Many charities can’t afford a dedicated finance team or accountancy firm to keep their accounts in order, but there are strategies and tools to help you. Bill Kennedy, CPA, CA, works with nonprofits in Canada. Here are his five finance tips for charities.
Create a Realistic Budget
When you create your charity’s budget, be realistic. Don’t be overly optimistic about potential fundraising dollars, says Kennedy. “It’s also important to anticipate any financial curve balls that might be thrown your way and allow room for unexpected expenses,” he adds. Financial management tools like QuickBooks Online can help nonprofits manage cash flow and budgeting.
Use an External Treasurer
Charities want to be featured in the news for the great work they’re doing, not for mismanaging funds. As such, it’s important to have systems in place to ensure money is spent appropriately and only when authorized. “One safeguard is to use an external volunteer treasurer who keeps your finances accountable and double checks your work in case of any mistakes,” says Kennedy.
“The benefit of using a cloud-based system like QuickBooks Online is that an external treasurer can have access to your finances at any time, from anywhere. That gives them the flexibility to help out on their own time and terms.”
Keep Donors Informed
Nonprofits have to account for every incoming dollar they receive, and are expected to provide donors with up-to-date financial reports. “Each donor wants to know where their dollar is spent, so it’s really important that the charity shows how the money was expended,” says Kennedy. With a system like QuickBooks Online, you can set up accounts and sub-accounts to generate reports that can be delivered periodically to each donor.
If your charity is involved in a variety of philanthropic areas, such as food service, employment and housing, it’s crucial to report separately on each program, says Kennedy. “This will make it easier for you to understand and plan individual projects. You can do this by creating different classes or departments within your accounting system.” While it might seem tedious, Kennedy says this level of detail will let you analyze and report back to donors about what they care about most: the impact of their dollar.
Use Financial Management Software
Nonprofits often have separate fundraising and accounting systems. However, Kennedy explains, this can cause a discrepancy in finances because fundraising reports tend to be cash-based, while accounting reports are on an accrual basis. “If the two systems aren’t regularly reconciled, the amounts will be inconsistent.”
Kennedy recommends using compatible systems such as QuickBooks Online for accounting and Method:CRM for for fundraising, which can be integrated to keep your bookkeeping in order.
By creating a realistic budget, using financial software and developing safeguards for your funds, you can successfully manage your charity’s finances and keep your donors in the loop. Learn more about nonprofit accounting software at QuickBooks Online.