Top three financial recommendations for nonprofit organizations and why you need them.

I’m guessing you didn’t start your nonprofit with the goal of keeping financial records, running annual reports, reporting back to donors how their dollars were spent or spending time tracking expenses. Yet, doing those things are important to the success of your nonprofit. So, what are some things you can do to make your life easier in this area?

Below are three recommendations that will help you put financial processes and systems in place to lay the foundation your nonprofit organization needs to be fiscally responsible. The list is nowhere near comprehensive, but it is a start and it will help.

Financial Recommendations:

1. Have a system for tracking income and expenses. It may be basic, but it is the foundation of all other financial best practices. At the root level, knowing what money is coming in and where it is being spent will help with budgeting. Knowing where your money goes is key to being able to make the leadership decisions needed to direct your nonprofit activities. Tracking income is also crucial given some nonprofit donations come with legal strings attached: the money must be spent on what it was intended for. If you are ever audited, or the donor asks, you need to be able to prove that was done…and the only way to do that is by keeping good financial records.

2. Have a documented process for processing incoming donations and outgoing expenses. As much as possible, it is recommended that there are division of duties so that the person receiving the check in the mail is not the person processing for deposit and that there is an approval process in place to expend funds. While not always possible due to nonprofits generally being smaller organizations, to the extent that it can be done, will go a long way in the integrity of the organization and how you handle the finances.

3. Create a budget and a plan. This tends to be the first rule of thumb in managing your personal finances and it is just as important in running a nonprofit organization. The same way you have a plan for how to reach your mission, you should have a financial plan for how to support the mission. How much money is needed? Equipment? Staff? Supplies? Is there an income cycle where you get more donations during certain times of the year? How does that impact your expenditures the rest of the year? How much do you spend on advertising and what is its return on investment? Asking these types of questions will help to better understand your financial situation and gives you a platform from which you can make informed decisions about your organization.

Doing these three things is not the end all be all for your organization, but they will begin to lay the financial foundation your organization needs to be successful.

If implementing these recommendations seem daunting or something you wouldn’t enjoy or have the time to do, I recommend hiring someone you trust to help. Many virtual assistants, myself included, offer various packages for nonprofit organizations to help get you set up with a financial plan, put systems in place and can even help with day to day financial operations. If you are interested in finding out more about how I can support your nonprofit organization in creating its financial foundation, set up a free 15-minute consult to determine next best steps.