Entering and Designating a Gift
General Ledger Integration on Salesforce, Part 6
Hello! My name is Alexandra. I am a Solution Engineer for Salesforce.org. Welcome to my blog series about GL integration!
In Part 5, we introduced the steps in a typical gift cycle at a high level, from entering the gift in the CRM to posting it to the GL and reconciling the gift for financial reporting.
THE GIFT CYCLE, PART 1
Your nonprofit has an awesome fundraising team that is great at connecting your mission to donor support. The donations are flowing in! Now what? Where does fundraising end and accounting begin?
Let’s walk alongside our friends at Learning Empowerment (LE) and see how they use Salesforce’s Nonprofit Success Pack (NPSP) and Accounting Subledger to enter a donation and allocate it to the right funds, generate the debits and credits for the transaction, and prepare it for export to LE’s accounting software.
Note that this article focuses on how Accounting Subledger works and how your organization will use it for GL integration. Check out this link for technical instructions on setting up Accounting Subledger.
Entering a One-Time Donation
Diane the Donor has been a long-time supporter of education causes. After hearing about Learning Empowerment’s great mission, Diane makes a $100 donation. It is unconditional and unrestricted. Here’s what happens!
George the Gift Manager (or someone on George’s team) has a stack of checks that he needs to enter. Next in the pile is the $100 check from Diane. George navigates to Diane’s record in NPSP and enters a New Donation in the amount $100. (Note that George could have entered the stack of checks in a batch rather than one-by-one using the Gift Entry feature of NPSP.) Because it is a one-time gift rather than a pledge that will need to be collected, he marks the Stage as Closed. Then George hits Save to create the donation.
When George hits Save, a couple of things happen behind the scenes to help LE reliably and effectively manage their revenue:
A General Accounting Unit (GAU) Allocation is created to designate which fund the money should go to. For efficiency, LE has their NPSP instance set up to assign unrestricted gifts to the General Fund (Unrestricted) GAU by default. Perfect! Diane’s donation was unrestricted.
Additionally, some CRM systems like NPSP can be set up to automatically create the associated Payment record with a Status of Paid at the time you enter a one-time Donation.
Translating the Donation into Debits & Credits
Lastly, the corresponding Ledger Entries for this donation are also created. With Accounting Subledger Growth enabled in NPSP, Salesforce creates accounting records in the style of standard journal entries, writing the debits and credits for you automatically. The Ledger Entries are the secret sauce of GL integration using Salesforce; they translate George’s language of gifts and fundraising into Anna’s language of accounting and general ledgers. Here’s what the debits and credits look like for Diane’s donation:
This is a big deal for Anna the Accountant! With Accounting Subledger, Anna and her team no longer need to manually re-enter gifts into the accounting system. Rather, Ledger Entries are designed to be sent to any accounting system with minimal data manipulation.
Note that however you get donations entered into Salesforce, this process of automatically creating Ledger Entries to write the debits and credits will work. You can use the standard Donation screen, you can use the new Gift Entry screen that was rolled out as part of the Spring ’20 NPSP release, you can use Batch Data Import or even API integration. However you get gift information into NPSP, Accounting Subledger will work.
When Are Ledger Entries Created?
While automation is great for creating efficiencies and streamlining processes, in the world of finance it’s important to balance automation with your actual business needs. You’ll want to design your subledger processes with only the amount of automation necessary to create efficiencies while keeping your gift cycle running smoothly and reliably. Good thing Salesforce helps you with that! While Accounting Subledger will automate the actual creation of ledger entry records, you also have a couple tools that allow you to control when the entries are created.
First, you will choose whether to run Accounting Subledger in Trigger or Batch mode.
Trigger Mode
When you choose to create Ledger Entries in trigger mode, the moment you enter a donation and hit save the system immediately creates the corresponding ledger entry records. This offers real-time visibility into your gift revenue at any point in time. While it is rare that a nonprofit will want to run Accounting Subledger in trigger mode, it is available if desired.
Batch Mode
Our nonprofit customers will most commonly opt to run Accounting Subledger in batch mode. That means the Ledger Entries are not created individually when the donation is entered, but rather in batches that can be run either on a schedule (for example, every night at 2:00 a.m. or every Sunday at 6:00 p.m.) or on demand (by pushing a button). Most organizations want to use batch mode because it reduces the number of contradictory journal entries to reconcile.
Here’s an example of why Batch Mode is preferred: Let’s say George enters a gift for $50 to the General Fund. If you use Accounting Subledger in trigger mode, the system creates two Ledger Entries for this transaction. Five seconds later, George double checks the appeal card and realizes that the gift is actually supposed to go to the Women in STEM Fund. Because we’re in Trigger Mode, the system will now create an additional reversal Ledger Entry and a new Ledger Entry to reflect the corrected fund allocation. When you add those two new entries to the two original entries created at the same time George entered the gift, that makes for a total of four ledger entries.
Alternatively, if you run Accounting Subledger in batch mode, George updates the donation record when he realizes his error but the system still only creates two total Ledger Entry records since the batch process to create entries won’t run until later that night, capturing the most up-to-date information at that time.
So batch mode is more efficient because it allows gift entry staff the opportunity to make necessary, appropriate changes through the normal course of business. That’s important because it reduces the number of conversations needed with the fundraising team to clear up confusion.
Second, you can create a number of requirements that must be satisfied before a Ledger Entry is created. This feature is called ‘Stage to State Mapping.’
Stage to State Mapping
You are likely already aware that Salesforce NPSP allows you to track the Stages of a Donation (or Opportunity) to help with things like pipeline reporting and moves management. Accounting Subledger adds another field for tracking the accounting cycle called State. You have the flexibility to assign Ledger Entry behavior to the different States. For example, pledge donations in an Uncommitted State will only generate ledger entries for Payments and Write Offs (not for the pledge opportunity itself).
Then, you can map accounting States to your donation Stages in order to control ledger entry creation. How does it work? Based on the different Stage your Donation is in, that puts the Donation in a corresponding State which determines when the Ledger Entry is actually created. This gives you the efficiency of automation, with the flexibility and control to design your ledger entry creation to meet your actual business processes.
Accounting for Gifts with Multiple Fund Designations
What if Diane wants her donation split across more than one purpose? Let’s see how it looks to designate a gift across multiple funds.
Diane the Donor makes a $100 donation to LE. It is unconditional, but she indicates that she wants 50% of the donation to go directly toward LE’s Job Training program.
George the Gift Manager this time enters a New Donation for $100 related to Diane’s record. Because it is a one-time gift rather than a pledge that will need to be collected, the Stage is marked Closed and a related Payment record is automatically created with a Status of Paid.
George splits the GAUs assigned to the gift, assigning 50% of the total to the Job Training program fund GAU, and the remaining 50% to the General Fund (Unrestricted) GAU.
Accounting Subledger runs in the background to automatically create the corresponding Ledger Entries. Here’s what the debits and credits look like for this gift:
Accounting for Pledge Donations
If your organization also raises Pledge and Recurring donations, there are a few additional steps in your subledger-to-GL process. In contrast to the steps to account for a one-time donation, here is what a typical GL integration lifecycle looks for pledges and recurring donations:
Step 1: Donor Makes a Gift
Step 2: Enter Gift & Designate Funds
Step 3: Create Payment Schedules
Step 4: Post to General Ledger
Step 5: Receive Payments
Step 6: Make Adjustments
Let’s bring these steps to life with an example at Learning Empowerment.
Step 1: Donor Makes a Gift
Diane the Donor is inspired by the impact LE is making, and wants to continue her support. She pledges $1,000! Fran the Fundraiser collects Diane’s pledge card. The pledge is unconditional and restricted.
Step 2: Enter Gift & Designate Funds
The next day, George the Gift Manager navigates to Diane’s record in the CRM and enters a new Donation for $1,000 with a status of Pledged. Here’s what that gift translates to in Anna the Accountant’s language:
Step 3: Create Payment Schedules
Next, George schedules the payments. Diane wants to pay the pledge in five installments over the next five months. So George creates a Payment Schedule in NPSP for five payments, paid monthly. When George hits the button to Calculate the payments, he sees the Scheduled Payment Dates and everything looks good so he creates the Payment records. (Note that depending on the technology you use, the Pledge and Payment Schedule might be manually created like George did, via batch Gift Entry, via import file from your online giving platform, or automatically through an integration with your online giving platform. Regardless of the source, Accounting Subledger will create the same Ledger Entries that facilitate a smooth GL integration.)
Step 4: Post to General Ledger
Check out the subsequent Posting to Your Accounting System article for details on how all gift transactions actually make their way to your GL!
Step 5: Receive Payments
When Diane sends in her first $200 check, George enters a Payment and applies it to the Pledge. Acting as a true subledger, Accounting Subledger is working behind the scenes again to translate the payment into debits and credits. Ledger Entries are automatically generated that reflect the accounting changes that happen when there is a payment to a pledge. The Checking asset account is increased (a debit), and the Pledges Receivables account is reduced (a credit).
Step 6: Make Adjustments
I cover Managing Adjustments in a subsequent article. Stay tuned, we’re almost there!
What’s Next?
Now that we have walked through the initial steps of the gift cycle that are managed through your CRM, in the next article I will break down the additional steps you’ll take to prepare and post your revenue transactions to the accounting system.
