​3 Financial Tips for Well-Run Nonprofits

Nonprofits often face challenging financial situations, even during normal times. But during the current health crisis, finances have gotten tighter, even while there’s often more demand for their services.

If you’re part of a nonprofit, here are some things to keep top of mind when it comes to the business side. And always, if you’re feeling overwhelmed, let us know how we can help.

Variety is the spice of your mission

It’s important to be conscious about how your organization’s spending fits your mission and where your revenue comes from. You need a varied donor base or revenue stream. Typically, your success is measured by how well you spend your funds. Spending that doesn’t fit with your mission or goals could result in your nonprofit losing its public charity status. That means your donors’ donations wouldn’t be tax deductible, and your organization wouldn’t qualify for certain grants.

When you choose someone to help you manage your spending and finances — whether that person is external or internal — they need to understand how nonprofits work.

For nonprofits, revenues and expenses may “hit” in different periods. So, one year could look like funds for your organization are plentiful, but in the next year, it could seem like your nonprofit’s losing money. Also, some revenue sources have restrictions about their use. In that way, it might seem like your organization has a lot of money, but you might not be able to use that money to fund your general operations.

Keep your books clean and transparent

No matter how worthy your mission is, if your books aren’t clear, it can be tough to attract and retain board members and even volunteers. Your books should be transparent so that those who want to help you have an accurate picture of your financial situation.

Your board won’t be able to properly advise your organization or make operational decisions if your finances aren’t in good order. As such, your bank and other account reconciliations should be done monthly.

Even if there are areas where you’re struggling, your board, volunteers, and employees need to know that so they can look for solutions that will fit and work for your organization.

Understand your finance folks’ roles

Nonprofits often run on a shoestring budget. So, it’s often not feasible for a nonprofit to have a bookkeeper, controller, and CFO on staff. Because of that, it can be tempting to have a volunteer try to fill all or some of those roles. But as noted above, whoever helps with your books and finances needs to understand the nuances of a nonprofit.

Those responsible for bookkeeping also need to have enough time to keep your records up to date and perform reconciliations promptly. It can also be difficult for part-time volunteers to know how to record or classify transactions if they’re not regularly interacting with program staff.

Your organization will have to make strategic decisions based on your past and present expenses. And that’s when an outside accounting and tax firm can help you get a clear idea of where you are and where you’ve been so you know where you’re going.

If your nonprofit needs some guidance, we’re always here to help.