Good financial management is an integral part of nonprofit strategy to ensure the continued existence of an organization and the services they provide. Nonprofit budgets can be complicated, however, because of barriers to raising money, regulations governing how money is used, and a focus on service over profit. All of this requires that you exercise exceptional financial control, making managing your cash flow is crucial.
These are some easy ways to better manage your cash flow:
- Know your costs: Spend some time identifying what your exact costs are so that you’re in a better position to fundraise appropriately. Plan for your future programs and services to get the best estimate of costs.
- Construct a budget: One of the best things you can do to protect your financial health is to be strict about budgeting. Of course, there’s room for some flexibility within a budget (it is only a guide, after all), but treating it seriously is essential.
- Review your budget: Once you’ve created your budget, as a nonprofit, you’ll likely need to get board approval. This helps hold organizations accountable and ensures a thoughtful, thorough document. Once your budget passes review, it will guide your decisions in the months to come, especially if you commit to reviewing it with regularity. Build in some space for flexibility, but also approach the year knowing you’re going to do your best to keep close to your budget.
- Focus on accountability: It might make sense that an organization wouldn’t want to showcase things like budgets and operating expenses, but this isn’t actually the case. One of the ways you can protect your organization is by ensuring that everything happens out in the open. This helps prevent theft, curtail spending, and even enforce federal rules.
- Maintain a reserve: A great way to limit the chances of being caught in a precarious financial situation is to maintain a financial reserve. For new or small nonprofits, this can feel like an unreachable challenge. If you’re operating on a shoestring budget, saving money feels impossible. Doing so will help reduce the chance of needing to dip into personal accounts, reduce services, or downsize staff. Decide what you need (enough to cover an emergency, enough to sustain business in the absence of a grant you usually receive, etc.) and find ways to save a little each month to meet your goal–and then maintain it unless absolutely necessary.
- Stay current: Nonprofit organizations are subject to a lot of rules, and these rules change quite frequently. Make sure you’re keeping up with potential changes. This is especially important during times in which many things are in flux, as is the case during a global pandemic, for example.
- Evaluate regularly: In the case of mistakes or successes, make sure you’re holding regular evaluations of your process to ensure that they’re working for you, your employees and board, and your organization. Regular check-ins help keep policies in place that work for everyone, so take the time to reflect on how things are and are not working.
Good financial management requires constant flexibility and a willingness to learn, but ultimately results in stronger, healthier organizations that are better able to help their communities succeed.
Trust the Professionals at Goldin Group CPAs
At Goldin Group CPAs, we can help nonprofits and small businesses with bookkeeping, taxes, and all other accounting needs. We understand that as a business owner or non-profit manager, keeping up with accounting and taxes is time-consuming and can even be overwhelming. We work with nonprofits and businesses, offering a one-stop-shop for financial services. If you are a nonprofit looking to outsource your accounting or if you need help managing any aspect of your nonprofit’s finances, we would love to hear from you! Call us at (301) 913-0008 or email firstname.lastname@example.org to make an appointment.