Not-for-Profit Accounting

Most people are drawn to volunteer or work for a nonprofit organization to help achieve the mission of the organization but nonprofit management teams are tasked with many roles to keep the organization running. Below are a few tips and tricks to help the organization’s management team and board of directors aware of the financial status of the organization:

Make a Budget
The easiest way for your organization to know where they are financially at any point during the year is to know where you want to be at the end of the year. To do this, you need to have a budget.  The strongest financial statement budgets begin with the organizations strategic goals in mind. If your organization wants to serve 10,000 meals to the homeless next year, you need to plan for the revenue needed to prepare the meals along with the associated costs of the meals.  As the year progresses, the organization will quickly know how many meals have been served and if revenue and expenses related to those meals is on track.  

Keep Reports Simple
When reporting to the Board of Directors, one of the biggest mistakes financial managers make is providing budget to actual financial statements with every account listed on the general ledger.  While it may be necessary to provide detailed financial information, it is generally best to provide the information on area summaries.  

Focusing on the areas effecting the mission of the organization. If the expenses are on track with the budget, there is generally no need for additional detail. Or course, if the organization if off track on the budget, additional information should be presented to help determine the best course of action to get back on track or adjust goals. 

Use a Dashboard Report
Dashboard reports are used to highlight key metrics and illuminate trends. They are a blend of financial information and operational statistics.  Dashboard reports include key performance indicators (“KPIs”) that are of high priority to the organization’s overall mission. Dashboard reports are easier to understand by those without a financial background. 

A dashboard KPI for an organization that serves meals to the homeless could include the average cost of a meal served by month. This will provide a fast metric to management to make decisions on costs and goals throughout the year. 

When combining mission-related financial and non-financial KPIs, the dashboard report can act as a balanced score card for the organization. Adding benchmarking to the balanced score card will provide a very powerful tool that captures the essence of the organization’s operations in comparison to peer organizations. This will provide the opportunity to increase efficiencies within the organization for greater impact. 

Timely and Accurate
Like any report, the quality of the information that can be gained from the financial reporting is based on the quality of the underlying information and how timely it is presented. At Faw Casson we have trained professional in our Entrepreneurial Services group to handle the outsourced accounting services of your organization that ensures you have the most reliable and timely reports possible.