Financial Management In Nonprofits


New nonprofit leaders and managers have to develop at least basic skills in financial management. Expecting others in the organization to manage finances is clearly asking for trouble. Basic skills in financial management start in the critical areas of cash management and bookkeeping, which should be done according to certain financial controls to ensure integrity in the bookkeeping process. New leaders and managers should soon go on to learn how to generate financial statements (from bookkeeping journals) and analyze those statements to really understand the financial condition of the business. Financial analysis shows the "reality" of the situation of a business -- seen as such, financial management is one of the most important practices in management. Budgets will help you understand the basic in financial management, and build the basic systems and practices needed in a healthy organization.

  1. Assess the group's cash flow. This is an exercise in basic accounting. Take a look at the influx of all monies and donations. List these on a balance sheet as assets. Record all accounts, liquid cash and investments.
  2. Detail expenses. Take a long, hard look at the group’s expenditures. Count in everything from paid staff positions to office supplies. Figure the operating expenses like the rent for facilities, travel costs and utilities. Count in fundraising costs as well. List these as liabilities. 
  3. Create a balance sheet. Now it is time for simple arithmetic. Add together the assets and liabilities. Deduct the liabilities from the assets and study the result.  This will give you a basic guide for where to take the budget.
  4. Time for a trim. Take a fresh look at the group’s expenses. Are there areas that can be eliminated? Think about which paid staff positions could be replaced by a volunteer. Maybe a student in need of volunteer hours could handle the responsibilities and save the organization money. Eliminate any unnecessary travel expenditures. After the budget is trimmed, assess the extra revenue the paring down has netted.
  5. Project expenses. While you are in the mode of looking closely at the non-profit group’s financial layout, make projections for the next year, giving special attention to upcoming events. Try to anticipate unexpected needs and budget accordingly. 
  6. Assess needs. Next, take a look at the numbers you have accumulated. Look at the current budget and projected needs to help you determine future needs.  Brainstorm fundraising ideas. Be sure to document and consider the additional expense fundraising efforts will add and deduct them from the projected monies raised.
  7. Put it all together. Now that you have the figures, make a budget. Plan out expenses and assign a dollar figure to each. Create a projected budget based on the predictions for the upcoming weeks and months. Make plans to replenish monies spent on expenses. 

Revisit the budget on a regular basis. Instruct all organization members to document all expenses closely. Routinely reevaluate the budget to keep a tight handle on the money. When it comes down to it, managing a non-profit group revolves around one bottom line. You are in the non-profit field to make a difference for a cause you care about. Creating a solid budget for a nonprofit ensures that the most good will come out of your efforts.

Finding Information On The "How To's"

Building your nonprofit budget is not easy!One of the most important aspects of your budget is knowing that what you present to your board and the public is correct and accurate. Donors expect that you are using the money wisely. It is essential that you can provide the facts and figures they will ultimately request at your fingertips! While it can be expensive, one of the best tools you can have is a good bookkeeping system!

Nonprofit Accounting

It is a fact of life in the nonprofit sector that organizations will not truly become viable until they have the correct financial policies and procedures in place. One way to ensure that your organization is transparent and accountable financially is to be able to rely on the guidance of others that not only know what they are doing but have the talent to be able to explain it to others so it makes sense.

Bender Consulting can help your organization with the following:

  • Provide a Financial Health Assessment to determine financial viability 
  • Provide sample policies and procedures that assure organizational performance and transparency
  •  Explain financial stewardship and its role in the organization
  • Define the role of Treasurer, Finance Committee and Audit Committee of the organization
  • Develop a budgeting process based on Mission as well as organizational goals and objectives, including forecasts, comparison and analysis, reviews
  • Identify characteristics of financial health
  • Develop a cash flow and cash management analysis
  • Develop a Risk Management Plan

    DISCLAIMER: This information is not intended to provide legal or accounting advice, or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.

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