Why Time Tracking Is Critical for Nonprofit Organizations

August 8, 2017

Nonprofit time tracking is not only useful, but critical, for any organization to track the time they spend on certain tasks or projects. This is because nonprofits must open themselves up to public scrutiny and must behave with transparency if they are to work effectively. Read on to learn more about why time tracking is so important for nonprofit organizations.

Accountability for Grants and Funding

A substantial portion of the work of a modern nonprofit involves applying for grants and collecting funding. This is a great way for people who care to get involved with the work a nonprofit organization does, and also an effective means of generating the capital required to achieve real results.

However, accountability is key here. Individuals and bodies who donate need to be able to see that their money and resources are being used effectively. If not, they may pull the plug on future funding, or even take legal steps to reclaim funds donated in the past. Not only this, but for many grants and/or federally-issued funding, nonprofits are required to report on payroll charged to those grants, which means time records must be maintained.

In the United Kingdom in 2015, financial mismanagement at the Kids Company nonprofit organization led to a nationwide scandal and a police investigation. The anxiety surrounding this underlines how important proper time tracking and transparency is in the nonprofit sphere.

Compliance Auditing

A nonprofit is in a position of trust and responsibility. It must handle significant amount of funding from the general public and it has a duty to manage and oversee the application of such funding to the relevant causes.

It is understandable, then, that governmental and regulatory bodies closely monitor and oversee the function of nonprofit organizations, conducting regular compliance audits to make sure that they remain in line with current rulings and regulations. If a nonprofit organization does not have the means to handle such an audit, they are going to struggle to remain in operation.

A key element of this is time tracking. By tracking time spent on different tasks and operations, nonprofits will have these reports readily accessible for the relevant authority, and compliance auditors will be able to quickly and easily analyze whether or not the organization is operating within set regulatory boundaries.

If you’re new to navigating the nonprofit compliance waters, the National Council of Nonprofits has created this handy Nonprofit Audit Guide to help you.

Resource Planning

What represents the biggest cost to your nonprofit organization? If you answered ‘labor costs’ then you are far from alone. For many nonprofits, this is where the lion’s share of funds allocated for a project go to.

With this in mind, your organization needs to make sure it is not spending more than it needs to in this department. Robust time tracking procedures give you and your organization a reliable means to help you get a handle on where resources of all types (people, supplies, etc.) are over- or under-allocated.

This means no overcharging and the opportunity to create a watertight budget for projects going forward. Failing to track time leads to uncertainty. This is never a good thing when you are trying to run a successful nonprofit.

Performance Measurement

Finally, and perhaps most importantly, time tracking provides the data you need to keep track of your performance on an organization-wide level. Of course, time tracking tells you how long team members, and teams as a whole, spend on certain tasks, but, in effect, the mechanisms of tracking time connect you with far more profound insights.

For example, by factoring in wages and contracting fees, you can deduce, to a high level of precision, the cost of each task or project. You can then use this information to assess how worthwhile this project is to the ultimate ends and aims of the nonprofit and decide how efficiency can be improved in the future.

The progress of ongoing projects and general productivity across the board can also be measured in this way; reflecting the diverse nature of the valuable insight that time tracking can provide to your nonprofit organization.