Take the Stress out of Managing Nonprofit Financials.
Updated: Oct 16, 2021
Our network C.P.A., Andrew Melton, discussed the basic overview of Nonprofit Financial Management and how to organize the functional areas (governance, programs, and administrative) and staff responsibilities of your organization, replay is available in the Collective Impact App under the Impact Toolkit tab.
Rightfully so, the title “Accounting Systems and Organizational Structures” sounds intimidating. Our goal at Collective Impact is to help our audience overcome internal and external barriers preventing N.P.O. from being successful. Lack of financial accountability is one of the many barriers that affect nonprofits primarily led by people of color. Don't stress, below are a few tips to help you better understand how to implement accounting systems and organizational structures to improve your organization's internal impact.
#1 Strategically select a Board Treasurer that you trust and has experience with bookkeeping or accounting background.
A nonprofit treasurer typically takes on the following responsibilities:
Reconciles bank accounts and produces financial statements, which they present at board meetings
Ensures tax-related documents and legal forms are filed on time, such as the documents required to maintain the organization's tax-exempt status
Serves as chair of the finance committee and financial officer of the organization
Manages, with the finance committee, the board's review of and action on its financial responsibilities
Assists the chief executive or the chief financial officer in preparing the annual budget and presenting it to the board for approval
Reviews the annual audit and answers board members' questions
As the nonprofit Founder or C.E.O., you have many things to do and manage. For organizations to impact the community, you must have a working board that brings their skills to the table. Utilize your board treasurer to the fullest and save yourself a headache. Later this week, we'll focus more on organizational structure and break down the responsibilities of all board and staff members.
#2 Record EVERY transaction(expense/donations)
Even if you are self-funding your organization, you need to maintain a paper trail. Only use the organization's bank account to pay for expenses and receive donations. If paying cash, deposit in the bank account before making a transaction.
Most accounting software's like QuickBooks and or Waverly can link to the nonprofit's bank account; you have to reconcile (categorize) the transactions. (Ex., Funder's investment)
Maintaining and communicating your nonprofit's financial activities gains the trust of the community, stakeholders, board, and grant funders. If you are not sure when your organization's tax period is, you can refer to the top right section of your tax-exempt determination letter, Form SS-4 (E.I.N.), and prior-year 990.
Yes, tracking transactions is a tedious process. However, once you get a sound system down, make sure it's documented. This leads to our next tip.
#3 Screen record book keeping process or create a checklist.
This task can save so much time and can be passed down to the next treasurer or, in a crunch, delegated to someone else. No need for a meeting when you can email out a video and financial information to be added to accounting software. A prime example of organizational structure. This information can be used to explain the roles and tasks of administrative duties and on file to provide to hired staff and or volunteers.
Creating processes and procedures to maintain a financial system is the foundation to running and growing a nonprofit organization that sustains AND creates jobs and solves social issues plaguing our communities. That’s the type of impact we need from nonprofits of color.
#4 To help you stay accountable, make sure books are categorized and entries are imputed before each board meeting for review.
There are many accounting systems like Quickbooks and Waverly. You can also use a Microsoft Excel sheet. We have created the “Get $ together” template you can access from the link or in the resource section of our App. Nonprofits lose tax exemption status because they do not file annual requirements with state and I.R.S. Partly because it is too overwhelming to search for receipts and input transactions on the financial statement at the last minute. Non-compliant organizations are flagged on Guidestar, a tool used to verify 501 c 3 organizations. This will deter grant funders and donors, AND you'll have to resubmit form 1023 and pay a fee to regain tax-exempt status. SIDE NOTE: Create a profile on Guidestar, upload requested information, and check it regularly. Hiring a C.P.A. and or bookkeeper to manage your nonprofit's accounting is a great investment that can save thousands of dollars down the line. For startup nonprofit organizations, reviewing financials during board meetings is a great opportunity to encourage your board to financially support the organization and or fundraise to help with expenses. If you're ready to schedule a consultation with our Network CPAs complete our assessment form.
You may be wondering why this is important. Most, if not all, grant funders want a copy of your financial statements/budgets when submitting grant proposals. They want to ensure you know where money is going and are trustworthy to invest in.
When working with our clients, we always ask what area do they need help in, and nine times out of 10, they say "GRANTS." When looking at your current organization's financial management, if you received a million-dollar grant tomorrow, would you know where it went, where it needs to go, and how much your program expenses are? Efficient bookkeeping helps to determine your operating budget, which can be communicated to grant funders, your board of directors. It also helps when filing your 990 tax forms at the end of the tax year and eases the burdens of financial audits.
#4 Enroll in Impact Academy
This is why we stress the importance of STEWARDSHIP in Impact Academy courses. Scripture tells us in Luke 12:48 “to whom much is given, much will be required”. You’ve been blessed with a vision to serve God’s people through your nonprofit organization. Stewardship, unity, and servant leadership are the biblical pillars on which our course and company are based. If you feel these are areas you need to grow in, enroll in Impact Academy. This self-paced course is available through the Collective Impact App or www.collective-impact.app/iaenrollment Impact Academy is a community of servant leaders learning about nonprofit operations, team building marketing, and more from our network of nonprofit consultants. Invite your board members to subscribe, and we will train them for you. Why reinvent the wheel when you can apply knowledge from our experience network to maximize your organization's IMPACT in the community. We cover topics of board governance, time management, self-care as a nonprofit leader, and much more. Every month relevant content is added to Impact Academy to equip nonprofit leaders with the tools needed to run an efficient organization.
For more information on our network and Impact Academy, visit our website www.collective-impact.app, or download the Collective Impact app in the Google Play and Apple app store today.