Current loctn: salesforce > data structure > npsp pledges > Accounting System Consideration

Accounting System

Overview

As of February 2017, this page is under construction and is not yet complete.

The accounting system used by an organization (accrual or cash-basis) can influence the data storage approach used to represent pledges within the Salesforce NPSP.

This page provides a very high level overview of the considerations.

Accrual Accounting   Cash-Basis Accounting   Discussion   References

Accrual Accounting

Organizations using accrual-based accounting typically report the full amount of a pledge as soon as a firm promise of that pledge is obtained. So they may well want to use approaches in SF that place the amount that has been promised in the values displayed within NPSP-provided Account anc Contact fields that summarize Opportunity data.

Those summary fields display values from Opportunities with a stage value of type Closed/Won. So the application of Opportunity.Stage values will have to be arranged to provide the desired outcome.

1. If the approach recommended for use with the NPSP Payments package is used:
   • The Opportunity representing the overarching pledge aggreement should have a Stage value of type Closed/Won set at the time a firm committment from the donor is received..
   • Collection information will be stored only on NPSP Payment records. No changes to Opportunity.Stage values will be made in response to changed collection-time data related to the pledge.

     For instance, if no payments are actually received from the donor, the Payment records representing those installments will be marked as write-offs. The Opportunity.Stage Closed/won type value should remain, since that represents the donor's donation promise rathat than his payment performance.

2. If the approach using the NPSP Recurring Donations package is ueed:
   • The Opportunity.Stage picklist value of Pledged should be edited to change Type from Open to Closed/Won

     NPSP automation that creates Opportunities linked to a Recurring Donation record typically sets the Opportunity.Stage value of Pleged. The Opportunities will only be included in NPSP rollup fields on the Account and Contact objects if this change to the Pledged value is made.

Cash-Basis Accounting

Organizations using cash-based accounting typically report the amount of a pledge at the time the actual payments are received. So they may well want to use approaches in SF that place the amount that has been actually recieved in the values displayed within NPSP-provided Opportunity rollups located on the Account and Contact objects.

Those rollups display values from Opportunities with a stage value of type Closed/Won. So the application of Opportunity.Stage values will have to be arranged to provide the desired outcome.

Organizations using cash-basis accounting will probably want these fields to summarize only donations that have actually been received.

1. Opportunities will be assigned an Open Stage value at the time the donor promises their constribution.
2. The Opportunity stage value will then be changed to a Closed/Won stage when the donation is actually received.

However, severak approaches might be used.

• If the NPSP Payments package is not being used:

  Use the older approach which uses Opportunity stage values to track both development results and collection informations, as outlined at Create Payments and Recurring Donations

  1. Use an NPSP Recurring Donation record to represent the overaching pledge agreement obtained from the donor
  2. Use Opportunity records linked to the Recurring Donation record to represent each anticipated pledge installment.

     Set the Opportunity.Stage value on these Opportunities to the Pledged picklist value. NPSP installations typically defined this value with a Type of Open That value will be intrepreted to mean that the installment payment has been promised. But the Open Type indicates the patyment has not yet been received from the donor.

  3. Whan one of the installments is received, set the Stage value of the corresponding Opportunitye to a Closed/Won Type picklist value like Closed/Won or Posted.
  4. If you decide that an anticipated payment will never be provided by the donor, set the Stage value of the corresponding Opportunity to a picklist value defined with Type Closed/Lost.
• If the NPSP Payments package is being used, and in the originally intended manner to completely separate tracking of revenue and income/collection information:

  See the information providet at Salesforce Data Structure - NPSP Payments, which provides recommendations and discussion.

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Discussion

Steve Anderson provided a blog post explaining the goals of the NPSP Payments package just prior to it's release ( Nonprofit Starter Pack and Money) In this article, Anderson outlines the primary goal as an effort to separate the tracking of revenue and income. A desire to provide SF/NPSP structures that better matched needs of organizations using accrual-based accounting systems is obvious.

Although Anderson describes the goal as a separation of revenue and income, alternative wording can provide useful insight. For instance, the goal might have been stated to be separation of earnings from collections. Accrual-based accounting systems typically report earnings at the time they are committed, and also report debts such as bills (or other payables) at the time the time the bill is received.

The older NPSP approach using NPSP Recurring Donations and linked Opportunities does not provide this full separation of fundraising outcomes and collection details. Common NPSP approaches instead use the Opportunity record in a hybrid approach that breaks the separation of fundraising outcome from collections. For instance, if you return to the Opportunity later to change the stage setting to Closed/Lost because of a donor's non-payment, or to edit the CloseDate field to indicate a delayed payment, this edit actually destroys the storage of the original fundraising outcome.

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References

Links are numbered to allow easier reference during discussions, etc.

Accounting Practices

1. Accounting Considerations for Non-Profits

   You may need to use the website search function to find this specific page.

2. Accounting For Pledges Receivable - Capital Campaign

   Question/answer dialgue providing some information about handling of Pledge donations.

3. Cash vs. Accrual

   Simple discussion of difference between accrual and cash-basis accounting systems.

4. Cash vs. Accrual Accounting For Non-Profits: Which is Right for Your Organization?

   Simple discussion of difference between accrual and cash-basis accounting systems.

5. FAS 116

   Brief explanzation of Financial Accounting Standards Board rules that nonprofits are often required to meet..

6. Pledges Receivable: Explaining the Basics to Your Development Department

   Explains the typical differences betwen accural and cash-basis accounting, with specific mention of how pledges are typically handled under the two systems.

7. Pledges vs. recurring donations

   Explaingation of typicaly distinctions between pldeges and reucrring donations. From Idealist Consulting

NPSP Usage

1. Create Payments and Recurring Donations

   Salesforce trailhead page. Please note, this explanation suggested using the Opportunity.Stage value Pledged, which differs from our recommednations for situations where the NPSP Payments package is being used.

2. Nonprofit Starter Pack and Money

   This article provides some basoc explanations of nonprofit accounting principles and of the needs the NPSP Payments package was intended to meet. Especially focuses on frequenty nonprofit needs to record revenue on a date that differs from the actual collection date of the funds promised. Written at a time after the Recurring Donations package had been released, but shortly preceeding release of the newer NPSP Payments package.

3. NPSP Recurring Donations - Overview and Setup

   Main NPSP document explaining typical entry of recurring donation or pledge donations when using the NPSP Payment object

4. NPSP: Manage Multiple-Payment Donations

   (From the Power of Us Hub) Recommendations for basic used of NPSP Payments for entering multiple payment donations.

   (I believe an earlier, but relatively recent version of this article specifically linked the Kell Partners page described just below.)

5. NPSP Opportunities and Payments 101

   (From Kell Partners) Recommendations for more advanced uses of NPSP Payments. Includes more detailed recommendations specific to the needs of organizations using cash-basis and accrual accounting approaches. (Accrual accounting seems to be more common among nonprofits, especially among larger or international nonprofits.) The only changes suggested are a different assignment of Opportuniity.Stage values for Opportunities representing pledges. The details may be important for your organization. Page dated 2017.

   Note especially the sections on

   • What if you want to record both the pledge and the collection story?
   • And then there's rollups
6. NPSP: Recurring Donations versus Opportunity (Donation) Payments

   Very basic, but does mention (briefly) the main differences in recommended data entry approach for accrual and cash-basis accounting systems.

Last modified: 13:49:22 06-Mar-2017