Six Financial Management Tips for Small Nonprofits
It’s no secret that small nonprofits try to do more with less. But to make the most significant impact, effective financial management is critical. Unorganized finances can lead to unnecessary purchases, improper fund allocation, and poor financial decisions — resulting in having to do even more with even less. Don’t hold your organization back— better manage your money with these six financial management tips for small nonprofit organizations.
Better your nonprofit budget
If not already, create a budget for your nonprofit and follow it closely. Proper budgeting helps track revenue and expenses, helping to ensure your organization stays on track financially. A good budget also provides the financial information needed to support all future and strategic planning. At a minimum, your budget should include estimated revenue, expected overhead costs, defined activities (like marketing and fundraising), and specific timelines for revenue collection and fundraising goals.
Create multiple streams of revenue for your nonprofit organization
Relying heavily on just a few large funders is risky, as they’re not always sustainable. Always be on the lookout for more funding opportunities. Creating a broad mix of funding sources is the key to success, as they maintain financial health even if one or two sources dissipate (or disappear.) Some ideas include matching gift opportunities, monthly instead of annual giving, and new grant funding options. You could also appeal to your volunteers, especially those who are particularly passionate and dedicated to your mission.
Timely filing of Form 990
Typically due on May 15 each year, Form 990 is required by the IRS to report on your organization and its activities. Form 990 is essentially a window into your organization — its mission, impact, and finances — making it an incredible marketing tool. If your nonprofit makes less than $50k in annual revenue, you can file a Form 990-N. For those with an annual gross income of $50k-$200k, a Form 990-EZ is required. Preparation of Form 990 is time-consuming, so don’t procrastinate or put off getting the help you need to get it filed before the deadline.
Keep personal credit cards and expenses personal
Smaller nonprofits may not see any harm in using personal credit cards for nonprofit expenses but mixing the two is a bad idea. Granted, a nonprofit shouldn’t avoid credit cards altogether. Much like a for-profit business, when it comes to making purchases or paying vendors, credit cards are a valuable tool that simplifies expense management. Credit cards also provide a smart way for a nonprofit to build credit. A dedicated organizational credit card is a better choice, especially one specifically for nonprofit use. It makes tracking expenses much easier, provides better visibility into spending, prevents misuse, and increases accountability and transparency.
Conduct an audit
While the IRS doesn’t require nonprofits to obtain audits, some state and government agencies do. Whether or not your nonprofit must get one, performing one is highly beneficial. Regularly conducting them increases accuracy, transparency, and, often, more funding. And periodically checking your financial and accounting practices typically leads to improvements that help pave the way to your organization’s long-term success.
Invest in financial management tools
Nonprofit financial management tools make it easy for organizations to streamline, manage, and track finances. If you have limited resources or your staff is overextended, accounting software is a wise solution that typically pays for itself in saved time, money, and effort. Nonprofits that embrace technology make significant positive impacts on their organization. It helps create cost-effective efficiencies and optimal ways to do marketing and conduct fundraising, not to mention streamline operations, automate processes, simplify financial reporting, and reduce errors that manual processes often miss.
If you need help with your nonprofit’s financial management or software solutions, we’re happy to lend a hand. When you team up with our friendly nonprofit accounting experts here at Qbix, you’ll get all the valuable accounting advice and help you need. So, if you’re ready to save time, money, and stress, schedule a free consultation with us today. We look forward to chatting with you soon.
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Qbix's goal is to provide the latest cloud-based accounting technology while delivering real-time visibility into your nonprofit's financials 24/7. Numbers are our passion, but providing your nonprofit with the financial expertise needed to facilitate growth and profitability is our top priority. And because no two organizations are the same, Qbix offers the flexibility you need to accomplish your nonprofit's goals.
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