The Trust Factor in Accounting for Nonprofits

accounting for nonprofitsWhen it comes to accounting for nonprofits, trust is the most important factor in every transaction. To fully consider the impact of trust, consider the impact of mistrust. Nonprofits who break the trust of their donors, members, and constituents find themselves the subject of intense public scrutiny, fewer supporters, and a long-lasting negative impact. It is difficult to restore trust once it is broken.

To enhance the trust of your organization, updating your accounting software may be helpful. New software offers accurate, timely, and flexible reporting. Reports on donations and fund use can then be shared easily and quickly with the public to enhance trust.

Maintaining the Public’s Trust

Given the importance of maintaining public trust in your organization, actions taken during accounting for nonprofits can make or break the public’s trust. Watch for any of the following actions that can undermine trust and take immediate steps to correct them.

  1. Fraud: Accounting for nonprofits includes preventing fraud. Fraud can take many forms. Even though you’re probably doing all that you can to prevent obvious fraud, there are other less obvious ways in which fraud can occur. Using old, outmoded accounting systems can make it easier for people to succumb to temptation and tamper with accounting records to cover evidence of fraud or embezzlement. Poor controls in your accounting office can also lead to fraud. Always have two people present when cash is counted and lock checks and other financial materials in the safe, with strict controls over who can access such materials. Take steps to prevent fraud before you’re faced with the task of combating it in your office.
  2. Inertia: Organizational inertia is the term used to describe nonprofits who get so set in their ways and comfortable with the way things are going that they do not deviate from their prescribed actions. They continue running their organization and handling accounting for nonprofits in the same way they’ve been handling it for many years. The result is an organization that slowly slips behind the times and ends up bloated with unproductive activities. Schedule time quarterly to review activities, programs, and the financials for your organization. Make sure that every activity aligns with a major goal of your nonprofit. Keep the lines of communication open to staff and actively seek and listen to new ideas.
  3. Outdated systems: Another area in which trust can be broken is when a nonprofit organization fails to maintain transparency with their members. Financial transparency is necessary to reassure people that their donations are used wisely. It can be difficult to offer financial transparency, however, when your systems for accounting for nonprofits are outmoded. Updating fund accounting software, fundraising software, and accounting software for nonprofits can provide you with the accurate, flexible, and timely reporting that you need to reassure the public that their contributions are being used wisely.

Proactive Public Relations Is Vital

Proactive, ongoing public relations is also vital to establish and maintain trust. Continually promoting the good work that your organization does for the community helps maintain a level of trust and support that offers a steady stream of goodwill. Such public goodwill is the offshoot of consistency which also enhances the public’s trust.

Accounting for Nonprofits Means Accountants as Leaders

Although public relations is probably not within your purview, accounting for nonprofits often means taking the lead in areas where financial information can support other groups within your nonprofit. Providing updated reports on the organization’s use of funds, for example, can support the messages shared by your public relations department, and enhance trust and accountability with the public.

Accounting for nonprofits must take into consideration the element of trust or integrity throughout all transactions. Transactions may include purchases such as buying goods from a nonprofit like books and publications or other items. It also includes the trust of the members, who support a nonprofit through their dues. Nonprofits must fulfill their obligations and promises to their supporters while acting with honesty and transparency in all their financial dealings.

There’s an old saying that it takes 20 years to establish a reputation and five minutes to ruin it. Don’t let your nonprofit make the mistake of tarnishing its reputation. Good accounting for nonprofits, clear and transparent financial reports, and ongoing public relations can continue to build and enhance trust for many years to come.

RBP Methods: Advice You Can Trust 

At RBP Methods, we care deeply about our clients’ success. 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. Products that can help your nonprofit with reporting and accounting include AccuFund Accounting Suite, Abila MIP Fund Accounting, and many others. For more information, visit our website or call 503-648-9051.