Management Is — Steve Andersen — Web of Change Ignite 2012 from Web of Change on Vimeo.

“One of the recurring questions in the Salesforce for nonprofits world is about how we handle money and enter Donations/Opportunities to best track donations, grants, etc. Here, I’ll outline how I handle common scenarios in the Non Profit Starter Pack (NPSP), and how it affects the donor rollup totals.”

I had the chance to meet some of the Invisible Children staff Thursday at an event in San Francisco. Invisible Children is a customer and grantee of the Salesforce.com Foundation. I saw 6,000 chatting business people hush to silence when a 3 minute Invisible Children video was played. People wanted to hear from their COO Chris as he was interviewed live on stage by Peter Coffee. The interest and attention was powerful.

I saw the news yesterday and it upset me. We worked hard to get Invisible Children on stage. We would love to tell their campaign story to our customers. The technical side of how they dealt with virality is a blog post in itself. How inconvenient of him to screw things up for Invisible Children, for mass action in general, and for me.

But as all of this was happening, I ran across two TED talks by Brené Brown. You may have seen them already–on vulnerability and shame. Watch them if you haven’t.

The events yesterday, and Brené Brown’s talks, remind me that all this work we do, all this change we’re trying to drive, it’s all done by people. People, like me, who are flawed. People who have fears and things to prove and misguided notions and moments of brilliance.

I have never met Jason Russell, I don’t know what brought him to this work, I don’t know his motivation, and I don’t know what is behind the event that happened today. And on one level I don’t really care. My thoughts go out to him as a person trying to do what he thinks is right in this crazy world where so much is wrong. I don’t see it as naive, I see it as humane. I saw humanity in the Invisible Children staff I met Thirsday–smart, kind folks trying to do good work in an organization that changed over night in a way that they are struggling to manage.

It will be so easy to follow the funny internet memes about Jason, to listen to the late-night talk show jokes. I’ll likely laugh at many of them–I’ve already seen some that are clever.

But I’ll also remember how quickly the world tears down change makers at the first visible flaw. And I’ll hold back from joining in the tearing down, not because I know Jason in unimpeachable, but because I know he’s flawed, just like all of us.

Go get it in the Chrome Web Store and please rate it if you try it out! The source is also out on Github free to use.

This article is meant to lay out what I’ve learned about this subject from all the great finance people I’ve worked with over my career. But more importantly it will examine how it all relates to Salesforce.com and some changes Kevin Bromer is making to the Nonprofit Starter Pack.

First I’ll talk a bit about how the Nonprofit Starter Pack works today. Next I’ll get into the accounting of it all, with the full disclaimer that I am not an accountant. And then I’ll get into the new way we’re going to do things, and talk about why that’s better, all with the goal of us better understanding the business processes we support.

Salesforce.com isn’t an accounting system, but thousands of organizations use it to track money. Many organizations directly integrate with their accounting systems. Modeling money well in Salesforce.com makes that kind of integration easier. And even if you don’t integrate, the changes we’re making provide much better support for key nonprofit work like pledged gifts, and gifts with multiple payments.

I got a lot of help in writing this article from Debbi Lewang, Shalinee Thakur, Nick Bailey, Sam Dorman and of course Kevin Bromer–any insights should be attributed to them, any errors in logic or accounting are most definitely mine.

How the nonprofit starter pack works today

The Nonprofit Starter Pack is used by thousands of organizations on Salesforce.com to manage their organizations and their missions. These organizations are incredibly diverse, engaging in everything from class-room education to lobbying congress to providing health care to the homeless. But no matter what they do, they must track their organizational revenue stream, and many do in the form of gifts, grants, ticket sales, etc.

Salesforce.com has a database object called Opportunity that represents revenue and potential future revenue. It was created by the company to handle sales deals when Salesforce.com was limited to Sales and Marketing. Now that the platform is so much more flexible, the Opportunity object serves well as any kind of revenue–gifts, grants, memberships, ticket sales, etc.

The Nonprofit Starter Pack uses Opportunity to track revenue, and it works pretty well. We also have a Recurring Donations package that can be used to track gifts that are paid with more than one payment. It has a simple object and wizard for creating a schedule of Opportunities spaced out at intervals you select. It is a simple way to create multiple Opportunities that are related.

There are some limitations with the way the Nonprofit Starter Pack supports money today. The main problems have to do with a lack of support for cash in addition to revenue. In the next section I’ll talk about the accounting realities that we are planning to support.

Revenue and Cash: Nonprofit accounting

Revenue tracking and forecasting is critical to all nonprofits. Annual revenue must be reported to the IRS, and any business that doesn’t know its revenue picture can’t effectively plan for the future. This is easily done by reporting on Opportunities, and most nonprofits using Salesforce.com have already figured that out.

Nonprofit accounting (and accounting in general) is more complex than simply recording revenue, though. We need to support cash tracking in addition to revenue. This is because nonprofits can report revenue without receiving any money. When that happens from a donor or a grant maker, we often call it a pledge. The donor commits to giving to the organization, and may identify a payment schedule at that time. Let’s look at an example case to get into the specifics.

The nonprofit Friends of Tiny Creek (FOTC) wins a $1 million grant from a foundation. At the time of the award, they are promised a check for $250,000 and are told to expect 3 additional payments of $250,000 over the next 3 years. How should this be recorded on the financial statements?

FOTC records $1 million in revenue from the foundation. This is revenue in the fiscal year in which the grant was received. Because the cash isn’t received at the time the revenue is recorded, it can’t be spent yet. While the funder can put other restrictions on the gift, we will assume that this one hasn’t, and the money will be available when the cash payments are received.

So this $1 million commitment is recorded as a credit (increase) to revenue on the income statement and a debit to assets on the balance sheet.

One week later the $250,000 check comes in as promised. $250,000 is now cash that can be spent. On the balance sheet, cash is debited by $250,000 and assets receivable is credited by the same amount. The effect of this seemingly backwards transaction (there is a reason I’m not an accountant) is that $250,000 of the grant funds are now available for use and $750,000 is still to be received. [1]

The initial pledge and the resulting cash are related, but come in at very different times. And in this case you can see how the date the revenue is recorded is very different from when FOTC can actually spend the money to support it’s mission efforts. If FOTC isn’t paying attention to it’s cash picture, they’re going to have a hard time planning and delivering.

As the yearly payments come in, they are recorded and revenue is released accordingly. When all payments are made, the receivable goes to zero and the funds are available.

In this case, though, the foundation in question rescinded the last payment of $250,000. In this case, FOTC must record that amount as a write off against the receivable. That balances the sheet, and the change in revenue can be reported in their annual numbers.

The case of monthly giving

On the face of it monthly giving looks a lot like a pledge of multiple payments similar to our grant example above. A monthly giver commits to $20/month and then makes payments on a schedule. However, the monthly giver’s commitment isn’t an official pledge unless they tell you the end point of their giving. In many cases the monthly gift is started with no set end date. If you don’t know the end date, you don’t know the total revenue, so you can’t record it as pledged revenue on your income statement.

Because of this, each monthly gift should be considered a separate revenue entry, with it’s own matching cash entry when it is paid.

Better modeling cash in the Nonprofit Starter Pack

As stated earlier, the Opportunity object is great for tracking revenue. But what about cash related to that revenue? There isn’t a good way to model cash in the Nonprofit Starter Pack, but lots of Salesforce.com users have already solved this for themselves–that’s the beauty of a flexible platform. We’ve looked at those solutions can come up with something that we think works pretty well. When we release this functionality, you’ll be able to turn it on, or continue to use the Nonprofit Starter Pack as you are today.

The Nonprofit Starter Pack will get a new child object to Opportunity called Payments. Payments will be where cash is recorded. The Payment object will represent all the cash received by an organization. It will be helpful in a number of ways:

• Payments will allow you to record received cash payments against promised revenue
• Payments will allow you to record a payment schedule and make sure you don’t forget to collect them when they come due
• Payments will allow you to write off rescinded payments
• Tracking cash in Salesforce.com allows for much better analytics than most accounting systems

The Payment object will have rollup summary fields to the Opportunity that show you the number of payments per Opportunity, the amount of payments that have been made, and the remaining balance. Having this information on Opportunity makes it very easy to see which Opportunities aren’t fully paid yet.

Ok, back to our scenario for some illumination.

FOTC is a very stable organization. If we look at a dashboard of their revenue (Opportunities), we see that it’s uniform. They get about the same amount of revenue each month.

Most of those Opportunities were one-time payments–the cash came in the same time the revenue did. But about a third of them were paid in multiple payments. If we take a look at a chart of the cash, you’ll see that it’s much more irregular than the revenue chart. Note that the scale is different in these charts.

The same is true with forecasting–revenue in the future is expected to be pretty stable.

If we look at a cash forecast, it’s very lumpy, with peaks and valleys.

FOTC needs to see its revenue picture and also it’s cash picture, and it’s not clear from one what the other will look like.

Revenue where the cash is received immediately

At most nonprofits, most gifts aren’t pledged, they are just given. A typical scenario is a $100 check coming in the mail. Recording that check requires recording the revenue and the cash at the same time. Data entry is a time consuming task as it is. Having to do double entry–revenue and cash–for all gifts is an unacceptable burden, so we built automatic cash recording right in.

In the case of a gift where revenue and cash are simultaneous, the new payments functionality creates one payment for every Opportunity. It keeps this payment in sync with the Opportunity, unless you choose to set up a payment schedule. This solves the case of multi-payment gifts without causing extra work for all those gifts that don’t have multiple payments.

By creating automatic cash payments for each opp, the cash picture isn’t limited just to pledges with payment schedules, but includes all cash for all revenue. This allows for better reporting, like the charts shown above.

The case of monthly giving

For monthly giving, each gift should be considered it’s own revenue event because they aren’t connected to a known pledged amount. Therefore each gift should be an Opportunity, rather than Payments under one Opportunity. Each gift will, of course, have a payment, because all revenue does when you’re tracking revenue and cash.

The Recurring Donations functionality in the Nonprofit Starter Pack will handle this case better with the next release. You will be able to create a Recurring Donation Profile, detailing the recurring gift. The wizard will then create Opportunities according to your schedule. At present moment we’re thinking that the Recurring Donation functionality doesn’t need to know about payments at all–it will just interact with Opportunities. This may change, but it’s what we’re thinking now.

Currently Recurring Donations has the word “Pledges” in the object name. If you’ve read this far, you understand now that this is incorrect. Kevin is planning major upgrades to Recurring donations, and we will likely be renaming things to make more sense. He’s also planning on supporting the automatic creation of Opportunities for open-ended giving, and keeping the Recurring Donation Profile in sync with the Opportunities. We’ll likely give you the ability to keep a rolling year of potential gifts in the system. If you don’t want all those open gifts out there, we’ll likely give you a way to keep just one open gift for each recurring donation.

Conclusion

While Salesforce.com isn’t an accounting system, better modeling of nonprofit accounting practices is great functionality and we expect it to be popular. The coming upgrades to the Nonprofit Starter Pack will allow for cash reporting, write-offs of revenue, and facilitate collections of promised payments. Upcoming improvements to Recurring Donations will make it easier to handle recurring donations that are open ended.

If you have questions or comments on our implementation, or have feature requests, please comment on this post.

————-

1. Technically, multi-year grants are received as restricted assets. Each year the revenue is released from restricted net assets to operating net assets as it is needed (credit on the restricted side, debit on the unrestricted side). Another interesting point – multi-year pledges are worth less than cash received today.You have to discount to present value and adjust based on the outstanding amount of the pledge each year. Again, this is something you’ll likely want to handle in your accounting system.

If you want to make a difference working with the best tools and the best customers, on a great team, this may be the job for you.

I’m finding his tale of the merging of internal systems of record with external systems of engagement, and the socialization and consumerization of these objects to be really compelling. The corporation is changing, and his take resonates with me. It’s worth a read.

Gideon Rosenblatt is currently breaking it down chapter-by-chapter. I recommend reading his digests and then getting your hands on this fascinating book.

Coherence is Rick’s name for telling the truth. For aligning “what we deliver with what we say we deliver.” It’s hard to argue with telling the truth, but it’s amazing how many people and organizations spend energy hiding their true selves. Coherence is about looking at who you are, and then projecting that to the world so that people who see a match can find you. It’s about creating an experience that is authentic and unique to you and your strengths and weaknesses.

This resonates deeply for me. The best leadership experiences I have ever had were when I was most honest about the reality of the situation. Where I stopped trying to control things and land them in a specific place, but was open to them going where they would go. I yearn for control, and it takes effort to release that yearning.

Organizations will better serve their constituents if they are honest about what they’ve got. So many groups try to be something they are not, only because they think that’s the way it has to be. Rick tells a great story about Goshen College and how he helped them change how they told their own story. Goshen is a Mennonite college with a tradition of service–they turn out amazing people who really take service seriously. I have been lucky enough to know two Goshen College graduates and they are both brilliant, dedicated change-makers.

Rick’s story of Goshen really struck me because the way he recommended they talk about themselves was directly in line with my experience. He called out Goshen’s quirky, joyful dedication to service–exactly how I would describe my Goshen alum friends. And that’s the point–people know what they see, and if you’re telling an untrue story it just doesn’t work. If Goshen tried to tell a story that they were like a midwestern Yale University, I’d see right through it. My friends are as smart as the most brilliant Yale students, but they aren’t the kind of people Yale attracts. It all either hangs together, or it doesn’t. Coherence is critical to it all hanging together.

Social change organizations, and for that matter individuals, could stand to be more authentic with themselves and what they tell others. Amazing organizations are doing this and delivering experiences to their supporters that are really powerful. Rick lays out how he consults with groups to get there–be honest in looking at who you are, look at how you are currently talking about yourself, and find out what people really think about you. By doing this you can best connect with your authentic value proposition, and share that unique story with the world. Once you do that, the people with whom that story resonates will be drawn to you, and it will be a good fit.

Rick works a lot with colleges, and so his deepest case studies are in that arena. But the message is much broader and great for any social change organization to hear. I recommend the book and the approach. We could all stand to be a little more coherent!

In that article I talked about doing some simple A/B testing. A/B testing is best described as doing some effort while changing one variable in the hopes of learning something about how to affect the outcome of effort. It’s been perfected by the direct mail industry–mailings are run as experiments and each mailing adds to the base of knowledge of how to increase response rats.

As I was writing the article I became dismayed that what I was proposing wasn’t actually very easy to do in Salesforce.com, the system I champion on a daily basis. We use Campaigns for outreach efforts, and while Campaigns are incredibly powerful and easy to work with, randomly breaking them into segments for A/B testing wasn’t easy.

I say “wasn’t” because I have released a tool for A/B testing that is free to users of Salesforce.com, which is listed on the Appexchange under the name Campaign Segmentation Wizard.

Build your list of people to whom you want to reach out, then use the wizard to randomly break them into segments of the exact size you desire. Those segments are Campaigns of their own, and can be used in any way you see fit–mass email, phone banking, etc.

Here’s a short video showing how it works.

If you install it and use it, please rate the app on the Appexchange so others will get a sense if it’s helpful or not.

With the new features Textexpander got really interesting for use in coding on the Force.com platform. The Force.com IDE doesn’t have code completion like the in-line code editor does, and it’s something I look forward to Salesforce.com providing. But in the meantime Textexpander is a great solution for helping you with code you write over and over again.

Textexpander now allows you to put variables in your snippets and allows you to fill those variables as you are expanding the snippet. So, for example, when you’re declaring a List of Accounts, you don’t have to type List twice, and Account twice. It’s really slick.

I’ve created a Snippet Group for common Apex syntax. To use the file, install Textexpander. Right click on the link to the Snippet Group and save to your computer. It’s an XML file, but you need to maintain the .textexpander extension on it. Then open up Textexpander and ‘Add Group from File.’ The group will show up in Textexpander.

Right now this Snippet Group includes:

• declaration of lists, sets, and maps
• declaration of an sObject
• for loops, both kinds
• if statements
• select statements
• test methods
• try catch block
• system.assert statements
• describe result for an sObject
• describe result for a field

It’s just a start, but if you take it and like it, add to it. Let me know and we’ll expand this Snippet Group to be comprehensive. Clearly there should be a VisualForce Sinppet Group as well. If you create one, please let me know!

I’ve always thought that the biggest benefit of a good getting things done (GTD) system is the mental relaxation that comes from knowing you’re not forgetting things. My brain is one that cycles on things even when I don’t want it to, so I’ve really loved not having to spin on ‘am I forgetting something I’m supposed to do?’ In this transition there are a ton of new timelines and tasks I can’t lose track of. Budgets need to be done, priorities set, meetings to attend. But the best part is there is a new level of organizational strategic thinking–I get to design the strategy for my department and lead the process for our Theory of Change. And my GTD system is really helping me save the brain space for that processing. Now whether I come up with any good ideas is a different story, but it’s great to feel like I’m not spending all my cycles on a mental to do list and starving the part that could be cycling on the really fun, intellectually challenging work.

My GTD list is in Omnifocus. I haven’t fundamentally changed my GTD process, but I find I have tweaked it a bit in the transition:

1. I’ve upped the frequency of my reviews. I look at everything more often because so much of it is new. I’ve gone from one weekly review to multiple-times-a-day mini-reviews.
2. I created a new perspective called “Blocked”. This shows me things I’m waiting on other people for where the due date has passed. On short deadlines I need a place to look and see quickly who hasn’t gotten me what I need to move forward. This helps me with gentle nudging…
3. I have created waiting contexts for new people I’m relying on. I mostly relied on a general ‘Waiting for someone’ context, but I now find it helpful to call out key people who are supplying me with things I need.
4. I’m using due dates more than I have in the past. I’m finding that with all the new stuff it helps to put a hard date on it even if it’s not actually due that day. Perhaps I’ll stop doing this once the short-term stuff settles down, but for now it helps.

But I think the most important thing is that I entered this transition period with an established and working GTD system. I worked hard over the past year to get things to where they are. I was able to tweak my processes, rather than trying to learn a new system at the same time I was dealing with all the other new things. So my advice is this–the best time to get your GTD system working for you is now, not when you really need it most. You never know when transition will happen, so be ready for it!