How to Stay on Top of Your Nonprofit’s Finances
The topic of funding for non-profits has always been a tricky one, especially with the added layer of donors, some of whom get too involved with dictating expenses. Consequently, many organizations fall into the trap of financial mismanagement. On top of this, it’s well known that a lot of non-profits also have limited resources and staffing. As a result, they are more susceptible to criminal targeting, like fraudulent activity. In 2021, a study found that 9% of non-profits worldwide suffered through fraud cases that cost them an average loss of $75,000. Alongside criminal threats, there are plenty of other financial pitfalls for non-profits. This is why a non-profit needs to stay on top of its finances in order to be an effective company. If you need help on how to do this, here are a few tips on how to properly manage your non-profit’s finances.
Consult a financial analyst
Non-profits are unique because they have a distinct set of financial statements. These should include the organization’s financial position, cash flows, functional expenses, and activities. Collating these is part of the annual auditing process, which is essential in determining if non-profits still reach their financial goals. In order to address this task, it’s best to consult with financially literate professionals, such as financial analysts. The role of a financial analyst entails overseeing many financial functions, including auditing, taxes, and consolidation. They are trained to handle budgets and analyze key metrics to assess an organization’s growth. Furthermore, non-profits can use their guidance on business strategies and how to better handle funding. This way, non-profits can have someone to monitor their financial resources closely.
Focus on donor retention
Donors are one of the key players in keeping non-profits operational. The only way an organization can thrive is through their support and backing. Unfortunately, one of the biggest problems with non-profit donors is consistency. A lot of donors tend only to give once, which isn’t a reliable model for organizations to continue their business with. Thus, it’s highly important to focus on keeping existing donors and building a connection with them. By rolling out initiatives concentrated on the retention and protection of donors, non-profits can have a dependable source of funding on a long-term scale.
Have a variety of revenue streams
Acquiring funding is an integral part of non-profits as it helps them stay afloat. However, only focusing on one source can lead to a financial loss should something unexpected happen. As such, non-profits would benefit from having multiple revenue streams because it can help them endure tough financial situations and even achieve growth. Some of the most profitable avenues for many non-profits are through charity events, such as galas, festivals, competitions, and exhibits. Planning just one of these takes a lot of time and effort, so getting an events planner could be tremendously helpful. The duties of events planners include arranging all the aspects of an event and ensuring that everything goes well. With their expertise, non-profits can hold successful events that could raise lots of funding from old and new donors alike.
Use financial management software
Non-profit organizations tend to be on the smaller side. About 92% of them operate on a budget of less than $1 million annually, restricting the size of their team and assets. In order to offset this, non-profits can optimize where they can by turning to automation. There are financial management tools available specifically for non-profits to keep track of their finances and monetary documentation. Although these may be costly at first, they will cut down the time and labor needed to get these tasks done. Furthermore, accounting or bookkeeping programs can reduce losses from costly mistakes. By getting the right financial tools, non-profits can simplify some of the processes and increase the efficiency of their team.
Article written by Jane Roney
Exclusively for NONPROFIT LEARNING LAB