Best Practices in Fund Accounting for Nonprofits

Best-Practices-in-Fund-Accounting-for-NonprofitsNonprofit fund accounting is more than an accounting system. It is a way of financial management. True fund accounting for nonprofits requires fund development planning and strategic fund accounting. We have discussed fund accounting for nonprofits extensively on our blog and by now you most likely know the benefits of investing in a nonprofit fund accounting solution. What you may not know, however, is that in order for fund accounting to be effective, you must have a fund development plan in place.

Creating a Fund Development Plan
What is a fund development plan exactly? A fund development plan is similar to your nonprofit’s multi-year strategic plan. In fact, to be a little more specific, your fund development plan is sub-plan of your organization’s strategic plan. While the strategic plan provides an overview and foundation of your organization’s work, the fund development plan works to secure the financing to carry out your organization’s strategic plan. A good fund development plan creates an organization-wide awareness of the fund development process and instills an ownership of philanthropy.

It is important to know that fund development is not a one-time, as-needed occurrence to be ignored the rest of the time. Nonprofits should look at fund development as an on-going and beneficial process that engages every staff and board member in some way. Fund development affects every area of your organization and is affected by everything your organization does. To be effective and produce lasting results, the fund development planning process needs to encourage learning, generate organizational change, align employees with the organization’s mission, and produce shared accountability among the entire staff and board.

Your fund development plan should include:

  1.  Assignments of Accountability
    In order to be successful, your staff and volunteers must know what they are responsible for. Make sure that you have clearly defined what belongs to your staff and what belongs to your organization’s board members. Determine where your board members and the development committee fit into your plan prior to carrying it out.
  2. Relationship Building Strategies
    This is the most important part of the fund development process. Because your funding depends on the relationships your organization builds with the community and supporters, relationship building strategies (and measures) should be included in your written fund development plan.
  3. Fund Solicitation Strategies
    In order to receive funds, you typically have to ask for funds, so be sure to include fund solicitation strategies in your plan. Enlist the help of your board members and any other prominent figures of your organization. Remember that face-to-face solicitation always works best and is often the major component of your fundraising efforts so don’t forget to include it in your fund development plan.
  4. Timeframes
    Include a calendar of the fiscal year in your fund development plan. This will help you identify key fundraising months, meet important tax deadlines and map out solicitation strategies by month.
  5. Measures
    Define what it is that you will measure and remember to measure more than money and the number of donors. Measure the comprehensiveness and effectiveness of your relationship building strategies, and measure the performance of your board members. If you continue to measure the effectiveness of your strategies and goals, you will have the opportunity to make the necessary changes and see substantial progress.

The Benefits of Fund Development Planning
There are many benefits to developing a fund development plan. An effective plan will:

  • Reaffirm your nonprofit organization’s vision, mission, goals and direction
  • Set new goals and strategies, as well as test their attainability
  • Define measures and benchmarks for your organization’s goals
  • Ensure that volunteers understand the most critical principles of fund development and philanthropy
  • Assess the return on investment (ROI) of fund development tools and activities (such as fund accounting software)
  • Engage key stakeholders in the process
  • Assess the internal and external environment in order to proactively respond to challenges and capitalize on key opportunities

As you can see, creating a plan to manage the funds that come into your organization is an important task; however, fund management does not end here. To get a clear picture of your nonprofit organization’s financial standing, you should invest in software designed specifically for fund accounting for nonprofits. Fund accounting software will not only help you track funds as they go through your organization, but it will also help you create goals and establish new strategies for your funding.

Contact us today to learn more about how fund development planning and fund accounting software can help you reach a further level of success.