Why Nonprofits Should Track Time
No one ever said running a nonprofit is easy. There are endless rules and regulations, a near-constant battle for funding, and significant pressure to simultaneously reduce overhead costs and recruit top talent.
Sound stressful? It can be! But as any nonprofit veteran will tell you, doing work on behalf of those in need — and helping to champion a cause you hold dear — is one of the most important and fulfilling ways to spend one’s days (and occasionally, nights).
Successful nonprofits are efficient, tech-savvy, and excel at communicating with their members, funders, and the community. Oh, and there’s one other thing successful nonprofits have in common: They track employee time.
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Improved Program Management
Tracking timemakes it easy to understand and report on employee and volunteer activity. This allows you to quickly measure the overall costs of programs or initiatives, and easily share this information with your donors, board, or government organization.
Once you’ve started tracking time, you’ll begin to understand the number of employee hours — and true cost — it takes to perform certain types of work or functions. This allows you to create more accurate program budgets, and to more effectively forecast how much time and effort it will take to deliver on your commitments to your members or donors.
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Smarter Staffing
How many employees does it take to run your foundation? What about your fundraising efforts — if you bring on additional help, is there enough capacity on staff to train, manage, and mentor them? Is it more cost-efficient to design your annual report in-house, or should you work with an agency? Do you have enough funding to hire additional office support?
How do you know when it is the right time to make these decisions? These can be challenging questions. That’s why it’s so important to have the answers readily available. There are virtually infinite reports that can be generated from the data hidden within employee timesheets. And simply by entering hours, the larger operational picture becomes much more clear — freeing up your time to focus on strategy, on vision, and above all, achieving your mission.
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Increased Funding
Whether applying for grants, renewing existing funding requests, or preparing for a briefing with important donors, a time tracker offers powerful data that highlights exactly where critical funds are being spent. (We all know that labor is generally the largest use of donor funds, but it is rarely reported as anything but crude, whole-FTE estimates.) Armed with more detailed cost and budget data, it's much easier to tie expenditures to outcomes and make a stronger case for additional funding.
This way, you can can legitimately promise funders, “we will use your funds as effectively as possible” — and be able to prove it — with reports on program costs by task, role, or virtually any other way you can think of slicing the data.
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Better Fund Accounting
You’ve got the grant — now how well are you managing your internal and external resources? Organizations who work under a fund accounting methodology often don’t know where they stand until well after the close of a period. (No one wants to look back at their books and find out that overhead is all the way up to 40%!)
With real-time costs data — paired with funds allocated towards a particular purpose or project — you’ll know exactly where you stand with unspent funds, while there’s still time to re-deploy your resources and make adjustments.
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Eligibility for Government Grants
Nearly every nonprofit is eligible for some kind of government funding. In the U.S., that might be an NIH grant, Americorps, or the Centers for Medicare and Medicaid Services. Increasingly, governments around the world are turning to nonprofit organizations to provide services and outreach.
These programs always come with strings attached for record keeping and reporting. And with each passing year federal auditors have raised the requirements for transparency and auditability. These funds have become a critically important source of support for many nonprofits, so proper timekeeping must become part of their basic routine to remain eligible for them.
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Get More Out of Your Volunteers
Wouldn’t it be nice if all your volunteers came back again and again to help your organization? We’re not talking about 100% volunteer retention (because that's impossible), but there are ways to increase the likelihood of your volunteers returning. Tracking employee hours allows you to record the number of hours — and value — your volunteers provide. With this data, you can provide rewards and incentives that help ensure your volunteers feel valued.
Additionally, tracking volunteer time can help nonprofit organizations secure more funding. For example, some grants mandate that a percentage of awarded funds are matched by the nonprofit. Rather than match with cash, it may be possible to use the value of volunteer time to satisfy this requirement and enable your organization to win this type of grant.
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Easier Audits
Oh yes. The A-word. More or less every employee’s least favorite endeavor. Time trackin helps with this too. Having an accurate and up-to-date record of employee activities makes it much easier to ensure compliance and quickly pass an audit. Especially for 501(c)(3) and 501(c)(4) corporations who are required to report on their expenses by function, as required by FASB 117— which means that every dollar of wage has to be attributed to a specific program, fundraising, or administrative effort. In addition, all indirect costs (rent, phones, etc.) need to be allocated across programs, and employee timesheets are the very best way to distribute those costs. Auditors are far happier to see a timesheet system in place than rough estimates done months after the fact.
Additionally, most modern time tracking platforms integrate with QuickBooks, Salesforce, or other accounting or CRM systems you may use. This should reduce the time it takes to prepare for audits or report to any third-party organization.
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Time Tracking Is Easy
Gone are the days of pen and paper time entry. Or needing to physically be in the office to track your time. Time can be recorded on mobile phones, in Google Chrome, on Google Calendar, online, in the cloud, on your desktop — almost any way you can think of! It’s finally just as easy for field employees to track time as it is for those in the office.
