Checklist for a Financial Review of a Non-profit Organization

With all the demands of running an organization, executive directors often allow their nonprofit fiscal management go by the wayside. The focus tends to be on the mission, fundraising, didactics, and other solar day-to-day management responsibilities, which are all important. Setting aside financial management, however, is a big error. This is especially the case when information technology comes to maintaining the health of your system. Any successful nonprofit must be run like a successful for-profit, and that means knowing your numbers and using them to run your system.

If you're not a numbers person and are new to keeping tabs on your nonprofit's financials, a good place to start is here. Accept a look at the post-obit half dozen essential nonprofit fiscal management reports. Make sure you're familiar with these reports and how to read them. Past going over them every month, yous can use the data for the benefit of your organization and grow your mission.

Nonprofit Financial Management Checklist: Do You Have These vi Essential Reports?

one. Statement of Financial Position

The statement of financial position (also referred to every bit the statement of fiscal condition) is like to a remainder sheet in a for-profit company. The report's content is based on an bookkeeping formula:

• Assets = Liabilities + Net Assets

The document is basically a mirror of a for-profit's balance canvas. However, in a for-profit, the balance sheet lists owners' equity instead of net assets.The balance sheet is important because, at a glance, it provides you lot with a articulate view of your nonprofit's financial health. You lot can chop-chop encounter whether liabilities are overwhelming your organisation or if you're in a stable fiscal position.

two. Statement of Cash Flow

A nonprofit financial argument of cash period is also like to the cash flow statement used past for-turn a profit businesses. It includes financing, investing, and operating activities broken down into categories. This makes information technology easy to see where the cash flowing in and out of your business is going or coming from.

It's important to keep a close watch on cash flow statements. After all, these documents prove you whether you currently accept enough coin to cover the expenses currently due. While your budget might be balanced overall for the year, that doesn't hateful the timing of money coming in and going out of your nonprofit will be perfectly timed. Cash menses statements help you keep tabs on the timing of your revenue and expenses, and then that y'all always accept enough money in the bank to pay your bills, support programs, keep the lights on, and cover payroll.

Desire to know the all-time way to improve cash catamenia for your organisation? Consider a sustainer programme. Sustainer programs non only offering your organization a more than predictable revenue stream that makes cash flow forecasting a cakewalk, only they can too bolster your nonprofit with many other benefits. These include improved budgeting and effective planning.

3. Statement of Activities

A argument of activities is the nonprofit counterpart of the for-profit's income statement. Similar the residuum sail, this written report is also based on an accounting formula:

• Change in Net Avails = Revenues – Expenses

The statement of activities is important for executive directors to review regularly considering it can reveal shifts and trends in your net assets.If they are decreasing over time, this could suggest that your revenue is decreasing, your expenses are increasing, or both. Any the reason, whatsoever scenario that results in decreasing net assets is cause for concern in a nonprofit. This should prompt conscientious evaluation, consideration, and activity on the part of the executive director and lath.

four. Statement of Functional Expenses

In a nonprofit, it's essential to go on track of expenses for the purpose of budgeting and non over-spending. Merely tracking expenses is also essential to maintaining a good reputation with nonprofit watchdog organizations and alluring donors.

A argument of functional expenses allows you to meticulously track how your organization's money is being spent. This helps improve your impact while as well operating transparently with respect to the portion of your funds that get to your mission compared to overhead expenses. This statement breaks your nonprofit's expenses into categories such every bit programs, direct mail campaigns, education, management expenses, administrative costs, and labor costs. With this breakup, yous can accurately runway and report how your organization spends its money.

five. Annual Study and Course 990

Some nonprofits but use their IRS Form 990 as an annual report. Using this tax document on its ain, however, represents an enormous missed opportunity to highlight your affect, market your mission, thank your donors, appreciate your volunteers, and drum upward even more than support for the upcoming year.

In improver to including official financial reports, your almanac report should tell the final yr'south story of your system. Utilize the certificate to summarize the previous yr's happenings. First, outline your mission. So, list your major achievements, significant donations received, overall bear upon, the people (volunteers and employees) who made it all possible, and your aspirations for the upcoming year.

6. Nonprofit Budget vs. Actuals

Every month, compare your nonprofit'southward budget to your actual numbers and accept notation of whatever variances. If it looks similar yous are spending more or less than expected or generating more or less acquirement than expected, y'all will demand to make adjustments accordingly. Making minor adjustments each month—rather than one big aligning at twelvemonth-end—helps you to operate with your goals ever in sight.

Nonprofit Best Practices for Budgeting

Even though it's not an "official" report since it reflects projections instead of actual numbers, a upkeep is one of the almost important fiscal tools in nonprofit financial management. It helps you set goals and stay on track while anticipating and planning for potential problems. One way to stay on elevation of ebbs and flows this year is using a helpful Nonprofit Upkeep Guide.

Since budgeting is and then important for nonprofits, it'south important that you implement sound processes for putting together your organization's upkeep. Some of the best practices for nonprofit budgeting include:

• Showtime early with enough time to assemble data, become relevant input from stakeholders, and nowadays your budget for board approval
• Develop an official process for budgeting with a collaborative budget workbook and delegation of tasks to key members of your team
• Take time to evaluate the current context every bit well as your historic financial data
• Create a separate document where you record the reasoning behind all assumptions you brand
• Exist realistic well-nigh the acquirement estimates yous include and don't be afraid to contact past corporate donors and foundations to ask nigh their plans for the upcoming year
• Keep fixed and variable costs separated in unlike categories, in improver to operating vs. capital expenditures
• Accept fourth dimension to forecast your cash menses for the upcoming year and consider the timing of incoming revenue and outgoing expenses
• Maintain good bookkeeping records for authentic data
• Don't forget to include not-monetary contributions so that your Form 990 is accurate
• Take fourth dimension each calendar month to compare the numbers, as mentioned above

Financial Direction for Nonprofits: Always Be Study-Set With a Back Office Built for Nonprofit Accounting

Accounting for nonprofits does not accept to put an excessive strain on your nonprofit's operating budget. Your nonprofit arrangement can access the expertise of entire teams of bookkeeping and bookkeeping professionals by choosing to outsource your back office function.

View The Full Infographic Hither.

A team of outsourced nonprofit bookkeeping experts tin set your organisation upward with easy access to QuickBooks reporting for nonprofits. In addition, you can access all the fully integrated tools and technology to assist you lot automate your tape-keeping processes. These can include expense tracking, fourth dimension tracking, funds utilize, and more.

Later on working in the nonprofit financial management industry for 35 years, I see a difference when organizations use their numbers to make mission-driving decisions. That'due south why I started GrowthForce—to serve the overlooked group of nonprofits. With a powerful dorsum function, you tin start learning how to leverage your numbers to brand data-driven decisions. These decisions can cut costs, generate the biggest ROI, and lead your nonprofit to a healthier, more impactful future.

*This spotlighted blog mail is courtesy of GrowthForce

Near the Author

From tech founder to nonprofit CFO and fundraiser, Stephen Rex brings a unique combination of vision, foresight, and feel to help nonprofits maximize their cash flow and operational efficiency. He's been a dedicated board fellow member of many nonprofit organizations – including vii years working for Amnesty International USA – where he was the Director of Development and Chief Financial Officer. His fourth dimension at Immunity reinforced Steve's life-long commitment to giving dorsum to the community through charitable causes. Regarded as one of the accounting industry'southward top idea leaders, he's currently serving equally President & CEO of GrowthForce, a heart-centered company with specialized teams providing accounting for nonprofits. Acquire more about GrowthForce by connecting on LinkedIn.

From tech founder to nonprofit CFO and fundraiser, Stephen King brings a unique combination of vision, foresight, and feel to help nonprofits maximize their cash flow and operational efficiency. He's been a dedicated board member of many nonprofit organizations - including seven years working for Amnesty International USA - where he was the Director of Development and Chief Fiscal Officer. His fourth dimension at Amnesty reinforced Steve'due south life-long delivery to giving back to the community through charitable causes. Regarded as 1 of the accounting manufacture's height thought leaders, he'south currently serving every bit President & CEO of GrowthForce, a heart-centered company with specialized teams providing accounting for nonprofits.

fischerhourlind.blogspot.com

Source: https://nonprofithub.org/the-2022-nonprofit-financial-management-checklist/

Share this post