Accounting is supposed to be boring. Or confusing. And a bit scary. As in, when an auditor comes and finds a mistake … Accounting really has a bad name, right? With my nonprofit accounting tips I want to help change your mind about that! Because if you show your accounting systems and finance management processes a bit of love and care, they’ll love you back, I promise. And when they do, you’ll have smooth access to information and insights. Which will help you manage your money, projects and people with more ease and success.
So what’s key in nonprofit accounting?
Key in nonprofit accounting is actually planning with the end in mind. What do you need from your accounting systems and processes and from your finance people? What do you need now? But also: what will you need in future, once your organisation grows its team, operations, and reach for more impact?
Think of …
So let’s imagine what you’ll need from your finance team. Think of what is the information you need to have for
- Reliable and timely reporting to your different donors (now or in future, remember!).
- Managing your cash flow (so you can sleep at night knowing you have money to pay all the bills – now and in future).
- Creating realistic budgets for your work.
- Informing the (supervisory) board about your nonprofit’s performance.
- ….
Now think of
So now you know what you could do and achieve more easily with timely and correct financial information. So let’s look at what you need to put in place to be able to extract that kind of information in the way you need it? And just when you need it, too?
Here’s an example for you
Let’s say you want to be sure you’re budgeting the right amount for a certain service in a budget that you’re preparing for a donor. If your systems work perfectly, you can check if you have used a similar service before. Then you can grab the relevant invoice and check what you paid for how many hours of work, for materials, for this or for that.
What else could you get from your documentation?
On the documentation you’ll see for what project it was incurred. And you’ll see who approved it. So you can go to your colleague and ask them about this. Maybe they have extra information about the quality or negotiations, for instance.
In your files you’ll also be able to see if you’ve checked out other suppliers before contracting this one. So you could check out other offers made and your team’s analysis of them. Now, you can feel more confident that your budget amounts have a solid basis. And that you’re budgeting enough to complete that activity successfully.
OK, another example
Let’s say you want to report to your donor. The budget you submitted is very complex with lots of budget lines. And you’re afraid it’s going to take hours of work to create a report for it. But if you’ve got your accounting system set up properly, the complexity of the budget doesn’t matter much. You need to invest one time in creating a good reporting format out of your budget. And then you can simply import data from your accounting system. And link these data to your budget lines with basic formulas. Having your expenses next to each budget line helps you spot small mistakes (and big ones, too). And after corrections, you can make a new export and update your report in minutes.
Nice?
Sounds good, right? And it’s true. I do this ALL THE TIME.
It all starts with knowing what you need at the end. And then setting up your processes, accounting system and daily practice accordingly.
Yes, but how can I get started?
To get started, you’ll need to develop policies, instructions, Standard Operating Procedures, systems, practices, based on what’s important for you at the end.
For instance:
- A financial policy that describes when and how to select a supplier from different offers. And that also describes how to visibly approve invoices and allocate costs to projects.
- A good system for filing invoices and procurement documentation. (And someone checking that this is implemented!).
- A practical approach to setting up your accounting so that you can match output to your reporting needs. For instance by adding a label for a project. Or by creating specific ledgers for specific project costs. Etc.
- Clear guidelines for people sending in invoices, approving them or booking them. So that you are clear on what you’re paying for. And so that your accounting exports are understandable without needing to check with the underlying documents.
No accounting degree needed
All of this is not rocket science. It will take you some time to set this up so it can work for you, yes. And you may want some help with that. Sometimes it just helps to use someone as a soundboard. Or to pick the brains of someone who’s a little more experienced in accounting software for instance. And sometimes it’s helpful to do a workshop or course and simply follow steps outlined by an expert.
Love & care
As soon as you put a bit of love into setting this up, your systems will repay that. They’ll let you have quick and easy access to data and information you need. And that will help you be an effective (project) manager of a reliable nonprofit. With less stress!
How I can help
If you would like simple steps to set up and organise your finance & admin foundations guidance by me, you can get my bundle of six simple and short workshops.
- This bundle includes a bookkeeping workshop to understand important basics for nonprofits that could be purchased separately.
Watch my video Nonprofit accounting tips. You can also check out my YouTube channel here, and find a collection of videos on HR issues, fundraising, annual reporting, donations and other nonprofit operations topics.
Want to know more and ask questions?
If you want to discuss this more – jump into my nonprofit support community and get input from a wide range of peers and from myself!
Here is how you can join my free nonprofit support community
You can join my free nonprofit support community on the Heartbeat platform here. This group is a safe space for open exchange and discussion on potentially sensitive topics like boards, nonprofit management, fundraising, etc. You can visit the community via a browser or via an app. Here is the link to download the Heartbeat chat app in the Google Play store.
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The seaside always inspires me and helps me think of articles, videos, workshops and courses I can create for you. If you want to support me without getting a paid workshop, course or review – you can donate me a coffee and speed up my thinking process! You can support me here: https://ko-fi.com/suzannebakker