Many nonprofits spend so much of their time coming up with new fundraising campaigns that they neglect to focus on another critical component of sustainability and growth for their NFP: sound financial management. This is one of your NFP’s most important activities, however, as the more effectively you can manage your scarce resources, the easier it will be to achieve your goals, create actual positive change, and advance your cause forward. The following strategies will help you get a better handle on your organisation’s finances.

Create a Team

The financial management of most nonprofits typically falls on one person’s shoulders, and is usually the organisation’s director, or the board’s treasurer. Assembling a finance team can be a better approach because it allows for the sharing of responsibility and increases the amount of discussion and the free-flow of information, perspectives and ideas from multiple sources.

Look to members of your board, trustees, volunteers and staff to find members for your finance team. While it’s helpful if someone has specific financial experience in the Charities sector, it’s not an absolute must. Look for individuals who have a background in general financial management, and who are good communicators when picking your team, as they will need to be able to break down complex financial information and explain it to other stakeholders. Don’t forget that outsourcing can help you bring in the people with the necessary expertise that you need for your team.

Training

Whether managing your NFP’s finances will fall to one or ten, specialised training will help improve their decisions and the performance of your organisation. The ACNC offers some helpful resources that nonprofits can use to enhance their understanding of financial information. Other NFPs, such as Our Community, provides free financial planning lists and tools that can help improve financial literacy for nonprofit members. CPA Australia, in partnership with ProBono Australia, offers mentoring for NFP treasurers as well.

Establish Controls, Processes and Policies

Managing your NFP’s finances requires more than just keeping records of your organisation’s transactions. You will also need to create policies and adopt practices that identify and minimise the risk of theft and other losses to your NFP’s assets, or that might otherwise damage your NFP’s financial position. Segregating duties, monitoring the authorisation, disbursement and use of funds, budgeting, forecasting cash flow and expenses and preparing regular reports on your NFP’s financial condition are all components of wise financial management that you or your team should put into place.

Get a Handle on Your Finances

Often, the initial focus of a nonprofit changes over time, as does its sources of funding. To keep your NFP on track, it’s essential to have a good understanding of your NFP’s current financial position.

If you haven’t done so already, it’s a good idea to conduct a full assessment of your nonprofit’s operations and seek to understand how your current financial position impacts your operations. As part of your evaluation, look for ways to provide greater clarity about the total cost of your operations, and how fundraising contributes to both revenue and expense.

Move Towards Active Stewardship

When assessing your NFP’s current financial position, it’s also important to understand your sources of funding and how flexible, or restrictive they might be. Many grants, endowments and contributions often contain various obligations and conditions on how the funds can be spent. Before you write your next grant proposal, or create new fundraising campaigns, start to consider the implications of just how much it will cost your NFP to spend particular funds.

Take into consideration whether your nonprofit can efficiently run a specific program, what obligations and other conditions you will assume for accepting the funding, and how much it will cost your organisation to provide the services, before you apply for a grant or approve a contract.

The long-term success of your NFP is in your hands, but you don’t have to go it alone. Creating a finance team to share in the duties and decision-making processes will strengthen your NFP’s stability and prospects for growth.