Why Accurate Payroll and Time Allocation Is Crucial for Your Nonprofit Grant Reporting

As a nonprofit finance professional, you want all your data to be accurate. And payroll and grant reporting are two areas of your financial processes where accuracy is non-negotiable. You want your staff paid fairly, and you want to maintain good relationships with your grant funders. Maintaining compliance can protect existing funding, as well.

But allocating your payroll and time to your grants can be a cumbersome, manual, and time-intensive process.

Keep reading for actionable tips to improve your allocation processes and avoid issues common to managing your nonprofit payroll and time tracking for grant reporting.

The Importance of Accurate Time Allocation for Nonprofits

Accurate time allocation is a cornerstone for nonprofit organizations, especially those with grant funding. Here are some of the reasons why streamlined payroll and time allocation is valuable for nonprofits.

Ensuring Compliance and Preventing Financial Loss

Accurate time allocation ensures compliance with grant requirements. Grants often come with specific stipulations on how funds should be allocated and reported. Failure to comply with these requirements can result in financial losses, such as having to pay back funds already disbursed. Proper payroll allocation ensures that your organization does not leave money on the table and can fully access the grants they receive.

Building Trust with Funders

Accurate time allocation is also crucial for maintaining and building trust with funders. When you can demonstrate that your nonprofit is effectively managing and reporting your payroll expenses, it strengthens your relationship with existing funders and increases your chances of attracting new funding sources. Funders are more likely to invest in organizations that have a reliable and transparent allocation process in place.

Resource Needs and Planning

Accurate payroll allocation helps you better understand your resource needs and plan accordingly. By having a clear picture of how funds are being used, you can make informed decisions about staffing, program development, and other resource-related matters. This level of clarity is essential for your organization’s long-term sustainability and growth.

Attracting New Funding Sources

With a strong time allocation infrastructure, you can confidently scale to take on new grants and funding opportunities. Accurate allocation demonstrates that your team has the necessary systems and processes in place to manage additional funds effectively. This can be a significant advantage when applying for new grants or seeking additional support from existing funders.

Common Issues with Payroll Allocation and Time Tracking

Despite the importance of accurate time allocation, nonprofits often face several challenges when managing their payroll tracking and reporting. These common issues can hinder your ability to manage funds effectively and maintain compliance with grant requirements.

It’s Time-Consuming and Labor-Intensive

One of the most common issues nonprofits face with payroll allocation and time tracking is that it can be incredibly time-consuming and labor-intensive. Many organizations rely on complex formulas across multiple spreadsheets, which can be difficult to manage and prone to errors. This manual process can take up a significant amount of staff time, preventing them from focusing on other important tasks and causing unnecessary frustration.

You Rely on Multiple Data Sources

Nonprofits often have to rely on their payroll provider and cobble together different data sources to get the reports they need for grant tracking. This can result in fragmented and inconsistent data, making it challenging to provide accurate and timely updates to funders. The lack of a single source of truth can lead to discrepancies and frustration.

Lack of an Audit Trail

Spreadsheets are easily editable, and without proper documentation, it can be difficult to maintain an audit trail. This lack of traceability can create issues when it comes to compliance and reporting. Organizations need a system that provides a clear and documented history of changes to ensure transparency and accountability.

Discrepancies and Budget Overruns

Manual time tracking and payroll allocation can result in discrepancies between recorded time and payroll provider data. These discrepancies can lead to budget overruns and difficulties in managing funds effectively. Nonprofits need a system that ensures corrections to time entries flow back to the payroll provider data, maintaining consistency and accuracy.

The Hamster Wheel of Manual Data Entry

Many nonprofit organizations find that as soon as they finish getting time tracked and allocated for one period, it’s time to start over with a new period. This repetitive process leaves little time for data analysis and strategic decision-making. Automating the time tracking and payroll allocation process can free up valuable staff time and enable organizations to focus on higher-level tasks.

6 Tips for Improving Your Time and Expense Management Allocation

To help nonprofits navigate the complexities of time and payroll allocation, here are six practical tips to enhance accuracy, efficiency, and give you more time for data analysis.

1. Clearly Define Costs to Be Allocated

The first step in improving time and expense management allocation is clearly defining which costs need to be allocated. This includes understanding the specific requirements of each grant and ensuring that all relevant expenses are accounted for. By having a clear definition, organizations can streamline their allocation process and reduce the risk of errors.

2. Understand the Percentage Allowed for Each Grant

Different grants may have varying requirements, and organizations need to ensure they are complying with these limitations. This understanding helps in accurate allocation and prevents potential issues with funders.

3. Train Your Staff

Training staff on the proper procedures for time tracking and payroll allocation is crucial. This ensures that everyone involved in the process understands their role and responsibilities. Regular training sessions can also help address any questions or concerns, ensuring a smooth and efficient allocation process.

4. Incorporate Allocation into the Budgeting Process

Incorporating payroll and expense allocation into the budgeting process can help organizations plan more effectively. By considering allocation requirements during budgeting, nonprofits can ensure they have the necessary resources and systems in place to manage their funds accurately.

5. Use Automation

Automating the time tracking and payroll allocation process can significantly reduce the time and effort required. Tools like NXT Time from Capital Business Solutions can help organizations track employee hours, leave, and attendance, and integrate this information with financial management systems like Blackbaud Financial Edge NXT®. Automation ensures accuracy and consistency, freeing up staff time for more strategic tasks.

6. Document and Establish Procedures

Documented procedures include establishing a clear process for handling adjustments and addressing any issues that arise. By having a well-documented procedure, organizations can ensure consistency and transparency in their allocation process.

Get off the Payroll and Time Allocation Hamster Wheel with NXT Time

Nonprofits can streamline their payroll and time allocation process with NXT Time from Capital Business Solutions, a partner in Blackbaud’s Partner Network. This solution helps organizations track employee hours, leave, and attendance, and integrates this information with Financial Edge NXT. By automating the process, nonprofits can make better data-driven decisions and focus on their mission rather than getting bogged down in manual data entry.

Learn more and sign up for a webinar about NXT Time, check out the Capital Business Solutions website.