Managing the financial well-being of your nonprofit organization is stressful enough without all of the governmental and private donor rules, regulations, and reporting requirements. From creating an effective budget to developing reports your managers use to assess the value of your programs and activities, nonprofit financial management takes a lot of time, energy, and effort. Add to that the task of meeting government and private donor reporting guidelines, and you have yourself a long list of high-priority items.
In order to handle the demands that come along with nonprofit financial management, nonprofit organizations turn to nonprofit accounting software. Nonprofit accounting software can relieve the stress associated with managing your nonprofit’s financial status, as well as help you create the reports you need to keep your board, donors and outside agencies happy. Accounting solutions such as Abila MIP Fund Accounting (formerly Sage 100 Fund Accounting) and AccuFund software can help nonprofit organizations develop good financial practices for years to come, as well as provide them with a clear view into their financial records so they can make better decisions for the organization. Nonprofits rely on nonprofit accounting software to meet growing government and donor requirements, but in order to create effective reports they need to know how to use the software effectively.
We’ve created a list of nonprofit financial management best practices to help your nonprofit maintain effective financial reports and get the most out of your software:
- Make cash flow your number one priority.
Managing cash flow and contributing to cash flow projections needs to be a top priority for nonprofit leaders. Accounting departments often lack the insight needed to create accurate cash flow projections, so nonprofit leadership needs to have a part in developing these projections. It’s important to anticipate cash flow issues and formulate a plan to solve any potential cash flow problems. Remember that timing problems can often be prevented by improving internal accounting systems, properly managing the timing of payments and receipts, and arranging for a line of credit.Many financial reports document spending trends from the past so nonprofits can easily review and analyze their financial habits. It’s important to run these reports regularly so you know how the organization’s cash flows and can address issues where it does not.
- Create an annual operating budget.
Budgeting is an essential financial best practice for nonprofits and businesses alike. It’s important to compare your organization’s expenses to your annual income (this includes donations, grants, etc.). Your budget should include both guaranteed and as-yet-to-be-identified income; however, the Board and leaders need to be aware of the amount of unidentified income in the budget as well as the plan to raise funds during the year.
- Don’t avoid “restricted” grants, but do use caution when accepting them.
Restricted grants certainly require more reporting than regular grants and because of this, nonprofits often rule out these types of grants. Restricted grants, however, can be beneficial to nonprofits if you know how to handle them. Rather than looking at the restriction as a whole, you should consider what the grant is restricted to. If the grant is funding a program essential to your organization’s mission, accepting the grant would be in your best interest. If, however, the grant pulls you in a different direction than you’d like to go (or goes against your mission), you’re better off avoiding it.
If you’re not using your nonprofit accounting software to maintain nonprofit financial management best practices, you are wasting its capability. Contact us today to learn how you can maximize the potential of your software solution and begin implementing financial management best practices into your daily routine. For more nonprofit financial management tips, stay tuned to our blog.