How good financial management increases your nonprofit’s social value
Managing a non-profit organization or trade association effectively is a very specialized skillset. As the management board or trustees, you’re the absolute experts in running the day-to-day elements of your non-profit in order to meet your key social objectives.
You’re driven by your social beliefs, you’re bringing in the donations you need and you’ve got all your event planning, fundraising, and membership under complete control. But there’s one element of managing your non-profit where many organizations fall down – and that’s getting control of your financials.
The better your financial management is, the more impact you can create from your available funding – and, after all, increasing your organization’s social value is precisely why you went into the non-profit sector, right?
So, how does better control over your financials impact your organization?
The impact of good financial management
When your non-profit organization was founded it had a mission; to address an urgent social or community need or to serve the interests of a particular group of beneficiaries, stakeholders or members. Your aim is, no doubt, the same now as it was then, to have the most positive impact possible in furthering that mission.
A key part of creating this positive change is in maximising your fundraising efforts and managing your financial affairs responsibly and with a view toward greater efficiency and transparency. To do this well, you need to:
- Develop a budget and stick to itMonitor your costs, expenses and other transactions against your budget
- Record your donations and funding in detail
- Provide clear reporting on how you’re spending these funds.
In short, you need a robust and transparent accounting function.
The good news is that it’s never been easier to set up a cost-effective and easy-to-use accounting system. Advances in cloud technology and financial technology mean that there’s a great choice of cloud accounting solutions to choose from – from Xero Online Accounting to QuickBooks Online.
Cloud accounting software is simple to learn, automatically backs up all your data to the cloud and gives you a convenient, mobile way to access your accounts and key numbers at any time. Critically, with an accounting solution in place you’re in an excellent position to start improving the level of control you have of your organization’s financials.
A budget you can understand and track
Creating a budget for your spending is fundamental to staying in control of your financials. By knowing your expected overhead and projected funding income, you can calculate a budget that’s realistic and practical to adhere to.
This budget can then be plugged into your accounting system to give you a benchmark for the organization’s income and outgoings. By regularly reviewing your actual funding and spending against your budget, you can track these numbers and easily see where there’s a shortfall – and where there may be a need for urgent action.
Practical performance management
Tracking your budget is just one part of the wider need for performance management within your non-profit organization.
By running more detailed reports from your accounting system, and setting clear metrics and key performance indicators (KPIs), you can tag, monitor and review nearly every element of your internal performance. Keep a close eye on your cash-flow numbers, measure how your monthly funding income is performing against your projected budget, or see how well your payroll costs are comparing to your available income.
The core benefit here is that you have a transparent view of how well (or not) the organization is performing. By working closely with your accountant and advisers, you can monitor performance more productively, and get the guidance and advice that’s needed to avoid any pitfalls and take direct action, where needed.
And for those non-profits that have opted for the cloud accounting route, there’s the additional bonus of access to a wide range of hugely helpful cloud-based reporting, performance and forecasting tools – all of which adds to the depth of your financial insight.
The non-financial elements that help your non-profit
Of course, it’s not just the financial elements of running a non-profit that have an impact on the organization’s cash reserves and overall performance. And that’s where a deep working relationship with your professional adviser can add real additional value.
- Increase your membership – working on strategies to expand your membership or finding new investor opportunities is a highly effective way to pump up your cash flow.
- Meet your compliance deadlines – running a non-profit means meeting a lot of regulatory and compliance-driven deadlines – something your adviser can help you with. The less time you spend on meeting your compliance requirements, the more time you have to focus on fundraising, events and other core ways of expanding your reserves.
- Expand your professional network – when you work with a non-profit expert, you have access to a growing network of other professionals who can help you get more from your own organization. The bigger your network, the more impact you can have.
- Find the best talent – your non-profit is only as good as the people that run it, so having access to a wider professional network also opens up opportunities to source the best possible talent and non-profit professionals to work on your team.
Work with a nonprofit expert
At Checkbox Accounting, we’ve been working with nonprofit organizations and trade associations for decades – so we know the challenges your organization faces and the most productive ways to overcome these potential hurdles.
Unlike some CPAs, we understand that running a nonprofit is a very different proposition to running the average private business. Your goals are different, you’re not driven by pure profit and your objectives are driven by a desire to work for the greater good of your communities.
We’ve pulled our nonprofit insights and advice into a free helpful guide – giving you all the key steps to take in order to improve the efficiency of your organization.