The Covid-19 outbreak is affecting businesses across the economy in Singapore and worldwide, and the nonprofit sector is no exception. With the road ahead looking to be a long one, it is vital for boards of Singapore’s nonprofit organisations to ensure good governance and financial controls are in place, re-evaluate their priorities and make the changes necessary to endure the crisis while serving their communities.
Technological advancements, access to information and generational changes, alongside an evolving socio-economic landscape, have reshaped trends in philanthropy and giving behaviours. The days of dropping coins into a tin are fading into the past and donors are increasingly using digital means as a way to contribute to charities.
The result is that nonprofit organisations are now faced with a quicker, more informed giving base, and increased accountability. This is no bad thing and non-profits have been coming to realise they have no choice but to adapt to these changes.
However, the present health pandemic has pushed these changes to the forefront.
How do leaders and boards of nonprofits ensure that they remain operational, safeguard their funds and position themselves for the future? At a time when people may have less to give and government funding is stretched across multiple channels, nonprofit organisations will be increasingly called on to serve the community in a greater and more urgent capacity.
The health pandemic has been a catalyst in refocusing the attention of leaders from raising funds and enhancing yield to tackling immediate challenges.
While charities and nonprofits operate like most other businesses, boards and leadership teams have even greater responsibilities despite leaner resources. This means management must pay close attention to managing costs while maximising income streams, and safeguarding assets, data and security.
From a financial perspective, there are a few points that nonprofits may want to consider when managing their risk and cash management approach.
A key consideration for the nonprofit sector is the need to digitalise their businesses not only to respond to a digitally giving public but to also streamline businesses to minimise costs.
The outbreak of Covid-19 has pushed businesses towards adopting a virtual environment as they are forced into business continuity mode, and this is a good time for nonprofit organisations to take stock of how paper-dependent they are in areas like payroll, payments, and authorisation arrangements.
Upgrading systems may seem like an unnecessary expense, especially during tough times, but the advantages of going digital are long term. Once systems are in place, manual processes are reduced and resources can be reallocated to more pressing areas.
Going digital ensures data and information remains stored and accessible electronically. It also ensures traceability and transparency in monitoring the use of funds. Taking data a step further can provide useful forecasting and targeting outcomes. As individuals focus their charity contributions on causes that they believe in, it is vital to have the tools available for givers to be able to conveniently and regularly contribute, and to track the progress of outcomes. One such tool is the use of PayNow Corporate with the use of QR codes (see box, “Digital Payments for NPOs”)
The benefits of using machine readable quick-response (QR) codes are widely known from a consumer point of view. In addition, they have multiple business benefits which nonprofits can leverage.
PayNow Corporate, for instance, is a peer-to-peer funds transfer service that allows payments to be made digitally via a QR code without the need to obtain bank details from beneficiaries. This greatly improves consumer experience and increases convenience for businesses.
QR codes offer multiple payment and collections benefits:
The ability to “go digital” will be a key determinant of a business’ survival during this time of unprecedented challenge. Initiatives such as Carry on with PayNow launched by The Association of Banks Singapore are practical and meaningful solutions to help keep businesses transacting. Transfers made on PayNow are instantly credited into a bank account without having to physically handle and deposit cash, supporting the government’s fight against the virus, whilst allowing business to continue operating safely and securely.
Going digital does not come without its risks. Technology presents opportunities for all types of businesses, but also gives criminals tools to access information and funds. With lean budgets, nonprofit organisations are often hard pressed to invest heavily in online protection.
Singapore’s nonprofit organisations should take full advantage of government aid that is extended to help organisations. In the Unity Budget announced in February 2020, the government announced an extension to the “SMEs Go Digital” scheme, which helps build digital capabilities for small and medium sized enterprises. This is a forward-looking measure to support SMEs (including charities) to evolve their payments and payroll, which are often a highly manual process, to a more efficient and cost-effective process.
Nonprofits can also approach vendors for in-kind donations or reduced fees as part of their corporate social responsibility efforts, making it possible to perform software or infrastructure upgrades without encroaching too much on reserves.
Amidst the immediate priorities for boards in dealing with the current situation, the fundamentals of financial stewardship should not be neglected. While the board may not be involved directly in the day-to-day management of an organisation’s money, it can help ensure sound financial stewardship. For instance, by ensuring that the management understands the importance of having a structure that can support secure and automated online and mobile processes that can ease the transition to digital, opening up donor channels and generating new income streams.
When it comes to a banking partner, talking through priorities, concerns and challenges is key. A good banking partner is not necessarily the one offering the best rates, but rather one that understands the mission, needs and limitations of nonprofit organisations.
Guidance on financial stewardship matters can help to better-manage assets as well as keeping an eye on market liquidity risks, and assists with treasury management and fraud control.
No one can predict how things will pan out in the coming months, but this time of challenge could be an impetus for leaders of nonprofit organisations to take stock of their position and review their systems and processes for greater operational efficiency.
These tips could lead to a smoothing over of operational concerns, so leaders and boards can focus on more important matters, putting the organisation in a better position to survive the pandemic, and place it on a steadier footing for when the storm clouds start to clear.
A contribution piece by Li Lian Ng, Head of Business Banking, CMB, HSBC Singapore. A version of this piece was first published in Singapore Directors Bulletin Q3 2020 Edition.