Best Practices for Streamlining Year-End Nonprofit Financial Reporting

It is more important than ever before for nonprofit finance leaders to monitor the financial health of their organizations and demonstrate sustainability and stewardship to funders.

Today, donors scrutinize financial reports and expect transparency. Board members and executives require more timely insights for decision-making.

Compliance with federal regulations and donor restrictions also demands accurate financial reporting accountability.

Although nonprofit financial reporting is critical to your organization’s success, it can be extremely time-consuming and full of manual processes.

The good news is that cloud-based automation can transform the efficiency of your reporting. Sage Intacct helps organizations reduce the time required to close their books by up to 79%.

In this article, we will share what nonprofit financial professionals find tedious or challenging about financial reporting. Will also explore how organizations are improving their reporting processes with automation.

We will also explain how cloud nonprofit financial management solution like Sage Intacct helps optimize nonprofit financial reporting through each stage of the month-end and year-end close.

Here’s what we’ll explore in this article

How to close the books faster and get back to your mission

Cloud financial management streamlines year-end reporting

How to achieve a smooth, automated year-end close

Final thoughts

How to close the books faster and get back to your mission

The Sage 2023 Close the Books Survey asked more than 1,000 finance professionals around the world—CFOs, VPs, directors, controllers, and more—to share their experiences and insights about how their organizations close the books.

On average, organizations spend between six to eight days closing their books each period.

That’s equal to 90 days a year. That’s roughly 25% of the finance team’s time, spent on month-end and year-end reporting!

When comparing the experiences of organizations that close the books slowly with those who can complete reporting more quickly, the key difference was financial automation:

Respondents with the lowest level of automation available spend only 18% of their time on value-added tasks, while those with high levels of automation at their disposal spend almost 58% on these activities.

2024 Nonprofit Technology Trends Report

The 2024 Sage Nonprofit Technology Trends Report revealed nonprofit leaders chose a lack of process automation and manual time-consuming reporting as their top two internal challenges for the past three years.

So, it should be no surprise they named the ability to automate financial reporting as their most important priority for accounting software functionality.

Cloud financial management streamlines year-end reporting

According to the Close the Books survey, finance teams that adopt a cloud financial accounting solution are on average 25% more automated than those using an on-premises solution.

Being in the cloud offers a number of advantages during month-end and year-end reporting, including:

• Real-time reporting and visibility
• Anytime, anywhere access for teams dispersed around the world
• Dashboards for key stakeholders
• Ability to integrate easily with other systems for synchronized data
• Internal controls and role-based security
• Streamlined workflows

Additionally, a cloud-based nonprofit accounting solution can help you dramatically reduce the complexity of your chart of accounts, contributing to smoother reporting at year-end.

For nonprofit financial management, a logic-based structure provides a better approach to the chart of accounts.

Sage Intacct has a table-driven chart of accounts, which lets you create primary natural account codes (assets, liabilities, net assets, revenues, and expenses). You can also tag transactions with attributes called “dimensions” (location, grant, fund, program, and more) that provide additional context.

In this way, Sage Intacct makes it easy to customize reporting while maintaining a streamlined chart of accounts.

How to achieve a smooth, automated year-end close

Let’s walk through the steps to complete nonprofit financial reporting at year-end when you have cloud automation like Sage Intacct.

1. Start with a good checklist

Sage Intacct offers a checklist tool that provides a streamlined process for month-end and year-end nonprofit financial reporting.

Break year-end close tasks into assignments with due dates and monitor real-time status including tracking the percentage completion for each assignment.

The tailored checklists act as a reliable guide to guarantee the completion and documentation of all necessary actions, minimizing the chances of mistakes or omissions in your financial reporting.

2. Utilize in-system collaboration tools

For both efficiency and security reasons, it is important to be able to work together as a team from inside your nonprofit accounting system.

Collaboration software helps keep everyone on the same page. It also provides a history you can refer to and review in the future.

Sage Intacct Collaborate helps you communicate easily with your team to solve accounting issues. While keeping the entire conversation logged in the accounting system and out of email inboxes.

3. Reconcile external systems

Before you start your year-end reporting, ensure you’ve brought the transaction data from all relevant business systems into your accounting solution.

This may include your CRM, grant management, AP and AR automation, expense tracking, payroll, e-commerce, or point-of-sale solutions.

This would take a lot of time if you had to run manual synchronization to export and import data—or worse—if you had to manually reenter transactions.

Fortunately, with a cloud accounting system, pre-built integrations and APIs make it quick and easy to ensure continual synchronization between systems.

The Sage Intacct Marketplace features pre-built links between Sage Intacct and more than 50 of the most popular applications used by nonprofit organizations.

Check to make sure all systems have synched, and no errors were reported.

4. Check for transaction errors or incomplete transactions

After posting subledger transactions, check for any transactions that may not be complete.

This could be:

• a recurring transaction that failed,
• transactions you entered as “drafts” but never finalized,
• or transactions still waiting for approval.

In Sage Intacct, you can easily filter to identify draft transactions.

Failed transactions are easily monitored in transaction status reports and the system will automatically retry them.

Transactions awaiting approval can be easily identified by filtering for submitted or partially approved transaction status.

5. Verify and close subledgers

Now it is time to lock down subledgers like Accounts Payable, Accounts Receivable, Time & Expenses, Client Expenses, and Cash Management.

Sage Intacct allows you to lock each subledger independently. So if you have assigned different team members to subledgers, they can close them with one click as they complete the work.

Closing subledgers still allows you to record month-end journal entries. In Sage Intacct, you can also choose to close the subledgers and general ledger together with a single click.

Remember to process 1099s for vendors and both file them with the IRS and deliver them to your vendors.

Sage Intacct Marketplace partners can automate e-filing and vendor delivery for you.

6. Reconcile subledgers to the general ledger

With proper automation, this involves quickly running pre-built reports for each module and making sure they reconcile with the trial balance or GL report.

7. Close the general ledger

Now it is time to run your year-end financial reports and trial balance. When you’re finished reporting, close the GL and finalize your financials for the year.

Final thoughts

Year-end nonprofit financial reporting can seem painful and time-consuming, but it doesn’t have to stay that way.

Automation with cloud nonprofit accounting software can free your team from manual data entry and reporting. It will significantly reduce the time required to close your books.

Organizations with financial reporting automation are saving 24 days per year on average, according to the 2023 Close the Books survey.

If your organization hasn’t made the move to cloud automation in your nonprofit financial reporting, consider what you could accomplish for your mission with an extra month each year.

Download the Achieving Real-Time Visibility with Nonprofit Financial Reporting and Dashboards e-book to read about the ten symptoms of inadequate financial reporting and learn more benefits of cloud automation for achieving real-time visibility and reporting that supports your mission.