Is your nonprofit living from paycheck to paycheck, i.e., from day to day without a solid financial plan? It sounds strange, but some organizations are like college students living from hand to mouth. They aren’t quite sure how they’ll find their next activity, instead relying upon good luck or frantic effort to fill their coffers in time to pay the bills.
Focusing on improving accounting for nonprofits can help ease cash flow woes in your organization. We can help. At RBP Methods, we provide expert consulting, software, and services dedicated to the nonprofit world. Contact us to learn more.
With the right approach, accounting for nonprofits can help ease those cash flow woes. This is important even for organizations that feel as if they have good control over their cash flow. Despite your best efforts, funds can dry up without warning. Unexpected opportunities or emergencies can tap into your resources. Without a steady cash flow, you too could be in the “paycheck to paycheck” scenario.
Cash Flow Tips for Accounting for Nonprofits
To help ease those cash flow woes, we’ve put together five tips for accounting for nonprofits that can strengthen cash flow and reserves so that you can respond effectively to unforeseen circumstances. These five tips may prove useful as you build budgets, examine opportunities, and guide your organization’s finances.
- Manage the balance sheet: Keep a strong debt-to equity ratio to ensure there’s enough cash on hand to keep your organization running. Tip the balance to the side of equity or keep it balanced rather than on the debt side in order to keep a positive cash flow.
- Avoid debt: Credit cards and poor loan choices can weigh down an organization with high levels of debt. Instead of accruing debt, strive to pay for all items with cash on hand. Manage any unavoidable debt such as mortgage payments to find the best rates. Make payments on time to avoid late fees.
- Lease expensive equipment: Vehicles, trucks, and other equipment can be leased rather than purchased. This will help you avoid debt to buy expensive equipment which only depreciates in value the second it leaves the lot. You can also lease equipment seasonally, if necessary, to avoid large purchases that stand idle during off seasons.
- Add cloud-based software: Cloud-based software helps make accounting for nonprofits easier and faster. It’s efficient and cost-effective, too. You receive more services from cloud-based software than site-based products, and you do not need to pay for expensive hardware or upgrades to keep it running. There’s fund management, accounting software for nonprofits, and many other products to help you manage your nonprofit wisely.
- Have funding ready for new projects: It’s so hard to turn down new projects, but smart financial management means agreeing only to projects for which you already have funds. Taking on too much strains a nonprofit’s budget. Many get into debt or similar unprofitable situations because they say “yes” to too many projects. Secure funding for new work before you start an initiative and plan for its long-term success by making sure there’s funding in place to continue.
Accounting for nonprofits means more than tallying the books so they balance. It means leading the financial management for your organization so that you are able to continue serving your mission. Sometimes that means making difficult choices about where to invest and when to start new work. Eventually, however, making such decisions pays off with a solid financial foundation that can fund your organization’s work for many years to come.
RBP Methods: Advice You Can Trust
At RBP Methods, we care deeply about our clients’ success. Software such as Abila MIP Fund Accounting, Abila Nonprofit Online, and many others can help you improve efficiencies and successfully manage your margin. We offer financial management, fundraising solutions, and grant management software, as well as nonprofit financial management software and consulting to help you choose the right software solution. For more information, visit our website or call 503-648-9051.