7 Essential Nonprofit Finance Tips
If you wish to run a nonprofit you want to make sure you plan accordingly for its financial obligations. Nonprofit finance includes many challenging tasks that you have to take seriously.
You need to make sure you manage your books, fund your initiatives, and meet legal obligations.
This article will share the guidelines on how to manage your nonprofit finance obligations.
Let’s start with the importance of budgeting.
You want to make sure that you keep track of your budget before making any decision for your nonprofit. Your budget must include all earnings and expenses. This will help you make decisions for your future.
If you require $10,000 for a project, you must refer to your budget to see if this amount is feasible. You want to see if you require more funding or cutting down on expenses.
Budgeting can be an arduous task, so you want to make sure you find great accounting services to help you with this.
2. Understand Legal Obligations
A nonprofit is always under scrutiny from the IRS, donors, the media, and the general public. While you started your nonprofit with the best intentions, others want to make sure you aren’t trying to profit off the funds.
You need to understand the legal obligations surrounding a nonprofit organization. You should consult both a lawyer and your accountant on how to meet these obligations.
3. Diversify Your Funding
To run a successful nonprofit, you want as many funding sources as possible. If you lose one funding source, you want to make sure you have others to rely on.
You can have a donation option on your website. You can use a payment service such as Stripe or PayPal to request these donations. Your nonprofit can also host local events that serve as fundraisers. Many nonprofits also reach out to local entrepreneurs and businesses to solicit funding.
You can also consult with your accountant to see if your nonprofit can invest funds. Investing your donations can bring in more funds, but you must first find out if this adheres to nonprofit guidelines.
Applying for an interest free credit card can also help a lot in improving a non-profit organization’s cash flow as it allows the organization to essentially borrow money interest-free for a fixed period of time.
4. Practice Financial Responsibility
You want to make sure that you and your team make responsible decisions when handling the nonprofit’s finance.
For example, anyone who has to make purchases for the nonprofit must know how to “shop around.” You want to educate everyone on how to find the best prices for your expenses. You also want to make sure to avoid expenses when possible.
If you are hosting a fundraiser, you can use your funds to hire a catering service. Or, you can have all members of the nonprofit to cook a dish for the event. Whatever you choose, make sure you try to save as much as possible.
You also want to set financial goals for your nonprofit. You might wish to receive at least $2,000 in donations each month. You want to then have strategies each month on how to meet this goal.
Financial responsibility also includes making financial information transparent. If your assistant does the shopping for the upcoming fundraiser, it’s their responsibility to share these receipts with the team. All funds received should also get recorded and shared.
You might want to consider having a spreadsheet shared across a cloud storage drive. Receipts, invoices, and other financial documents can also get uploaded on a cloud drive.
5. Communicate With Board Members and Staff
This follows off with what we left off in the previous tip. Part of your nonprofit’s financial obligations includes regular communication with the Board Members and your staff.
You want to let them know how many funds your nonprofit has garnered. You want to let them know about any challenges the nonprofit is facing.
For example, if you get audited by the IRS there will be concern among the Board and Staff. Make sure you keep them abreast of the audit and ensure them that you are complying with the rules.
You also want to make sure you take advice from anyone in your nonprofit. A nonprofit works together as a team. As such, the Board Members or Staff Members might have advice on how to raise funds, cut expenses, meet tax obligations, etc.
6. Create A Reserve Fund
One thing that a nonprofit has in common with a business is that anything can go wrong at any time with its finances! One cannot ensure that you will always have regular funds coming in. Expenses can also rise at any time without warning. At any time, you might have to depend on emergency finances.
Make sure you create a reserve fund as soon as possible. The reserve fund is for you to dip in whenever there’s a financial challenge in the nonprofit. You can put aside funds each week to this reserve fund. For example, if you receive $100 in one week, you might consider keeping $10 for the reserve fund.
7. Consult With Financial Advisors
You want to consult with financial advisors for your nonprofit early on. These financial advisors will help you make the best decisions for how you can manage nonprofit finance.
They can advise you on how to cut down on expenses. They can provide you with ideas and case studies on how to raise funds. Financial advisors can also help you with the legal structure and legal obligations that a nonprofit requires. Often, financial advisors work in tandem with the nonprofit’s accountant.
Your financial advisors should have previous experience in working with other nonprofits. You can also offer positions within your nonprofit to anyone who managed finances for another nonprofit.
Succeed With Nonprofit Finance
The guidelines and rules surrounding nonprofit finance are crucial for its success. While not a business, a nonprofit works in the same way as any entrepreneurial endeavor.
If you follow the tips in this guide, you’ll be sure to grow your nonprofit and make the change you wish in your community.
Please make sure to share this guide with anyone else interested in starting a nonprofit. For more information about business, check out more of our blog today!