Financial management for nonprofits and blockchain do not seem they would complement each other well. Is blockchain just a fad, or is it something that we should be paying more attention?
Blockchain is the new technology which is reinforcing an economy that is now fueled by cryptocurrency. It is also a perfect fit for businesses that have integrity at the forefront of their minds. Blockchain is a powerful method of payment that creates a transparent, secure, and permanent record. It can also be used to securely transfer records, demonstrate transfer of ownership, and many other applications.
Forbes describes blockchain technology as one of the most promising developments that could revolutionize the world in the years to come. It not only promises to improve your workplace, but it is going to disrupt the entire way in which your business is managed. Innovations will continue to redefine workplaces. That is why it is crucial for business professionals to keep up with the technological developments that will affect their business, truly understand how they work, and anticipate how they will revolutionize their organization and economy.
The wheel was a primitive technology that influenced many other inventions, including automobiles, trains, aircrafts, etc. Just as the wheel forever changed how people use transportation, blockchain will forever change how transactions are made. Financial management for nonprofits is just one area that should adapt to this new model of complete transparency and integrity that is fueled by the blockchain.
What is Blockchain?
Blockchain is an open, digital ledger of your transactions, making it a good technology for nonprofits to show transparency. Because these transactions need to be accepted by a consensus of multiple parties, instead of one person, it helps to eliminate fraud. Once a transaction is recorded and authenticated, it is a permanent transaction record.
What is the Appeal of Blockchain?
It is understandable if you are still confused by how blockchain can affect your financial management for nonprofits. It is one thing to understand how transactions can be unalterable and abiding, but it is another to understand how it can be applied in the daily world of your nonprofit organization.
The main appeal, and the most important to your nonprofit, is trust. The security, vulnerability, and transparency within blockchain brings a new level of trust. Because every single transaction on a blockchain must be verified as a consensus, transactions cannot be forged for fraud. The transactions are always time and date stamped, so that all parties involved in the transaction can easily look up, or verify, when a transaction was made and confirmed.
Enhanced Trust is a Must
Blockchain will thrive exponentially in the world of financial management for nonprofits for donor relations.
Millennials now make up the largest demographic, even larger than the Baby Boomers. With this in mind, it is important to point out that millennials are extremely interested in supporting their favorite nonprofits through donations.
Trust and transparency are highly important in this demographic group. Public trust in nonprofits is a questionable matter, currently, with 49% of donors complaining that they do not know how the nonprofits they donate to are spending their money.
The blockchain model appeals to millennials due to the transparency and traceability of transactions. Many millennials are already familiar with the concept of blockchain, or they are already incorporating blockchain into their daily lives. Because of this, they are open to the idea of new technology. Organizations incorporating blockchain into their financial management for nonprofits can demonstrate their integrity by setting themselves up with a permanent, established record of how donations are received and used.
Decrease Reporting Time
Another advantage of using blockchain to track donations in financial management for nonprofits is the decreased time in reporting for the government or for grants. Many nonprofits receive funds from donors that require detailed reports of how the funds are being distributed.
The blockchain model eliminates the need for reports by providing an open, yet secure record of all transactions. Donors can immediately check the blockchain’s time and date stamps to see the transactions that were made. They don’t need the report, because by offering blockchain you allow all your donors to view all your transactions with openness and clarity. This saves both the donor and your nonprofit time and effort spent on creating reports.
Blockchain is still in its beginning stages and it may be difficult to comprehend, but the potential of implementing it within your financial management for nonprofits will far outweigh the difficulty of fully understanding it. Read more to understand blockchain and the hot commodity it is for nonprofits.
RBP Methods provides accounting software, advice, and consulting in financial management for nonprofits. Our financial management systems include software such as Abila MIP Fund Accounting™ and AccuFund Accounting Suite. These and other software solutions for nonprofit organizations provide easy to use, understandable, and useful software to track finances for nonprofits, manage donations, donor campaigns, and much more. Contact us or call 503-648-9051 for a consultation.