Your nonprofit must face many choices every day, and one area where choices are of the utmost importance is in nonprofit accounting. Weighing and prioritizing different tasks, such as choosing the right nonprofit accounting software within your nonprofit, can be overwhelming, but is necessary. Choosing how to classify donations, whether to give a trusted employee a raise, or how to comply with the new FASB 958 regulations are all choices that must be made.
RBP Methods has worked with many nonprofit clients to help them identify and prioritize key elements of their accounting activities and the right nonprofit accounting software to use for maximum business impact. Below are several tips to help you make mindful choices about your financial and accounting needs.
Three Tips to Help You Set Priorities
- Focus on strategic clarity: Clarity of your nonprofit’s purpose, mission, and vision is essential for good business management and nonprofit accounting. When your nonprofit’s mission and vision is clearly identified, it will be easier for you to prioritize the essential parts of your nonprofit. Activities in direct support of your mission are funded first, with secondary activities funded next, and so on. It is difficult to develop strategic clarity if you are not used to doing nonprofit work.
- Diversify income sources: Do not “put all your eggs in one basket.” Relying on one sole source of funding could potentially be catastrophic for your nonprofit if anything were to happen to the funding source. For example, grants may end or donations can become scarce if the economy declines. Diversifying your income stream is just as important as diversifying your investments. Diversification spreads out the potential risk if one of the streams dries up.
- Measure outcomes: Measuring outcomes is not just for the for-profit world, as nonprofits should also measure the outcomes of their efforts. Measuring your nonprofit’s donor campaign results, educational activities, and other similar projects can help you prioritize. You can only prioritize funding for the future once you have measured how well your nonprofit achieved their objectives. Knowing that one area achieved its objective while another fell short can greatly help you decide whether additional funding, staffing, or publicity can change the dynamic, or not.
Ask Yourself the Tough Questions
It is important to ask yourself the tough questions, too! Most likely, your nonprofit has several initiatives that need to be questioned to help you set and achieve your goals. It will most likely be difficult to learn that a favorite activity does not meet your revised mission statement, but it is wise to stop the activity before spending resources unwisely.
Ask yourself these questions:
- Are we continuing any activities just because of comfort? Some companies continue with charitable events, marketing campaigns, or other activities in the same manner year after year only because that is what has always been done. Ask yourself if the activity serves your nonprofit’s best interests, or if it has strayed away from your mission.
- Are we holding onto “pet” projects? Larger organizations are more prone to falling into the “pet project” syndrome. It may be the director’s favorite activity, or a cherished idea that is hard to let go of. Basically, the project is done because so-and-so asked for it to be that way. You must have the courage to question even pet projects in order to prioritize the important ones from the rest.
- Does this serve our constituents? No matter what activity you are considering, ask yourself if it serves your constituents best interests. This mindset helps to keep your focus on what your nonprofit does based on its mission and helps prioritize your budget and accounting activities around what matters most, your constituents.
RBP Methods is a nonprofit software and consulting firm that helps right-brained people navigate a left-brained world. We understand how hard it is to ask these tough questions and to change your nonprofit’s mindset. We offer a wide range of consulting services focused on helping nonprofits manage their accounting and financial needs. Our software choices include Abila, AccuFund, and other nonprofit accounting software. For more information, visit RBP Methods or call us at 503-648-9051.