The Best Practices for Easy, Accurate, and Secure Accounting for Small (but Mighty) Nonprofit Organizations
As a small nonprofit organization, you face unique accounting challenges. It’s not just your mission to change the world that makes it so, but limited resources and employees too. So whether you’re tackling the books alone or outsourcing the task to a contractor, following these six accounting best practices will help your small-but-mighty nonprofit change the world. Not to mention ensure accounting that’s easier to manage, more accurate, and less vulnerable to fraud.
1. Change the World With Realistic Operating Expenses
Every dollar counts for your small nonprofit. You’re expected to operate on a shoestring budget and still do more with less. Your donors want their contributions to support the mission, not the electricity bill. Your operations must run efficiently, but cutting internal costs means cutting external corners. Unless you want to negatively impact your services and increase costs in the long run, basic operating expenses (like program, administrative, and fundraising expenses) must be met.
2. Change the World With an Updated Annual Budget
An updated annual budget is going to take your small nonprofit from mission impossible to mission accomplished. Every expense needs to be accounted for in an annual budget — including your marketing plans and basic operating expenses. But don’t budget once and be done. Revisit your budget on a biannual or quarterly basis. That way you can note trends and adjust mission objectives, should you experience unexpected costs or donations fall short of your expectations.
3. Change the World With Better Internal Controls
Few missions are accomplished by individuals who play by their own rules. There is something to be said for innovation and going against the grain, but internal controls must be followed. Internal controls are systematic rules and guidelines that prevent financial malpractice. Remember your 10th grade history lesson on checks and balances? That’s how internal controls work. They’re written policies that define who does what, how, and when in regards to handling money and managing accounts.
4. Change the World With Financial Duties Assigned to Different People
Appointing all of your financial duties to one person not only violates the purpose of internal controls, but it’s the ideal way for that one person to commit fraud. “Any organization with assets is in danger of … being targeted by dishonest individuals. And, unfortunately, a notable portion of that threat comes from the very people who have been hired to carry out the organization’s operations,” according to the Association of Certified Fraud Examiners’ (ACFE) 2016 Global Fraud Study. Asset misappropriation accounts for 83.5 percent of fraud cases reported, so to prevent fraud and embezzlement, appoint access to books, invoices, and bank statements to different people within your organization.
5. Change the World With Processes for Cash Donations
Part of maintaining internal controls means having processes in place for cash donations. More than checks and fees collected online, cash is highly vulnerable to theft. With money changing hand and lots of people running around at your annual community event, it’s all too easy for cash handlers to “lose track” of paper donations. Appoint at least two people to collect and handle cash donations for maximum accountability. After cash is accepted and properly catalogued in a receipt book, donors must receive a corresponding receipt.
6. Change the World With Separate Financial Accounts
While you do spearhead your small nonprofit’s mission, you don’t own all the funds and donations collected. Never use your personal bank account for nonprofit finances. Your organization needs its own account, either through a bank or credit union. Once you have separate financial accounts, you can arrange for monthly bank statements to be sent to your designated account reconciler.
Let Us Help Your Small Nonprofit Change the World!
Utilize the best accounting practices with the Cougar Mountain Software Denali Fund. Our software is designed specifically for nonprofit accounting. Finding the right accounting software for your small nonprofit can be overwhelming. We’re here to guide you through the entire process and answer all your questions. Call 800-390-7053 to speak to a sales and support expert, or start your free demo today!