Learn something new every day
More Info... by email
Financial management tips for nonprofit organizations start with treating the nonprofit organization as a business, except that the nonprofit is not looking to make a profit. Proper financial management for nonprofit organizations also requires a great deal of upfront planning and budgeting. Nonprofit organizations have to find a way to keep their expenses at a minimum and maximize the amount of money they raise for their cause or causes.
The first tip for financial management for nonprofit organizations is to spend a lot time creating a financial plan for the organization. The financial planning process is very similar to what an individual or for profit business would undertake. The nonprofit organization's financial plan should include the financial goals of the organization. In addition, the plan should also discuss the techniques and tactics that the nonprofit organization will choose to implement in order to reach these goals. The financial plan should also include measurement tactics, so that the nonprofit organization can track their financial progress along the way.
An important part of the planning process includes creating a budget for the nonprofit organization. First, the nonprofit organization should list out all of the expenses the organization expects to have throughout the year. Next, the budget should include how much money the organization needs to raise for the cause in which the organization exists for in the first place. The budget should also include a cushion for unexpected expenses or costs that may come up throughout the year.
Budgeting is about more than simply creating a budget as part of the financial management for nonprofit organizations. It also includes tracking the income and expenses that the organization has throughout the year. A quarterly, semi-annual or annual review allows the board and staff of the nonprofit organization to make decisions on cutting back expenses or reallocating funds from one area of the budget to another area, if necessary. A review of the budget can also reveal areas where the organization needs to cut down spending or cut out spending in particular areas altogether.
The best tip for financial management for nonprofit organizations is to treat the nonprofit just as a regular business. In other words, the nonprofit should focus on maximizing the income of the organization, which is the funds raised for the cause, while keeping the expenses down to a minimum without sacrificing the cause the nonprofit organization supports.
One of the most important tips when it comes to financial management is to make sure there is a reliable way to watch the money. What happens when you have a board full of volunteers who don't keep a close on the hired, executive director and staff who run the nonprofit? Usually, nothing at all happens. However, there are times when money tends to wander off if it is not watched closely. There are plenty of tales of nonprofits that have been robbed blind by unscrupulous employees -- those incidents could have often been prevented with good oversight and financial controls in place.
One of our editors will review your suggestion and make changes if warranted. Note that depending on the number of suggestions we receive, this can take anywhere from a few hours to a few days. Thank you for helping to improve wiseGEEK!