Although your nonprofit’s Board of Directors is not responsible for the day-to-day operations of the finance department, they are responsible for overseeing the overall financial health of the organization. The Board should have confidence that the organization is managed effectively. Sound financial management is critical to the sustainability of the organization and is necessary when vying for donor contributions.
Here are five key steps to take to instill confidence in your Board in your nonprofit’s effective financial management.
1. Distribute Monthly Financial Statements in a Timely Manner
Distributing financial statements to the Board for January in April does not provide up-to-date useful and meaningful information the Board needs to make important decisions about the organization. Implementing a month-end close checklist enables the finance department to close the books for the month and generate timely and accurate financial statements. The checklist should include the tasks to be performed, staff member(s) assigned and due dates for completion.
2. Provide the Board with Your Accounting Policies and Procedures Manual
Your Accounting Policies and Procedures Manual should be provided to the Board annually for their review and approval. Discuss with them how you implement, enforce and monitor the policies and procedures to ensure they are consistently and uniformly followed.
3. Implement a Conflict of Interest Policy
Implementing a Conflict of Interest Policy is a vital component of effective financial management. This policy ensures that decisions about the organization and the use of its assets are made solely in terms of benefit to the organization and not to individuals with positions of authority within the organization. Annually, board members and key staff members are required to disclose any potential conflicts of interest.
4. Establish a Process for Timely Audit Completion
The Board is responsible for appointing an independent public accounting firm to conduct the organization’s annual financial audit. The independent auditors report directly to the Board. Completing the audit in an efficient and timely manner indicates to the Board that the finance department was well prepared. This requires that preparation for the audit by the finance team takes place throughout the year.
5. Undergo an Independent Assessment
Undergoing an independent assessment of your finance department’s operations and implementing the recommendations provided for improvements gives the Board confidence in the effective financial management of the organization.
An assessment can identify internal control weaknesses, workflow inefficiencies, ensure that key tasks are properly assigned to staff members and identify additional resources needed in the budget for automated systems to replace manual processes.
Does Your Nonprofit Need Help Taking These Steps?
Book a free consultation with me to discuss how I can help. I have hands on experience successfully implementing these steps at many nonprofits. Your finance team will work directly with me and benefit from my knowledge, expertise and guidance.
Leave a Reply