We’re about halfway through the year, a good time for a financial roundup. It’s like looking back to see how well you’ve stuck to your New Year’s resolutions, only the consequences for neglect are more serious than passing regret.
Are you ready to see how you’ve done?
Let’s go.
1. Financial Fundamentals
The burst of energy at the beginning of the financial year should include your annual budget and scheduled reviews – like now. Your budget must be based on relevant data, like spending patterns and revenue streams, which also play a role in accurate forecasting and resource allocation.
It doesn’t matter if you have one grant or a dozen, you need to use the same precision to ensure accuracy. Accurate grant accounting keeps you on the right side of compliance regulations, provides transparency for donors, and allocates funding where it’ll have maximum impact.
Tracking key financial metrics is essential to keep your financials on track. Fuzzy data or irregular record-keeping makes it impossible to make strategic decisions that will keep your NFP financially healthy. If you want actionable insights, ensure your records are accurate – and transparent.
2. Optimizing Efficiency
Efficiency is only possible when you’ve eliminated all the time-consuming tasks holding you back from peak performance. Outsourcing payroll doesn’t just streamline your operations, it also ensures greater accuracy in your financial records.
Outsourcing other accounting tasks ensures greater accuracy across the board. You have access to specialists in NFP accounting who understand regulations, regulatory compliance, and financial reporting. It helps to have your staff back in their proper roles, too.
If you can outsource your accounting, that’s great. But you have an important job ahead; choosing accounting software that meets your needs. It takes a fair bit of research, but you can save time with Sage Intacct. Sage is one of the leading accounting software companies in the world, so you know your NFP is in safe hands.
If you can’t outsource it, automate it. Choose software with automation functions that manage all the boring tasks. Not only are staff free to focus on their core activities, but automation speeds up the processes while enhancing efficiency and reducing costs.
If your NFP isn’t using cloud-based accounting solutions yet, best remedy the situation ASAP. The cloud takes a lot of pressure off nonprofits with scalability, data security, and streamlined operations that improve overall efficiency, not just financial stuff.
3. Financial Planning
Forecasting makes realistic scenario planning possible. The idea is to develop solutions for a range of challenging scenarios. That’s plan A, B, and C and contingency plans to boot. The aim is sustainable growth. Don’t you love it when a plan comes together?
Planning isn’t just for the future, sometimes it’s for right here and now. Like cash flow management. You need a cash flow plan that you can implement immediately to track inflow and outflow, stem bleeding funds, and optimize revenue. It’s an investment in your operational stability.
So, we’ve punted NFP accounting software but you must choose software that fits your nonprofit. It’s not an eeny meeny miney moe decision. You must consider budget, analytics, and the size of your NFP.
4. Compliance and Governance
There’s another consideration before you pick your software: Industry. Accounting requirements vary by industry. For example, NFPs in healthcare have different reporting and compliance requirements than NFPs in education. Take your time before you commit to software. Do your research to find the best fit for you.
Tax. It had to come in somewhere. Tax is one area where you have to be a million times more conscientious than others. Ensure you have the right forms for tax exemption and that all your records are in perfect order.
Sometimes, despite your best efforts, a bad apple turns up in your barrel. You want to identify and toss it before it ruins the bunch. To do this you need strong internal controls to prevent and detect fraud and mismanagement.
Good governance isn’t just about financial acumen. You also need vision – strategic vision and not pie-in-the-sky vision, but vision nonetheless. Combine acumen and vision and you’ve got a pretty good recipe for insightful decision-making that will help you achieve your mission.
5. Grant Management and Donor Relations
There are a lot of NFPs and a limited number of grants available. Nonprofits that are grant-ready are more likely to secure funding than those that aren’t. If you’re not sure if you’re grant-ready, you probably aren’t. A checklist can pinpoint what you still need to achieve grant-ready status.
Considering the scarcity of funding, it makes sense for NFPs to hold onto the donors they already have. Aside from shackles, how can you encourage donors to commit to long-term funding? You can woo them, nurture relationships, and use evidence of their successful impact to keep them engaged.
6. Leadership and Strategy
If you want to achieve your goals, you need a strong leader to guide the way. Good leaders aren’t empowering rather than power-seeking, enabling teams to work for the good of their nonprofits. The good news: You can outsource leadership to keep costs down.
Speaking about empowerment, it doesn’t do any good if your problems are always solved for you. Strong NFPs are the ones that face challenges and come up with innovative solutions that are unique to their operations – no cookie cutters, please.
Your NFP will face unique challenges, but there are also some challenges that all NFPs face at some point, like lack of funding and staff and donor retention. It’s important to have strategies to deal with these challenges and anything else that comes your way.
It don’t mean a thing if you ain’t got … sound financial management. What does sound financial management look like? It looks like all of the above combined into one package tied up with a bow. Why Financial Management of a Nonprofit is Harder than Running A For-Profit and you need the right person to do it.
How Did You Do?
Are you on track to meet financial goals and attain financial sustainability? Do you have the resources to stay on track or get back on track if things have gone a little awry?
Either way, dig deeper into your NFP’s financial health and reassess your strategies, plans, and budget. Remember, there’s no such thing as perfection. After all, maybe the only thing standing in your way of long-term funding is a tweak to boost your grant readiness.
