Economic uncertainty is impacting nonprofits’ ability to run their programs, deliver services and successfully fulfill their missions. With higher operating costs and decreased funding, now more than ever, it is critical for nonprofits to strengthen their financial operations and safeguard their organization’s assets.
Tips and Tools: Key Areas Your Nonprofit Should Address
THE NEED FOR TIMELY AND ACCURATE FINANCIAL REPORTING
In uncertain times, difficult decisions are made by management and the Board of Directors, such as whether to continue programs that consistently operate at a loss. Timely and accurate financial reporting is essential for making these difficult decisions.
Tips and Tools
A Month-End Close Checklist should be implemented to review the financial data recorded in the financial records to ensure that it is complete, accurate and timely prior to generating monthly financial reports.
A Chart of Accounts Expense Guide for commonly used expenses should be distributed to ensure that expenses are coded consistently and uniformly throughout the organization. As a result, your financial statements will provide meaningful information for management, your board and other external parties.
THE NEED FOR ENHANCED OVERSIGHT OF ORGANIZATIONAL SPENDING
Monitoring, controlling and effectively improving the management of the organization’s resources (e.g., cash, investments) is essential.
Tips and Tools
Ensure that expenses have a valid business purpose and proper supporting documentation prior to approval and payment.
Vendor invoices for contractual purchases of goods and delivery of services should be compared to contracts to ensure payment is made according to agreed upon prices.
A business Credit Card Policy should be distributed and enforced to ensure that the credit cards are monitored efficiently and used only for valid business purposes.
THE NEED TO IDENTIFY GAPS IN INTERNAL CONTROLS
Internal controls are vital for safeguarding assets and mitigating the risk of fraudulent activity. An Independent Operational Review of your organization’s finance department identifies gaps in internal controls and provides recommendations for improvement.
Tips and Tools
Review/Approvals: Review your approval hierarchy to ensure that appropriate staff members approve spending. Two approvals should occur for spending above a designated monetary threshold, in accordance with your organization’s policy.
Separation of Duties: No one staff member should have complete control over all aspects of a financial transaction. In nonprofits with limited staff, a board member might have to assume a role to create checks and balances.
THE NEED TO DEFINE STAFF ROLES AND RESPONSIBILITIES
In challenging times, retaining valued and skilled employees is vital. To maintain effective operations, it is important that staff and their managers have a clear understanding of their roles and responsibilities.
Tips and Tools
Job descriptions are important for managers in evaluating the role of each staff member and the needs of the department.
Review, document and evaluate the procedures each staff member follows in performing their daily job functions. Eliminate inefficient manual processes that should be replaced by automation. This frees up staff time for more challenging and necessary tasks previously overlooked.
Provide training to staff members in their areas of responsibility and other related areas to advance their skills and professional development.
FINAL THOUGHT
In times of uncertainty, nonprofit finance leaders need to increase oversight, strengthen controls and maximize resources to maintain effective financial operations. Providing timely and accurate financial reporting, safeguarding the organization’s assets and optimizing finance personnel will go a long way in achieving this goal.
Roberta Katz Consulting provides guidance and tools to help nonprofit organizations build a strong finance department infrastructure. These services include:
- Operation Assessment and Improvement: Conduct an operational review of your finance department leading to a detailed report of findings and recommendations for improvement.
- Ongoing Implementation Support: Offer ongoing guidance to ensure successful implementation of the recommendations provided.
- Staff Training and Development: Provide customized training to your staff in areas essential to the efficient and effective operation of your finance department.
Schedule a complimentary consultation to discuss how I can assist your organization.
I look forward to hearing from you!
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