Healthy and thriving nonprofit organizations leverage financial management tools that help them enhance outcomes, support mission storytelling, and be audit-ready. That’s why more nonprofit finance teams are using cloud nonprofit accounting software to manage funds, satisfy reporting requests and requirements, and gain greater financial visibility.
Nonprofits positively impact the world by providing advocacy, delivering services, and building community. This wouldn’t be possible without the work of passionate staff and volunteers who deliver innovative programs and execute powerful missions supported by sound financial decisions.
The healthiest nonprofits rely on modern cloud nonprofit accounting and financial management solutions that accelerate and enhance financial processes, reporting, connectivity, visibility, and collaboration. This article provides 12 days of nonprofit accounting advice that will help you transform your nonprofit finance operations, your organization, and your mission impact.
Day 1: Identify areas of fraud risk and mitigate vulnerabilities
Nonprofit finance teams know that auditors will ask what processes they have in place for identifying and responding to fraud risks. And it’s really important that those processes are concrete. Sometimes things go wrong—funds are misappropriated, or an employee uses the organization’s credit card for unauthorized purchases. These acts can have both immediate financial consequences and lasting damage to your reputation—leading to further financial losses.
Advice: Strengthen internal controls and minimize fraud risk by using modern cloud-based nonprofit accounting software with secure login features, role-based user permissions (enabling segregated financial duties), transaction approval workflows, and audit trails.
Day 2: Take a sustainable approach to budgeting
Nonprofit finance leaders know budgets matter. They provide the financial data to predict expenses, support decisions on resource allocations, and plan fundraising activities. It is also important to establish realistic budgets. A budget should be a living document that guides the organization’s activities and also allows you to make necessary adjustments in real time.
Advice: Use a modern cloud-based financial planning and budgeting software to help you collaborate in real-time across your organization to make better, faster, more informed decisions with modern planning and budgeting, forecasting, what-if scenario modeling, and reporting.
Day 3: Ensure accountability with donation and gift acceptance policies
According to Giving USA, individual donors still account for more than two-thirds of all funds given, and much of that comes from donor-advised funds and family foundations. As your funding sources change, it’s important to ensure your organization’s gift acceptance policies and acknowledgement practices stay in compliance with the rules.
Advice: Stay on top of how your organization receives and uses financial resources and provides real-time visibility and automated reports for stakeholders by integrating your donor management system with your financial management system.
Day 4: Provide up-to-date insights to your Board of Directors
The end of the year is a good time to review your organization’s strategy, tactics, and performance from this year and tweak your plan for greater mission impact next year. For example, many nonprofits have been shifting focus away from campaigning for smaller donations from individual donors in favor of attracting larger donations. What has been the financial impact of this approach? How have programs performed this year? Are operating expenses in line with the budget? Has funding increased or decreased?
When your executives, board members, and trustees try to answer these questions, they should do so with a complete view of up-to-date financial information.
Advice: Use a financial management system that provides real-time reporting and centralizes financial and outcome data. For example, Sage Intacct includes a real-time nonprofit digital board book that delivers graphical views of best practice metrics to stay on top of trends and priorities.
5. Don’t skimp on essential overhead expenses
Administrative expenses—also known as overhead—are necessary to keep nonprofit organizations running. While slashing overhead expenses may sound better to donors, this approach can be destabilizing and unsustainable to the health of the organization. It’s important to have the infrastructure you need to successfully support your mission. If your organization is relying on spreadsheets or an outdated accounting solution, then you can’t track program outcomes or improve service delivery.
Advice: Nonprofit finance transformation happens when everyone who needs information can easily access it. Accounting software powered by an Intelligent GL™ built on a dimensional database enables you to tag expense transactions and easily associate them with programs, locations, or other internal categories—enabling better insights and decision making.
6. Mentor younger professionals and build a great team
Like many other industries, nonprofit finance teams have had trouble attracting and retaining talent. Some organizations have had success bringing in younger professionals and helping mentor and develop that talent. When your organization has an intuitive cloud accounting system infused with best practices, it’s easier to help newer team members understand what you are doing and why. It also reduces the amount of mundane tasks leaving employees more time for more strategic and meaningful work. This all adds up to higher job satisfaction.
Advice: Use a financial management system with a collaborative, embedded communications tool to keep everyone on the same page when questions arise around journal entries, accounts, projects, invoices, and more. Messaging is centralized within the accounting system rather than lost in email thread providing an instant one-click record of issue context and resolution. This is especially helpful for remote workers.
7. Be audit-ready all the time
Donor trust is a valuable commodity for nonprofits. A nonprofit audit goes a long way to providing good stewardship and delivering transparency. One of the most painful parts of an audit is the time you waste hunting down requested information. Sometimes it takes hours to dig through transactions to find the one that supports an out-of-the-ordinary metric and search through emails to find the justification for an odd journal entry.
Advice: Get immediate online access to auditable information with a modern cloud nonprofit accounting software like Sage Intacct. It provides audit-ready visibility in three ways: drill-down visualization, automated audit trails, and messaging within the system that documents the why. Give your auditors role-based permission to access your system remotely. This will shorten your audit time and expense.
8. Go after more grants with confidence
Managing grants takes a lot of work—both pre-award and post-award. Since each dollar of grant funding is hard-earned, it’s critical to have impeccable fund management practices in place and ensure compliance with each grant. A strong financial management system helps ensure you accurately track expenditures, manage timelines, monitor sub-contracts, reconcile expenses, and report outcomes back to the grantor.
Advice: Ensure you have automated grant tracking and billing capabilities to help you build trust and credibility with the funder by ensuring careful management of restricted funds, accurate billing and reporting for grantors, and the ability to share outcome metrics.
9. Transform financial reporting
Nonprofit finance teams spend too much time on manual data entry and monthly reporting—at least 12 weeks every year! When you’re in the weeds with manual reporting tasks, it’s difficult to carve out any time for trend analysis or strategic insights.
Advice: Use a modern cloud accounting system to eliminate spreadsheets, improve the accuracy and timeliness of financial reporting, and provide real-time data and insights to decision-makers.
10. Improve connectivity by eliminating data silos
If your organization is experiencing a lack of data connectivity between key systems, then your visibility is clouded. No one has time to sit and rekey information from one system to another. Too much manual data entry leads to accuracy issues, slows down reporting, and hampers growth.
Advice: Ensure your accounting system facilitates integration to your other systems. In this way, your organization can automate the flow of data between your accounting system and other systems like AP and AR automation, expense reporting, CRM, and more.
11. Get real-time visibility into program costs
Financial decisions rely on good and timely information. That’s why it’s essential for nonprofit finance teams to understand the real costs of their programs to help support decisions about fundraising needs, contract terms, and program expansion.
Advice: Transform your finance operations to gain the ability to see key performance indicators in real time. That’s crucial for proactive management and good stewardship.
12. Simplify complex operations
If your nonprofit operates multiple locations and programs or works in many countries, you may need a higher order of functionality not usually met by entry-level accounting software, outdated systems, or spreadsheets.
Advice: Manage funds more proactively than ever before with continuous real-time consolidations, flexible multi-ledger architecture, and a single source of financial truth across all entities.
We hope these 12 pieces of advice will help your organization enjoy a strong finish to 2023 and also give you some ideas to ponder for 2024. Nonprofit finance transformation may sound like a lofty goal, but really, transformation is about giving your organization tools to turn data into insights and drive greater mission impact. Sage created the e-book, The Road to Nonprofit Finance Transformation to help organizations transform their nonprofit accounting and financial management practices to drive optimal impact. Download the e-book below to learn more.
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