Nonprofit Accounting: 5 Best Practices for the New Year
It’s still early in the new year, which means that there is still time to solidify your accounting practices for a super successful 2020. If you’re a new nonprofit, making the switch into the nonprofit world, or just hoping to get your finances in order, read on! We’ve got some best practices that will start your year off right.
Every week, there are countless stories about nonprofit accountants gone bad--good people who find themselves in a difficult situation and end up taking advantage of nonprofits who are trying to operate on smaller budgets. There’s a relatively simple way to help prevent this, and that is to have a variety of people involved in your financials. When there are multiple people involved, you form a system of checks and balances that helps prevent fraud.
You can also prevent fraud by establishing a system of diverse internal policies that hold people accountable and establish a code of ethics.
Use specialized tools
Nonprofit accounting isn’t like all other accounting. Equipping yourself with the best software and people can make a world of difference for your organization. Choose experts or accounting firms that specialize in nonprofit bookkeeping, which can streamline your process and make your life easier.
The right people make sure your knowledge on nonprofit tax and accounting regulations is up to par, and prevent costly mistakes from ever happening. Choose experts, and watch your nonprofit flourish.
Be real about your budget
Obviously, having a budget is a crucial first step. But you’ve got to be realistic about your operating expenses--what does it actually cost to run your nonprofit? Knowing this will allow you to operate within your budget, as well as plan for unknowns and future strategy that promotes growth.
Involving your board (who should operate totally independently of your organization, meaning they are not employed there or have family members who are) in budget approval is a great way to hold yourself accountable, as well as increase visibility.
Make communication a priority
All parts of your nonprofit, no matter the size, should be talking to each other at all times. Organizational policies and procedures can change, so talking to other departments ensures that you’re all operating as one well functioning machine.
The best nonprofits hold regular meetings, training, and conversations that bring together the great employees doing the work.
Focus on fundraising
Like a budget, fundraising plans work best when they’re realistic. When you sit down to write your budget, plan a fundraising strategy that is ambitious, but doable. Make sure you’re able to follow through on the plans you’re making, and set measurable, actionable goals. Don’t be afraid to try a new strategy, but be aware that it may not work, and have a backup plan.