next, please give us a call today.