Is Your Nonprofit Ready for Increased Funding Scrutiny? Here’s How to Prepare
The financial landscape for nonprofits is shifting, and the pressure is mounting. With government funding and donor contributions facing heightened scrutiny, nonprofit leaders must ensure their financial systems are rock solid. Every dollar spent is under the microscope, and transparency is no longer optional—it’s essential.
Having worked in the nonprofit sector for over 15 years, I’ve seen firsthand how quickly organizations can come under fire for financial mismanagement—sometimes even when they’ve done nothing wrong. Donors and grant providers want proof that funds are being used responsibly and efficiently. The good news? You can prepare for this increased scrutiny and protect your nonprofit by implementing smart financial strategies today.
Why the Pressure on Nonprofits Is Increasing
In today’s climate, nonprofit funding comes with more strings than ever. Government regulations are tightening, and donors are demanding more accountability. From federal grant compliance to donor transparency expectations, nonprofits must meet a growing list of financial integrity standards.
The bottom line? If your organization doesn’t have airtight financial oversight, you’re at risk of losing funding. Now is the time to adopt a fail-proof financial strategy to avoid common pitfalls and set your nonprofit up for long-term success.
6 Critical Strategies for Navigating Funding Scrutiny
1. Strengthen Your Procurement Policies
A structured procurement process is essential to ensure fair and ethical vendor selection. Implement policies for competitive bidding and vendor selection to prevent conflicts of interest. Avoid awarding contracts to board members, employees, or close personal connections to maintain credibility.
2. Implement a Strict Conflict of Interest Policy
Every nonprofit should require board members and key leadership to disclose conflicts of interest annually. This not only builds trust but also prevents ethical and compliance issues that could put your funding at risk. Pro Tip: Always document potential conflicts and establish a process for handling them transparently.
3. Keep Every Receipt, No Exceptions
Whether it’s a small office supply purchase or a major equipment investment, maintain records of every expense. This ensures accountability and makes audits or donor inquiries easier to manage. Pro Tip: Use expense management software like Bill Spend and Expense to track and categorize expenses automatically. It allows for individual spending cards, built-in approvals, and easy receipt tracking.
4. Enforce Strong Internal Controls
Without internal controls, nonprofits are vulnerable to financial mismanagement and fraud. Establish clear approval processes for all financial transactions, including vendor payments and employee reimbursements. Pro Tip: Leverage expense approval tools to ensure all vendor invoices and credit card transactions are reviewed and approved at the appropriate levels.
5. Master Your Budgeting Process
Know exactly what your grants and funding cover—and what they don’t. Misallocating funds can lead to compliance violations and loss of trust from funders. Maintain strict budget oversight and ensure spending aligns with your organization’s mission and restrictions.
6. Maintain Detailed Financial Reporting
Your nonprofit’s accounting system should allow you to generate detailed reports on every dollar spent. If you don’t have real-time access to financial reports, it’s time to upgrade your processes or invest in better financial management technology.
The Power of Financial Transparency
Strong financial reporting isn’t just about compliance; it’s a strategic advantage. Nonprofits that prioritize financial transparency can:
Build stronger trust with donors and grant providers
Make informed, strategic decisions to drive impact
Strengthen their fundraising efforts with credible financial data
At The Charity CFO, we specialize in helping nonprofits navigate audits, donor scrutiny, and financial management challenges. With 85% of our clients undergoing audits, we know how critical it is to have a robust accounting foundation in place.
Take Action Now
The financial pressure on nonprofits isn’t going away, but you can take steps today to protect your organization. By implementing these financial best practices, you can stay compliant, build trust, and ensure your nonprofit thrives despite increasing funding scrutiny.
Need help getting your nonprofit’s financials in order? Let’s talk. At The Charity CFO, we help nonprofits streamline accounting, meet compliance requirements, and focus on their mission.
Book a free consultation and we can see how we might be able to help!
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Blog-Images-1080-x-675-px-5-2-scaled.jpg16002560Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2025-03-13 18:47:042025-07-20 07:55:19Is Your Nonprofit Ready for Increased Funding Scrutiny? Here’s How to Prepare
Like many leaders of business, I find myself having seasonal ebbs and flows with work demands. It’s no secret that accountants have a “busy season”. I get asked all the time – how do you survive the busy season of accounting? For accountants, it’s typically January through April. Not only is this a busy volume of work to get done – it’s a double whammy being in the Midwest with the dark and gloomy cold weather days.
So, the question is, how do I survive this season? How do I stay motivated? How do I keep my energy high? While it’s taken me many years, some coaching, and a lot of habit building to get there, I think I’ve landed on a routine that works. Let me share some of my favorite tips…
Integrating Wellness into Professional Life
Staying healthy – especially in a high demanding job – is an undertaking. Keeping my physical fitness and mental wellness in top shape is an entirely separate job. A job that I take very seriously. Here are the key components of my wellness strategy:
Light Exposure: I start each day with natural or artificial light to help reset my internal clock and improve mood and focus. Most mornings, you’ll find me reading a book for 30 minutes in front of my artificial light.
Physical Activity: Regular exercise, including weight training and daily walks, is non-negotiable. It keeps my energy levels high and my mind clear. When the weather doesn’t cooperate, you’ll notice me walking on my desk treadmill.
Nutrition: I pay close attention to what I eat and drink, balancing caffeine and nutrients to fuel my long days without the crash. While the food is important, I argue that hydration is everything. If you are living on caffeine and skipping the water, you will hit a wall.
Social Interactions: Maintaining social connections is crucial, especially during winter. Whether it’s attending events, connecting with friends, or meeting peers, staying social helps avoid the slump that can come with colder, darker days. Social interactions are often the first to go when our energy is low – however, it might be the exact thing you need.
Streamline Easier Tasks: as an owner of a few businesses, I haveleveraged technology to make sure the easy tasks stay easy. At The Charity CFO, the most significant tool to keep my/our work easier is Quickbooks Online. It streamlines our operations and client management so effectively that it frees up time—time I use to focus on growth and wellness. We use Quickbooks Online for everything financial at The Charity CFO – from bookkeeping tasks to running getting that final P&L over to our tax team each year and even processing 1099s each January. Keeping things streamlined makes my year-end close so much easier. This might come as a surprise to many, but yes, even during the busiest times of the year, I’m able to step away and invest in myself and my business. Which brings me to my next point…
Step Away: Knowing that I hit a wall with the darker, colder days, I intentionally plan trips to warmer weather climates in the fall for the upcoming months. Getting these on my calendar ahead of time guarantees I actually make it there.
The Power of Community and Strategic Retreats
Prioritizing your wellbeing is a critical component but let’s shift gears to focusing on working “on the business” rather than “in the business”. I set annual and quarterly goals each year for The Charity CFO. We keep track of our progress as we move through the year. That said, it is important to take time away to reflect on those goals, identify the current and biggest issues in the business, and connect with others that are going through a similar journey.
This year, I took that time to connect with fellow accounting firm owners in sunny Fort Lauderdale. This wasn’t just a getaway; it was a strategic retreat, a deliberate step to build a supportive community and brainstorm innovative business strategies. We shared challenges, exchanged growth tactics, and discussed how to enhance our services—all while soaking up some much-needed vitamin D.
It’s imperative that not only should you carve out time to sit in the quiet and be strategic about the organization you lead – but to also connect with peers doing the same thing. The camaraderie and fellowship helps keep your sanity simply by knowing you aren’t alone. Added bonus? You can find ideas from others that might help you solve some of your own problems.
Looking Forward
As we continue through 2025, my commitment is to maintain this balanced approach, ensuring that wellness and community interaction are not sidelined but are integral parts of how we operate at The Charity CFO. This approach not only sustains our team but also drives our success, proving that you can indeed have it all—professional success, personal well-being, and active community involvement.
I encourage you to consider what kind of habits and tricks you can incorporate into your day-to-day life to make sure you take care of yourself – so that you can take care of your team.
This is a paid partnership with Intuit.
https://thecharitycfo.com/wp-content/uploads/2025/05/Blog-Cover-scaled.jpg16002560Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2025-03-07 17:59:072025-07-20 07:55:20Prioritizing Wellness and Community: My Strategy for Self-Care during the Busy Months
Nonprofit budgeting may be a source of dread for many, but there are ways to make the process (and outcome!) much better. Forget about the numbers for a second. A well-crafted budget is a reflection of your mission and a roadmap to financial sustainability. It helps you communicate how you’re going to make the difference you want to see in the world. It can be a tool to galvanize your team, community, and supporters.
Keeping that in mind, let’s go over what we’ve learned at The Charity CFO While supporting hundreds of nonprofits with their budgets.
Identify and address areas where budget priorities may drift from mission objectives.
Incorporate feedback from stakeholders to ensure alignment between financial decisions and community impact.
2. Understand Core Budget Categories
Every nonprofit budget has a few building blocks. Most will include these areas:
Revenue Streams:
Diversify your income sources to reduce reliance on a single funder. Incorporate grants, donations, earned revenue from social enterprise activities, and more.
Keep a clear distinction between restricted and unrestricted funds, ensuring you comply with donor intentions while maintaining operational flexibility.
Program Expenses:
These are the costs directly tied to delivering your mission. They often include program supplies, salaries for program staff, and other necessary expenses.
Administrative Costs:
Operational essentials such as technology, office supplies, and HR fall into this category. Though sometimes seen as “overhead,” these expenses are vital for keeping your nonprofit running smoothly.
Fundraising Costs:
Budget for donor engagement, events, campaigns, and marketing to sustain and grow your funding.
3. Prioritize Cash Flow Management
Even a great budget can fall short without strong cash flow management. Cash flow ensures your organization can meet its obligations month-to-month.
Plan for Seasonal Fluctuations: Map out expected income and expenses by month to anticipate and prepare for lean periods.
Build Reserves: Strive for at least 90 days of operating cash on hand to navigate unexpected challenges or delays in funding.
Monitor Restricted Funds: Ensure compliance with donor restrictions to avoid operational bottlenecks and keep programs funded appropriately.
4. Collaborate Across Teams
Budgeting shouldn’t happen in isolation. Involving key stakeholders ensures transparency and accountability. Plus, collaboration fosters a culture of shared responsibility, ensuring everyone works toward the same goals.
Engage Department Heads: Involve program managers and department heads in the budgeting process to give them ownership over their areas’ financial planning. Encourage department heads to regularly review financial reports for greater accountability.
Encourage Others to Contribute: While leadership teams may be the main point of contact, other employees and stakeholders should certainly contribute their ideas. Provide ways for them to share ideas and feedback in the event their ideas don’t align with the rest of their team. Diversity of opinions can strengthen your budget.
Provide Financial Literacy Training: To department heads and anyone else in the organization interested in being part of the process and empowering better decision-making.
Leverage Your Board: The reason your board exists is strategic oversight and supporting your team in these matters. Ensure board members with relevant expertise assist with budget ideas, reviews, and of course partnerships and fundraising.
5. Plan for Growth and Uncertainty
It’s no secret that nonprofits often operate in unpredictable environments, so your budget should be flexible enough to adapt to growth opportunities and unexpected shortages.
Use Historical Data: Analyze past financial data to identify trends and anticipate future needs.
Build Flexibility: When possible, leave room in your budget for unexpected opportunities or challenges. A contingency fund can help absorb surprises without derailing your mission.
Regular Reviews: Regularly compare actual performance against the budget and make adjustments as needed to stay on track.
Regular Reporting: Develop a system that regularly reports income, expense, and cash flow reports to get real-time insights into your financial health.
Simplify Visuals: Clear, simple financial reports make it easier for stakeholders to understand and engage with your budget.
7. Communicate the Budget’s Impact
Your budget should be used as a communication tool for donors and stakeholders. Don’t keep it hidden in a folder on your computer, bringing it out only for emergencies or quarterly reports. Make it a regular tool that you refer to in your activities.
Highlight Outcomes: Show how budget decisions directly drive mission outcomes.
Use Clear Narratives: Combine visuals and storytelling to connect financial stewardship with the community impact your nonprofit creates.
Build Donor Trust: Transparency about your budget fosters trust and strengthens donor relationships, encouraging long-term support.
The Charity CFO Can Help Make Budgeting a Breeze
A thoughtful budget is the foundation of your nonprofit’s financial health and mission success. By aligning your budget with your mission, prioritizing cash flow, and leveraging technology, you’ll build a strong, sustainable organization that’s ready to tackle challenges and seize opportunities.
At The Charity CFO, we’re here to help you master nonprofit budgeting. Whether you need help creating a budget, managing cash flow, or aligning your financial plans with your goals, our team is ready to support you.
Ready to take control of your nonprofit’s financial future? Schedule a free consultation with The Charity CFO today and let’s build a budget that empowers your mission.
As a nonprofit leader, you’re passionate about your mission. But to truly make an impact, you need to master the financial skills that will keep your organization thriving. At The Charity CFO, we’ve seen firsthand how understanding these key areas can transform your nonprofit’s financial health. Let’s dive into the essential skills you need to secure your organization’s future.
In this blog, we’re diving into a subject near and dear to our hearts at The Charity CFO – sustainability.
If you prefer, video, check out this presentation right here:
What do we mean by that?
At its core, a nonprofit exists for a mission. You want to serve others, bringing good into the world and meeting specific needs.
But if your nonprofit is not sustainable, whether by struggling financially or burning out your team – the mission will not reach its full potential.
In this blog, we’re breaking down some of the points made in the recent webinar with our CEO Tosha Anderson, and Instrumentl.
What we’ll explore in this blog are three important takeaways:
Key Takeaways
Financial Red Flags: Nonprofits should be vigilant about red flags such as insufficient unrestricted funding and low cash reserves.
Importance of Cash Flow: Understanding cash flow is crucial for maintaining operational stability and planning for future growth.
Strategic Planning for Expansion: Nonprofits must carefully assess their financial health before pursuing programmatic expansion to avoid creating unsustainable funding gaps.
Recognizing Financial Red Flags
Are you keeping a close eye on your nonprofit’s financial vitals? You should be. Two critical red flags to watch for are:
Insufficient unrestricted funding: Aim for over 50% of your funding to be unrestricted. This gives you the flexibility to allocate resources where they’re needed most.
Low cash reserves: If you have less than 30 days of cash on hand, you’re living on the edge. Strive for at least 90 days of reserves to buffer against unexpected challenges.
By staying vigilant about these indicators, you can address potential issues before they become crises.
Mastering Cash Flow Management
Your cash flow is the lifeblood of your organization. While budgets and financial statements are important, cash flow should be your primary metric for evaluating financial health. Here’s what you need to do:
Calculate your daily cash needs by dividing your annual budgeted expenses by 365.
Monitor your cash flow closely to anticipate challenges and make informed decisions.
Recognize the seasonal nature of your cash flow, especially if you rely on events or campaigns.
Understanding these patterns will help you plan effectively and avoid cash shortages during lean periods.
Planning Strategically for Growth
When exciting funding opportunities arise, it’s tempting to jump in headfirst. But before you commit to expansion, ask yourself:
Do we have sufficient cash reserves and operational capacity?
Can we maintain at least 25% in operating reserves and 90 days of cash on hand?
Taking a measured approach to growth will help you avoid overextending your organization. Develop multi-year financial plans that outline your projections for growth and resource allocation. This strategic approach will ensure your expansion is sustainable in the long run.
If finance isn’t your background, don’t worry. Start by focusing on a few key performance indicators (KPIs) that matter most to your organization. Whether it’s cash on hand or program performance, understanding these metrics will give you a clearer picture of your financial health without overwhelming you.
Analyze the factors that influence these KPIs and how they relate to your mission. For instance, if a successful fundraising event boosts your cash flow, identify what made it successful so you can replicate that success in the future.
Your Path to Financial Success
By mastering these skills – recognizing red flags, managing cash flow, planning strategically, and building your financial confidence – you’re setting your nonprofit up for long-term success. At The Charity CFO, we’re committed to helping you navigate these financial waters with confidence.
Remember, financial management doesn’t have to be daunting. By breaking it down into manageable components and focusing on what matters most to your organization, you can make data-driven decisions that align with your mission and drive your impact.
Ready to take your nonprofit’s financial management to the next level? Let’s work together to ensure your organization’s financial future is as bright as its mission.
Get in touch with us here and we’ll chart a parth to long term sustainability for your organization.
https://thecharitycfo.com/wp-content/uploads/2025/05/Your-Own-Dedicated-CFO-min.png558740Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2025-02-13 12:01:532025-02-13 12:01:53Unlocking Financial Success: Essential Skills Every Nonprofit Leader Must Master
Many nonprofit leaders think accounting belongs solely to their CFO or accountant. If you’re a particularly small organization, it may even be the CEO who wrangles an accounting spreadsheet every once in a while.
But what if the key to financial clarity and stability lies in sharing the load?
The truth is, many successful nonprofits empower leaders to manage their own department budgets.
Does this fill you with doubt and worry?
It can be hard to imagine this working in some settings, but it can be done with excellent results in many organizations!
In this article, we’ll explore why financial management is a shared responsibility and how nonprofits can use this strategy to drive their missions forward.
Why Shared Financial Responsibility Matters
A single CEO, CFO or accountant should not hold all financial knowledge. Teams need collective accountability to stay agile and informed. By decentralizing financial responsibility, nonprofits unlock powerful advantages including:
Increased Transparency: Leaders who understand their budgets reduce the risk of financial mismanagement and foster trust within the organization.
Improved Decision-Making: Department heads equipped with financial data can align spending with strategic goals, ensuring every dollar is used effectively to further the mission.
Empowered Teams: When leaders own their budgets, they’re more engaged and motivated to achieve results, growing in confidence and making decisions grounded in financial insights.
Improved Succession Planning: The world doesn’t collapse if a key team member needs to take a short or longer leave of absence.
Enhanced Donor Trust: Transparency in this approach reassures donors and stakeholders that their contributions are being managed wisely, because each team has a strong understanding of their finances, strengthening relationships and encouraging continued support.
Mission-Driven Focus: With financial clarity, leaders can focus their energy on creating an impact in their communities with less uncertainty or confusion.
Common Challenges & Solutions
Challenge #1: Fear of Overloading Leadership Teams
This may be one of the main reasons a nonprofit would be hesitant to increase shared responsibility for accounting at their organization.
The last thing we want to do is increase stress, burnout, or take away from core responsibilities.
Solutions:
Explain the benefits to the individual and their department.
Nonprofit leaders with hands-on financial literacy and experience are often sought after as leaders, consultants, and board members.
Team leaders don’t need to feel like the finances are a mystical silo when they are playing a direct role in tracking and understanding what’s happening. This allows them to better plan, advocate, and support their team in real-time.
Explain the benefits to the organization.
Share our list above to help them understand the rationale behind accounting as a shared responsibility.
Leaders can better understand what’s going on in other departments and perhaps come up with innovative strategies to better serve the whole team when they have more ownership of the accounting.
Make it clean, simple, and easy. Provide clear, consistent financial reports and templates tailored to each department’s needs. Intuitive cloud-based software makes accessing and understanding these reports easier than ever.
Challenge #2: Knowledge Gaps in Financial Literacy
Some leaders may feel unprepared to take on financial responsibilities. Without proper training or support, it could indeed be a daunting and stressful task.
Solutions:
Offer training focused on nonprofit-specific financial concepts like grant tracking, donor restrictions, and cash flow management.
Create opportunities for ongoing mentorship and workshops to build confidence over time.
Create clear lines of communication so they know who to reach out to for financial support – whether it’s the accountant, software provider, or another team lead.
Challenge #3: Resistance to Change
Leaders accustomed to traditional structures may hesitate to adopt a shared approach. Resistance to change is normal and to be expected in almost any situation. Approach team members feeling this way with empathy and kindness.
Solutions:
Frame shared financial management as a way to advance the mission.
Highlight how this approach aligns with organizational values and strengthens their impact.
Ask for their ideas to make the transition smoother.
Steps to Implement Shared Financial Responsibility
Start with Leadership Buy-In: Communicate the benefits of a collaborative approach to financial management. Share success stories from other nonprofits that have adopted this strategy.
Standardize Financial Reports: Develop easy-to-read templates for monthly department reports. Include actionable metrics like actuals versus budget, upcoming obligations, and cash flow trends.
Provide the Right Tools: Equip your team with modern nonprofit accounting software. Automate repetitive tasks to save time and minimize errors.
Offer Training & Support: Host onboarding sessions for new leaders and provide regular check-ins with CFOs or financial consultants to answer questions and address concerns.
Build a Feedback Loop: Encourage department heads to share insights, challenges, and suggestions for improvement. Use their feedback to refine processes and ensure the system works for everyone.
Your Team Can Do This – An We Can Help
Accounting isn’t just the CFO’s job—it’s a team effort. By empowering your leadership team to share financial management responsibilities, you’ll build a stronger, more agile organization ready to tackle challenges and achieve your mission.
Take the first step toward shared financial responsibility by scheduling a consultation with The Charity CFO. Our team will help you modernize your systems, train your leaders, and guide your nonprofit toward a more sustainable future.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Strategic-Advice-Guidance-min.png558740Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2025-01-22 11:39:292025-07-20 07:55:20Accounting as a Shared Responsibility? Why the Most Effective Nonprofits Share Financial Management Across Leadership Teams
Successful nonprofits and for-profit businesses alike use a variety of key performance indicators (KPIs) to help track their organization’s performance.
This guide will explore some of the most common nonprofit KPIs–including how to calculate them–to help you pick the right KPIs for your nonprofit.
Understanding the Importance of Nonprofit KPIs
KPIs are vital tools that help measure processes, evaluate effectiveness, and guide data-driven decisions. Tracking specific metrics helps nonprofits see how well they’re doing in areas such as:
Fundraising
Marketing
Program delivery
Operational efficiency
Overall impact
In turn, KPI data helps leaders make informed decisions, optimize resources, and build trust and accountability with donors and stakeholders.
Financial KPIs
Financial sustainability is one of the most common challenges facing nonprofit organizations. Nonprofits need a way to track financial data that helps them increase revenue and lower expenses.
That’s where financial KPIs come in. Nonprofit organizations can use financial KPIs to get a better picture of their organization’s financial health and create strategies to maximize financial efficiency.
Revenue Growth Rate
Revenue growth rate formula: (Current period revenue – previous period revenue) / previous period revenue X 100
The revenue growth rate of a nonprofit is the percentage increase or decrease in revenue over a specified period. This essential KPI is one of the most important financial metrics your organization can use to track growth and financial sustainability.
Your organization’s revenue growth rate can either be a positive or negative percentage. Positive growth rates indicate a growing or sustainable organization. If you have a positive growth rate, you know your organization was able to attract more funding than before.
Revenue Growth Rate Example
An organization’s revenue for the previous year was $100,000. Their current-year revenue is $120,000. Using the revenue growth rate formula, this organization’s growth rate is 20%.
Leaders can use this information to determine if the organization is ready to expand resources, such as hiring more staff or expanding program services.
Days of Cash on Hand
Days of cash on hand: (Average daily operating expenses) / (Current cash and cash equivalents)
This represents the number of days an organization can operate without additional cash flow.
We recommend that an organization maintain 90-120 days of cash but no fewer than 30 days.
Unrestricted Revenue
Unrestricted revenue for nonprofits refers to funds not limited by donors for specific purposes. Your organization is free to allocate these resources wherever they are needed.
This type of revenue provides flexibility in managing operational expenses, program development, and other essential activities.
We recommend that at least 50% of an organization’s revenue come from unrestricted sources.
This ratio demonstrates for what percentage of the year an organization can sustain itself without additional funding. We recommend that an organization maintain at least 25% of operating reserves.
Current Ratio
Current ratio: (Current assets) / (Current liabilities)
The current ratio shows how well an organization can meet its short-term obligations with its short-term assets. It’s a good indicator of liquidity and financial health.
We recommend that an organization maintain a current ratio of at least 1, indicating that it can cover its short-term obligations with its most liquid assets.
Diversification of Revenue
Diversification of revenue means reducing dependency on a single fundraising stream by generating income from a variety of sources, such as:
Grants
Donations
Fundraising events
Service fees
This strategy enhances financial stability and sustainability by mitigating the risk of income loss from any one source.
We recommend that no more than 15% of an organization’s total revenue come from the same funder or customer. Maintaining higher cash reserves can mitigate the risk associated with high revenue concentrations.
Long-Term Reserves
Long-term reserves are funds set aside to ensure the organization’s financial stability and sustainability over an extended period. These reserves are typically invested and can be used for future needs, capital projects, or to address unforeseen financial challenges, providing a safety net for the organization’s continued operations and mission fulfillment.
When an organization achieves more than 120 days of cash on hand, it should consider investing excess cash reserves to yield additional income. The board may choose to designate these funds for specific purposes and/or develop an investment policy that aligns with long-term goals.
Fundraising Efficiency Ratio
Fundraising efficiency ratio formula: (Fundraising expenses / Total funds raised) X 100
The fundraising efficiency ratio helps determine the sustainability and value of specific fundraising efforts.
Your fundraising efficiency ratio can help make decisions regarding resource allocation to maximize revenue and optimize expenses. The higher the ratio percentage, the less efficient a fundraising effort.
Fundraising Efficiency Ratio Example
A nonprofit hosts two major fundraising events per year. The first event costs $10,000 and raises $100,000 in donations. The second event costs the organization $50,000 and raises $250,000. The first event’s fundraising efficiency ratio is 10% while the second event’s is 20%.
Although the first event raises less money, it’s a more efficient use of resources.
Program Expense Ratio
Program expense ratio formula: (Program expenses / total expenses) X 100
The program expense ratio compares the cost of running nonprofit programs to the total cost of running the organization. Your organization can use the program expense ratio to compare program costs with other organizational costs, such as administrative or fundraising expenses. Tracking program expense ratios show how much of your resources go directly to your mission via programs and services.
In addition, the program expense ratio can help you determine the efficiency of your nonprofit program and services. This helps you see how efficiently your organization uses resources when delivering on your mission.
Program Expense Ratio Example
A nonprofit’s total annual expenses are $100,000 and its program expenses are $80,000. This means the organization has a program expense ratio of 80%. A higher program expense ratio shows an organization that dedicates a large portion of its resources to advancing its mission.
Operational and Fundraising KPIs
Efficient operational processes can help a nonprofit organization cut expenses and maximize revenue. Operational KPIs track metrics related to your operational expenses and resource allocation. You can use operational KPIs to improve the efficiency of how your organization runs.
Donor Retention Rate
Donor retention rate formula: [(Number of donors at the end of the period – number of new donors) / number of donors at the beginning of the period] X 100
The donor retention rate is the percentage of donors who continue to support your organization after a specified period. Donor retention rates help keep track of repeat donors, which can be a good indicator of donor satisfaction.
Tracking donor retention rates can help you determine if your donor outreach and communications are working to create repeat donors. The higher your retention rate, the more likely you are to have a sustainable donation pipeline from repeat donors.
Donor Retention Rate Example
Your organization starts the year with 500 donors and gains 100 new donors over the year. At the end of the year, you have 450 active donors. Your donor retention rate would be 70%, which could be a sign of effective donor engagement strategies.
Fundraising Efficiency Ratio
Fundraising Efficiency: [(Cost of fundraising) / (Net revenue from fundraising)] ×100
This measures the financial efficiency of your fundraising efforts by comparing the net revenue to the costs. You can use it to assess how effective your fundraising activities are and help you make future investment decisions that will maximize impact.
Remember: a higher efficiency means the campaign is raising significantly more money than it costs – this is great!
Administrative Overhead Ratio
Administrative overhead ratio formula: (Administrative expenses / total expenses) X 100
Your organization’s administrative overhead ratio gives insights into how efficiently your organization allocates resources. An organization that spends a significant portion of its resources on administrative costs may not put enough resources into program delivery and other mission-related activities.
Keeping administrative overhead ratios low shows financial transparency and responsibility to stakeholders and donors.
Administrative Overhead Ratio Example
A nonprofit’s administrative expenses are $60,000 and total expenses are $100,000. This means the organization uses 60% of its resources on administrative costs, which could indicate operational inefficiencies.
Volunteer Engagement
Volunteer engagement rate formula: Number of volunteer hours contributed OR the number of volunteers actively engaged
The volunteer engagement rate is a great indicator of volunteer participation in your organization. It lets you track volunteer engagement over time to see if your outreach is working to retain volunteers in a scarce environment.
High levels of volunteer engagement may show that the community supports your organization’s mission. They can also indicate an effective volunteer management program.
Volunteer Engagement Rate Example
Your nonprofit has 50 volunteers who collectively contribute 500 hours of service to your organization a month. Over time, you notice the rate drops to 40 volunteers who contribute 300 hours of service. This could be a sign that your volunteer management practices aren’t as effective as before.
Programmatic KPIs
Programmatic KPIs measure the performance of your nonprofit’s programs for your community. These metrics help you get a better idea of the effectiveness and efficiency of your programs and services.
Number of Beneficiaries Served
Beneficiaries served formula: Count the unique beneficiaries in a timeframe
The number of beneficiaries served metrics helps your organization determine the direct impact in your community. As you increase the number of people your programs serve, you show stakeholders, donors, and community members the benefits of your organization.
This metric also helps you see the reach and scale of your programs and services within your community.
Number of Beneficiaries Served Example
A nonprofit provides educational programs to 500 students in a year. The next year, the program served 550 students, increasing the program by 50 beneficiaries.
Cost Per Beneficiary Served
Cost per beneficiary served: (Total program costs) / (Number of beneficiaries served)
This measures the average expense incurred to provide services or support to each individual beneficiary. It’s a great metric for organizations to determine the efficiency and impact of their spending.
Program Success Rate
Program success rate formula: (Number of program objectives reached / total program objectives) X 100
The program success rate measures how many program objectives or goals your organization completes during a project. This is a great internal metric you can use to determine your organization’s ability to set and meet intended outcomes.
Nonprofit leaders can also use the program success rate to assess the efficiency and effectiveness of program implementation. You can use this data to help guide improvements to future projects.
Program Success Rate Example
A nonprofit sets ten objectives for its latest community development project and successfully achieves eight. The program’s success rate is 80%, meaning the program met most of its intended goals.
Selecting and Implementing KPIs for Your Nonprofit
These KPIs can help your nonprofit start tracking the performance of your organization–from financial health to program efficiency.
Need help getting started? The team at the Charity CFO is here to help you design a financial KPI strategy for your organization.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/270.png6301200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2024-12-23 13:56:192025-07-20 07:55:20KPIs You Should Be Tracking in a Nonprofit
No time to read this article now? Download it for later.
Your nonprofit organization relies on the knowledge and guidance of its leadership team to advance its mission. A strong leadership team makes it easy for your organization to reach its goals by effectively using resources and managing strategy.
However, nonprofit leaders face unique challenges that their for-profit counterparts don’t, such as limited resources or reliance on volunteers. Navigating these challenges is even more difficult when the nonprofit leadership team doesn’t work together efficiently.
If your leadership team isn’t working to their optimal potential, there are steps you can take to help create a better team environment. Try these strategies to help you get your leadership team on the same page so your organization can thrive.
Building a Balanced Leadership Team
Recruiting new hires for a nonprofit can be difficult, and finding the right fit for your leadership team can be incredibly challenging. To recruit–and retain–top leadership talent, consider these hiring strategies:
Prioritize mission alignment during the hiring process by looking for candidates who believe strongly in the organization.
Attract a diverse group of candidates by using targeted recruitment strategies.
The board of directors should also be involved in hiring and retaining leadership team members. The role of the board is to help shape and support the leadership team both during and after recruitment. The board of directors can help your leadership team stay focused on the mission by providing strategic guidance, advice, and oversight on key decisions.
Use a mix of internal promotions and external hires as you look for new leaders for your organization. This approach helps foster both fresh perspectives and continuity in the organization.
Developing Leadership from Within
Bringing in external candidates can help bring a fresh perspective to your organization’s leadership team. That doesn’t mean you should only hire from outside the organization.
Creating a leadership succession plan is essential for long-term leadership stability. Your succession plan creates a pipeline of internal leaders who have worked and studied under your existing leadership team. These new leaders understand the organization and are ready to step into larger roles when a vacancy comes up, helping your organization reduce periods of uncertainty between leaders.
You can use a variety of leadership development programs to get existing employees ready for leadership roles. Consider tailoring your leadership development programs to the needs of your nonprofit by focusing on:
Mentorship and coaching
Continuous learning opportunities such as workshops, seminars, or professional courses
Internal development programs designed to train for specific leadership roles
In addition to leadership development training, your organization needs to foster a culture of growth and development from the top down. Give employees a chance to grow in their current roles and explore potential new roles within the organization. Not only does this help with leadership succession planning, but it also shows employees that the nonprofit values them and wants to invest in their future.
Encouraging Collaboration and Communication
One of the biggest issues facing leadership teams in both nonprofit and for-profit organizations is a lack of communication and collaboration. This lack of communication creates silos within departments, making it difficult for the organization to work as one cohesive unit as each department takes on its own tasks.
Use these strategies to enhance teamwork and increase collaboration among leadership:
Host regular leadership meetings with clear agendas and goals.
Create cross-departmental projects that encourage collaboration to break down silos.
Ultimately, you want a leadership team that trusts one another–both with the organization’s future and with one another’s departments. You can reach this level of trust through transparency and open communication among the leadership team.
Aligning Leadership with Organizational Goals
An organization’s leadership team guides the nonprofit in every aspect, so you need to be sure your leadership is aligned with the organization’s goals and mission. You can make sure leadership teams are aligned with the nonprofit’s mission and strategic goals by setting clear expectations and regularly reviewing and adjusting leadership strategies.
Creating clear expectations for leadership helps your leadership team understand their specific responsibilities for their department and the organizaiton as a whole. Be sure to use measurable objectives to help track leadership performance and keep the team on track.
Additionally, regularly reviewing the leadership team’s strategies–and adjusting them as necessary–keeps the team aligned with the nonprofit’s goals. As the organization’s goals or metrics evolve, so should the goals and strategies of the leadership team.
Nonprofit Leadership Teams Drive the Organization
Your organization’s leadership team is the captain of your organizational ship. They need to be able to work together as a unit to help your nonprofit meet goals and maximize success. Without a strong leadership team to guide it, your nonprofit won’t run efficiently and could face financial troubles or staff and volunteer shortages.
Get started today to create a leadership team that drives your mission forward. Evaluate your current leadership structure and consider implementing these strategies to enhance your team’s effectiveness.
Many nonprofits find their leadership teams lack an experienced financial professional who knows nonprofit accounting and financial strategy. If this sounds like your organization, reach out to The Charity CFO today to learn more about CFO and nonprofit accounting services.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/320.png6301200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2024-09-23 14:46:142025-07-20 07:55:21How to Create Better Nonprofit Leadership Teams
For some nonprofit leaders, it can be easy to spend too much time poring over each and every category of nonprofit expenses, carefully scrutinizing each dollar that’s spent. It can quickly become an obsession – and not one that will help you or your organization prosper in the long run.
So, how do you change your thinking about the funds that are flowing out of your organization?
Let’s take a closer look at the significant effects the issue can have and how to overcome them.
The Effects Expense-Obsession Has on Nonprofits
To be sure, overhead costs and routine expenditures are an essential part of any budget, and not keeping them under control is a certain path to trouble. But in some cases, nonprofit leaders need to take a step back and consider the reason they’re operating.
Charities and other nonprofit organizations don’t exist solely to be ultra-efficient in their spending – they’re around to accomplish their mission, whether it’s helping needy children, the environment, animals, or anything else. There’s an old saying that you need to spend money to make money, which is as true as ever for nonprofits. Like it or not, making an impact requires spending money, as long as it’s done smartly.
Obsessing over every expenditure also has a negative effect on employee morale and the organizational culture. If employees feel like it’s a fight to secure every single dollar, they may set their goals lower for their work and accomplish less.
Employees who think their leaders value their reserve funds more than their mission will also likely be less productive and motivated or even become so discouraged that they burn out of the industry.
Focus on Revenue Generation, Not Expenses
Most organizations can only cut so much from their spending while still functioning properly. However, the potential for growing revenue is nearly limitless with hard work and the right strategies. By bringing in more revenue, leaders can avoid worry and tough decisions over how to dole out limited money to worthwhile projects.
The methods will vary from organization to organization, but nearly every nonprofit has the potential to tap into additional funding sources or put in place new strategies.
Look to successful nonprofits in your industry for ideas or brainstorm among your team on how to amp up current fundraising. While organizations shouldn’t look at growing revenue as an excuse to spend carelessly, more funds can solve a great deal of problems, not to mention improve your reputation and impact.
Building a Culture of Revenue-Generation
As with all culture changes, switching from a cutting to a growth mindset starts at the top. Leaders should consistently be visibly working to optimize the revenue being brought in, including integrating advice and guidance from employees.
Another significant part of this involves empowering staff not just to identify potential revenue opportunities but also to pursue them in the best way possible. This also helps employees take ownership of their responsibilities, creating an even more dedicated and engaged workforce.
Over time, this kind of mindset becomes infectious, with new hires easily taking to the culture as benefits continue to compound.
Measure Your Impact, Not Your Overhead Costs
As we’ve noted, people start nonprofits to make a positive difference in the world, not make money or run extra efficiently. That’s why it’s dangerous to rely on low overhead costs as a benchmark for effectiveness.
Instead, leaders and stakeholders need to determine their own key performance indicators that best measure the impact they’re hoping to achieve, whether it’s:
The number of events held
How many people benefited from your services
Projects completed
These should be objective and easily trackable, both to allow leaders to make the best changes and tweaks as necessary and also to provide real, concrete evidence to donors and board members about the direction of the organization.
Obsess Over Profit-Generation, Not Nonprofit Expenses
Obsession can be helpful for growing any organization – as long as it’s about the right things. For a thriving organization that’s growing its income, there’s no need to agonize over every single expense. Leaders need to be continually working to expand their fundraising, which can make achieving their mission so much easier than trying to slash budgets and find savings.
After all, revenue can grow without limits, while expenses can only be cut so far.
Still, keeping a lid on nonprofit expenses remains vital and can’t be ignored simply because you’re focused on growing revenue. Our experienced financial professionals can help with managing expenses to leave you more time to increase your income and expand your impact. Plus, they can provide guidance on selecting the proper indicators to track when charting your organization’s plan for growth.
Contact us today to see how we can help and get started toward ending that expense obsession.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Charity-Articles-11-2.png6301200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2023-09-25 18:17:162025-07-20 07:55:28Why Nonprofits Need to Stop Obsessing Over Expenses
Nonprofit communications can be complicated, and sometimes awkward.
It’s an avoidable fact of charity life that organizations are often in need of money – and donors are the primary source. But while it’s relatively easy to raise funds in dire situations or emergencies, getting donors to invest can be trickier when your charity seems financially stable.
The secret comes down to how well nonprofit leaders understand what donors are thinking and feeling and how charities communicate with them. Let’s take a closer look at the best ways to navigate this common but tricky situation.
The Donor Perception Challenge
All too often, donors (even large and involved ones) have relatively little idea about how a nonprofit’s operations and finances truly work. While some organizations have significant endowments and reserves, many are operating without much sustained and reliable revenue.
Under these circumstances, it can be difficult to make large investments in growth or plan for the future.
Furthermore, when donors believe things are fine and money is abundant, it can result in lower giving. This can lead to further cuts, lower programming impact, and a downward spiral that’s hard to exit.
Fortunately, this can all be avoided by being straightforward and transparent with those responsible for keeping the lights on with their donations.
The key to stable operations for any organization is an operating reserve. Think about an operating reserve as a sort of savings account and safety net for the nonprofit. It’s a general fund with no specific uses or restrictions, available to cover unexpected expenses of all types.
This could include everything from a dip in donations caused by a recession to a surprise major expense like equipment upgrades or even unexpected opportunities to expand programming.
The exact amount of reserves will vary from organization to organization, but most try to sock away three to six months’ worth of expenses, which gives ample time to right the ship if donations start falling.
It might appear to be a lot of money just sitting around unused, but these reserves can sometimes be the difference between the survival or failure of a nonprofit or charity.
Spend Down Policy: A Deeper Dive
As critical as creating reserves is clearly defining the circumstances that will lead a nonprofit to use them. With a clear policy on when it can be spent down, there’s no need for the sometimes extended, emotional debates that can result from dipping into reserve funds.
With a transparent spend-down policy, mission-driven organizations can quickly take action to cover financial shortfalls, allowing them to continue their work without the disruptions that funding slowdowns can cause.
Each charity will need to determine its own circumstances, but all should seek to balance immediate impact with long-term sustainability.
Nonprofit Communications Strategies for Navigating Donor Conversations
So what’s the best way to approach this with donors on a practical level? Remember these key principles to make donor discussions simple and low-stress.
Open and Honest Nonprofit Communications
While it can feel strange to reveal your organization’s financial details to outsiders, it’s imperative that donors have a complete and detailed picture of the nonprofit’s economic realities. That way, they can understand the budget and give the appropriate amount to keep things running successfully.
At the same time, paint a picture of the organization’s financial goals and needs in the future.
Educating Donors
It’s also vital to educate donors and other sources of financial support about the reason behind the large sums of money sitting in operating reserves. Break down the organization’s policy for building and maintaining reserves, as well as the rationale behind how and when leaders will use them. With these concepts in mind, it’s a lot easier to see the true financial picture for a nonprofit.
Demonstrating Impact
One of the best ways to grow donors’ confidence in you and ensure reliable future funding is to make them understand everything they’re getting for their money.
Showcase the organization’s ongoing programs and initiatives, taking particular care to highlight the success stories. Then, connect the dots and show how continued support is vital to keep making a difference.
Crafting a Compelling Fundraising Message
Fundraising doesn’t just happen on its own; organizations must carefully craft a compelling message and strategy to show donors why they’re the best recipient of scarce donation dollars.
Ensure the message is tailored to address donor concerns while also emphasizing the organization’s commitment to managing its finances responsibly.
Consider how any fundraising message is aligned with the organization’s mission and values.
Create engaging content that educates donors, which can be distributed using both traditional outreach and digital platforms, like social media.
These can encourage an open, direct dialogue between the organization and its supporters.
Don’t Stop Requesting Money
Reaching out to donors for money can feel awkward, but it’s the most crucial part of delivering on a nonprofit’s mission. Still, it’s critical to do it in the right way so all sides can feel great about where the funds are going. Focus on:
Transparency
Education
Open communication
This is especially true when it comes to operating reserves and how and when they’re spent down.
Reach out to The Charity CFO today for help navigating these complex issues and putting together your Operating Reserve Policy and Spend Down Policy.
No time to read this article now? Download it for later.
Addressing conflicts of interest in a nonprofit is essential for success. It directly impacts the credibility, public trust, and overall effectiveness of the nonprofit in achieving its mission. By actively identifying and managing conflicts of interest, these organizations can protect their credibility, maintain donor confidence, and ensure that their resources are utilized solely for the benefit of their intended recipients.
This article emphasizes the importance of addressing conflicts of interest in nonprofit organizations and how often it should be done.
What are Conflicts of Interest?
A conflict of interest in a nonprofit organization occurs when an individual’s personal interests or loyalties interfere (or potentially interfere) with their objective decision-making in their capacity as a representative or member of the organization. This conflict may arise when a person’s financial, familial, or personal relationships create a competing interest that could compromise their ability to act in the best interest of the nonprofit and its beneficiaries.
An example of a potential conflict of interest in a nonprofit is when a church accepts pass-through gifts. Although they may be well-intended to help a member of the congregation, churches often have little control over the funds and how they are used. These gifts or funds can be misused or lead to other ethical issues if not handled correctly.
Failure to address conflicts of interest can result in internal and external dysfunction within the nonprofit organization, potentially causing disruptions in its operations and relationships with stakeholders. Not to mention the integrity is compromised, leading to a bad reputation and loss of public trust. Moreover, in some cases, unmanaged conflicts of interest may lead to legal complications, subjecting the nonprofit to potential legal issues and regulatory investigations.
Understanding Legal and Ethical Obligations
Nonprofits must be well-versed in the specific legal requirements and regulations governing conflicts of interest to avoid potential legal pitfalls. Additionally, nonprofit directors have three primary fiduciary responsibilities: duty of care, duty of loyalty, and duty of impartiality- to act in the best interest of the organization. Beyond legal obligations, ethical considerations play a central role in ensuring fair and unbiased decision-making and fostering an environment of trust and accountability.
Identifying and Disclosing Conflicts of Interest
Encouraging proactive identification of potential conflicts of interest empowers stakeholders to address issues early on, minimizing the risk of undue influence on decision-making. Establishing clear policies and procedures for disclosing conflicts of interest provides a structured framework for individuals to come forward with relevant information, ensuring transparency and accountability. Open communication within the organization guarantees that conflicts are managed appropriately, helping to uphold the nonprofit’s mission and maintain the confidence of donors, beneficiaries, and the public.
Evaluating and Managing Conflicts of Interest
Evaluating and managing conflicts of interest requires conducting thorough and impartial evaluations to understand the extent of the conflicts. It is essential to assess their potential impact on decision-making processes and the overall integrity of the organization. Once conflicts are identified, implement appropriate measures to manage and mitigate them effectively. If necessary, decisive action should be taken promptly and impartially to address any conflicts that arise, ensuring the organization’s continued adherence to ethical standards and its mission-driven objectives.
Establish Strong Conflict of Interest Policies
Implementing defined conflict of interest policies helps ensure the decision-making process remains unbiased and aligned with the nonprofit’s mission. Promoting transparency and monitoring potential conflicts builds trust among stakeholders, demonstrating the organization’s commitment to ethical conduct and responsible stewardship of resources.
A comprehensive approach should define conflicts of interest, provide specific examples, and detail procedures for disclosing and managing potential conflicts. It is essential to ensure that all directors and stakeholders thoroughly understand the policy’s provisions, their responsibilities, and the possible consequences of non-compliance. Regular reviews and frequent check-ins enable the board to adapt to evolving circumstances and reinforce a culture of accountability and adherence to the guidelines.
How Does the Board Come into Play?
The board of directors plays a crucial role in managing conflicts of interest within a nonprofit organization. They are responsible for understanding and upholding the policies, ensuring compliance among all stakeholders, and making decisions that prioritize the organization’s best interests. The board exercises oversight by regularly reviewing and updating conflict of interest policies and disclosures, as well as conducting periodic self-assessments to evaluate their performance in handling conflicts and identifying areas for improvement. By actively fulfilling these responsibilities, the board reinforces the organization’s commitment to transparency, accountability, and ethical conduct.
Annually Review Conflicts of Interest
By conducting regular reviews, the organization can assess its policies and procedures, identify any potential gaps or emerging issues, and proactively address conflicts before they escalate. This practice emphasizes prioritizing the organization’s mission over individual interests and fosters a culture of accountability and trust among stakeholders. Through transparent and ethical decision-making, nonprofits can strengthen public confidence, attract donors, and ensure they remain true to their charitable objectives, making the annual review an indispensable process in the governance of nonprofit organizations.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Charity-Articles.jpg6301200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2023-07-31 09:22:382025-07-20 07:55:29Conflicts of Interest: Why it’s Important and How Often it Should be Done
When hiring your first employee at a growing nonprofit, it is crucial to understand the essential steps to hiring. Ultimately it involves finding the right individual to propel the organization forward while navigating the complexities of the hiring process. It can be overwhelming. In this article, we will explore the questions you should carefully consider during this hiring process
First Things First: Do You Need to Hire?
Hiring is a significant decision that requires thoughtful consideration and financial preparation. Before hiring a new employee for your organization, it’s crucial to ensure it’s the right move. Evaluate your organization’s growth and workload demands, then pinpoint areas where you need additional support. Understand your budget and resources to ensure you can sustain the new hire long-term. Consult with your accountant to determine if it’s the right time financially and to understand the potential impacts on your financial stability.
Definition: What Will the Role and Responsibilities Be?
Before beginning the hiring process, it’s crucial to define the role and responsibilities of the new employee. This involves crafting a comprehensive job description outlining tasks, duties, and expectations. Be sure to note the qualifications, skills, technical expertise, and experience needed to excel in the role, as well as the values and attributes that align with your organization’s culture, goals, and mission. By establishing a well-defined position and identifying the necessary qualifications and cultural fit, you’ll be better equipped to attract and hire the ideal candidate.
Establish your Nonprofit Hiring Process
Streamline the journey to finding the right employee and increase the likelihood of a successful recruitment outcome by outlining and establishing a transparent hiring process. Start by defining the key steps and setting clear timelines: What needs to be done, and when? Establish milestones for tasks such as creating the job description, advertising the position, conducting interviews, and making a final decision.
Additionally, determine how you will attract potential candidates. Consider utilizing job boards, social media platforms, and your organization’s website to reach a broader audience. A well-defined plan and timeline will keep the process on track and prevent unnecessary delays.
5 Tangible Steps to Hiring your first Nonprofit Employee
Create a Well-Written Job Posting
Create a compelling and accurate job posting that conveys the nonprofit’s mission, vision, and values to attract candidates passionate about the cause. Highlight the qualifications, responsibilities, and benefits of the role to draw in individuals who align with the organization’s objectives and possess the required skills. A well-crafted job posting that communicates the nonprofit’s purpose and provides a comprehensive overview of the position will attract top talent and lead to a successful and purpose-driven hiring process.
Selecting and Interviewing Candidates
The next step in the hiring process is reviewing resumes and applications to shortlist candidates. Once narrowed down, conduct initial interviews to assess skills, experience, and values alignment with the organization. Further, evaluate shortlisted candidates through in-person or virtual interviews. Before making a final decision, conduct background checks, call references, and ensure compliance with all legal requirements.
Manage Financial Operations
Before hiring your first employee, it’s crucial to ensure you have the proper accounting setup for payroll compliance. Determine the appropriate payment method, whether it’s a salary or hourly wages, and set up a reliable payroll system to process payments accurately and on time. Familiarize yourself with tax regulations and obligations related to employee payroll, ensuring you correctly withhold and remit taxes. Implement a reporting system to keep track of payroll expenses, deductions, and filings, as well as to maintain transparency and compliance with regulatory authorities.
Making an Offer and Onboarding
Now it’s time to make an offer. Present a comprehensive compensation package that includes salary, benefits, and any other relevant perks to showcase your commitment to the candidate’s well-being and career growth within the organization. Upon acceptance, make a formal written offer detailing all terms and conditions.
Following the candidate’s acceptance, ensure a smooth transition by going through an onboarding process that acclimates the new hire to the organization’s culture, policies, and responsibilities, setting them up for a successful and fulfilling journey with your nonprofit. Provide the new hire with all the necessary information to get started while also collecting the required details from them to ensure a smooth and seamless integration into the organization.
Provide Continuous Support
To ensure the success and growth of new hires, providing continuous support is paramount. Offer them access to resources and training that empower them to excel in their roles and contribute meaningfully to the nonprofit’s mission. Additionally, schedule regular check-ins to address concerns, offer guidance, and foster a sense of belonging within the organization, ultimately helping them become valued and engaged team members.
Is Your Nonprofit Ready to Hire?
If your nonprofit needs an extra hand and has the resources and means, it’s probably time to hire your first employee. As the organization expands its impact and operations, bringing in the right team member can significantly contribute to its success and mission fulfillment. We realize this can be scary and exciting all at once, and we’re here to help. Contact us to get started with our experienced financial professionals.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/79.png6301200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2023-07-24 14:13:302025-07-20 07:55:29Hiring your nonprofit’s first employee? Here’s what you need to know
Just like a human body’s health situation can be complex, nonprofit financial health is similarly nuanced.
That’s why staying financially healthy and keeping your nonprofit in tip-top shape requires the occasional “checkup” to see where you’re doing well and where you can improve. So what steps should nonprofit leaders take to ensure their organization will enjoy many happy years to come?
Read on as we explore some of the top strategies.
Master Your Nonprofit Financial Health with These Tips
Preserving your good nonprofit financial health is surprisingly straightforward. Try these ten tips for the most significant impact.
1. Define Expectations Through Benchmarks and Other Metrics
Before you can figure out if your nonprofit is healthy, you have to define what healthy means to your organization.
Work with stakeholders like donors, fundraising heads, program leaders, and others to determine what metrics and benchmarks should be used. By clearly identifying these indicators, it’s easy to see when one area is falling behind and take swift action to correct it.
These expectations should be realistic but also provide a goal for your team to strive for.
2. Understand How to Gauge if Your Accountant is Doing a Good Job
Unfortunately, too many nonprofits allow their accountants to take care of business with little oversight. While this may be easy, it can also result in missing out on critical tax savings or, worse, exposing your organization to an audit for breaking the rules.
Keep in touch with your accountant and ensure you’re asking questions about what they’re doing and why. If they can’t provide good answers, it may be time to switch.
Understanding the unique roles within your financial team is also crucial to the success of your nonprofit. Bookkeepers are not the same as accountants, just as staff accountants are not the same as Chief Financial Officers (CFOs). Each plays a distinct role in maintaining and enhancing your organization’s financial health.
3. Have Checks and Balances in Place
Every successful organization needs ways to check the influence of any individual member or department. This ensures all perspectives and impacts of decisions and programs are considered. Without these balances, leaders or others with influence can make decisions that don’t align with the organization’s over-arching goals.
In some cases, neglecting compliance with state or federal requirements can even lead to your doors being shut.
5. Use the Right Software
It can be difficult to do the job correctly without the right tools, and these days, the right software is a critical tool.
Your accounting and bookkeeping programs should be easy-to-use and have the appropriate features for an organization of your size. Consulting with an accountant who specializes in nonprofits is a great way to ensure you’re using the right software.
6. Create the Right Financial Reports
With the many features of modern accounting and bookkeeping software, the amount of information and reports available can be overwhelming. However, a few matter more than most.
Talk with your financial staff and accountant to figure out which you should be spending the most time creating and reviewing. This is vital for avoiding information overload.
7. Have a Succession Plan in Place
The best and healthiest nonprofits live on for decades or longer, far past the leadership and lifetime of their founders. They can do this because the critical members of the organization have proper succession plans.
Younger leaders should be given more responsibility over time to prepare them for more senior roles, and current longtime heads should have clear plans for how and when they hope to hand off the reins. On the financial side, there are systems and processes that need to be in place, so make sure you consult with an accountant to get these sorted out.
All of this ensures a smooth transition when the time for a change comes, planned or unexpectedly.
8. Understand the Structure of Your Accounting System
Even if financial issues aren’t your particular skill set, nonprofit leaders need to understand how their accounting system works.
It lends important insights into decisions about programs or other aspects of the organization and can help in conversations with donors who may have more detailed financial questions.
9. Share with Other Leaders of the Organization
If this all seems like a lot to handle on your own, it’s because it is.
Bring in other leaders to help manage the burden of keeping your nonprofit financial health in good shape and enjoy the bonus benefit of their added insights. This goes hand-in-hand with a succession plan but also helps improve nonprofit operations in the meantime, as well.
10. Take a Look at Your Culture
At the end of the day, keeping a nonprofit healthy from a financial perspective requires the buy-in of all employees, donors, and other stakeholders.
It’s a comprehensive mindset that focuses on maximizing always-limited resources and ensuring waste is minimized as much as possible. The rewards can be felt every day with an improved ability to carry out your organization’s goals and mission.
How is Your Nonprofit Financial Health?
As with your body, there’s no sense in putting off your nonprofit financial health checkup. Consider these key issues now, and you may be shocked at the improved performance of a “healthier” organization.
But we realize these issues can be complex and time-consuming, so The Charity CFO is here to help. Contact us today to get started with our experienced financial professionals, who’ll set your nonprofit up for many healthy, happy years to come.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Charity-1200x850-1.png8501200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2023-07-17 13:38:332025-07-20 07:55:2910 Tips for Nonprofit Financial Health
To outsiders, it’s often assumed that all any nonprofit status is basically the same. But those starting and operating these critical organizations know there’s much more to the various nonprofit statuses, with varying rules and qualifications for each.
So what do you need to know about the differences between nonprofit statuses? Let’s take a closer look.
What Does it Mean to Have a Nonprofit Status?
Two things typically distinguish nonprofits from other organizations.
Their goal
Unlike typical businesses, nonprofits aren’t set up to bring in profits for owners and investors. Instead, they’re designed to help people, advocate for an issue or goal, or conduct other activities to benefit members or other groups. While they bring in money via fundraising and other sources, that money is reinvested directly back into the organization to support its mission. This charitable goal is what leads to the other distinguishing factor.
Their tax status
Qualified nonprofits typically receive significant tax benefits or breaks federally, and are often exempt from or have limited state taxes as well. In return, nonprofits need to abide by sometimes strict rules regarding financial transparency, governance, and other regulatory issues.
What’s the Difference Between 501(c)(3) vs 501(c)(4) and other statuses?
While they may work similarly in a variety of ways, there are vital differences between statuses.
The organization’s purpose can dictate which status is applicable (as can other eligibility issues).
Certain activities can only be legally conducted by nonprofits of a certain status.
There are critical differences in tax benefits, which are key to how an organization operates.
What’s the Difference Between an NPO and an NFPO?
In general usage, NPO (short for nonprofit organization) and NFPO (not-for-profit organization) are often used interchangeably. However, they do have a vital technical difference that can determine which category your organization falls under.
NPOs are more strictly required to operate in the public interest, like charity work or furthering a cause or issue. There’s no such restriction for NFPOs, which can also include:
Sports or social clubs
Professional organizations
Homeowners associations
Etc.
However, NFPOs must still reinvest any surplus to take advantage of tax and other benefits.
Common Nonprofit Statuses
With all this in mind, new and future nonprofit leaders may wonder which status fits their organization. Here’s what you need to know.
501(c)(3) – Charitable Organizations
501(c)(3) organizations are the most common charitable group. They’re focused on “public good” activities, like:
Educational
Scientific
Religious
Sports
Public safety
Etc.
Federal tax law gives these groups an advantage by making donations to them tax-deductible, allowing donors to reduce their tax liability while helping these nonprofits stay afloat. However, this strictly prohibits them from taking political stands or engaging in politics.
501(c)(4) – Social Welfare Organizations
As their name suggests, 501(c)(4) groups work to improve social and living conditions for people. This can cover a wide range of activities, from:
Helping less fortunate community members
Hosting educational courses
Helping mediate area disputes
Fighting neighborhood deterioration
They can also advocate for public policies and laws that benefit the people they serve, as long as this isn’t their primary or sole activity. As a result, donations to 501(c)(4)s aren’t tax deductible for donors.
501(c)(5) – Labor and Agricultural Organizations
501(c)(5)s are formed to advocate for better conditions for workers, as well as improve agricultural products and help promote associated industries. This category includes labor unions and groups that advocate for farmers, livestock and dairy producers, and others.
These groups naturally have a significant interest in public policy related to their industries, so they’re allowed by law to advocate for policies and get involved in political issues. However, once again, this can’t be their primary mission, and donations are not tax-deductible.
501(c)(6) – Business Leagues and Trade Associations
501(c)(6) organizations sit at a unique crossroads of the for-profit and nonprofit worlds. They consist of:
Business groups
Chambers of commerce
Boards of trade
Real estate groups
Etc.
While these organizations don’t work for profit themselves, they advocate for better business conditions and policies for specific industries, types of companies, or geographic areas.
They have even fewer restrictions than other nonprofits when it comes to political activity and advocacy in their area of business, but it still can’t be their primary purpose. Naturally, 501(c)(6) donations are not tax-deductible.
501(c)(7) – Social and Recreational Clubs
The final category of nonprofits, as far as the feds are concerned, are 501(c)(7) groups, which cover social and recreational clubs. These groups collect funds from members via fees and other methods and operate strictly for fun and social purposes, with no significant external activities. Some examples include:
Country clubs
Yacht clubs
Swim clubs
Fraternal organizations
Amateur sports leagues
Their tax-free treatment hinges on not receiving any significant income from non-members or outside business. Typically, these groups engage in little, if any, political activity but still aren’t tax-deductible due to their lack of public benefits.
Seek Professional Guidance When Selecting Nonprofit Statuses
Selecting the proper choice among the many nonprofit statuses is a critical first step to getting any organization off on the right foot. Making the wrong move here can lead to significant tax troubles down the road.
Fortunately, The Charity CFO can offer a helping hand on the financial decision-making side of things. Our skilled financial professionals will help you assess your situation, plot your future financial plans, and make a choice that will form a solid foundation for years of nonprofit work to come.
Setting nonprofit goals is critical to growing in a manageable way that supports your mission and employees.
And one of the most vital steps toward reaching those goals is setting up the proper system to track key aspects of your progress. Let’s take a closer look at everything you need to know to define and track your nonprofit goals.
Categories of Nonprofit Goals
Nonprofit goals can be split into three broad categories:
Programmatic
Financial
Operational
Programmatic goals are ones that deal with your organization’s services, whether it’s sheltering animals, providing food for the homeless, raising environmental awareness, or any other services contributing to the greater good.
Operational goals cover internal issues like staffing, efficiency, improved management, and other factors that contribute to keeping your organization running.
While programmatic goals may be the most alluring, your attention should also be on the other categories, which are vital for keeping your nonprofit moving forward.
Setting Mission-Focused Nonprofit Goals
No matter the category, your nonprofit goals should always tie back into your organization’s mission and vision. Pausing and allowing leaders and stakeholders to frequently re-assess the goals is key to keeping them on track. Clarity and focus at this stage can provide major benefits down the line.
For the best results, nonprofit goals should align with the “SMART” goal-setting strategy.
Specific
Measurable
Achievable
Relevant
Time-bound.
Specific and measurable goals make tracking more straightforward, while the reasoning behind relevant and achievable goals should be obvious. Finally, adding a time element creates urgency, accountability, and motivation.
Tracking Nonprofit Goals
Have you ever heard the saying, “If you can measure something, you can manage it”?
Well, this definitely applies to nonprofit goals.
Without setting up a robust, reliable, and accurate tracking system or method, it’s impossible to know whether you’re making progress or if your plans need to be adjusted. However, when you appropriately track your goals, you can see the impact of different techniques or decisions, as well as enjoy the satisfaction of seeing tangible progress toward improvements.
The most common way to track your goals is to decide on key performance indicators, often referred to as KPIs. KPIs are the measurable factors that represent progress toward your goals.
For example, a nonprofit with a financial goal of increasing fundraising by 10% this year can set KPIs like the number of fundraising events, amount of calls or letters to donors, the number of new recurring donors each month, or even the total of the revenue brought in to date.
It’s important to note that your KPIs will vary by the nature of your goals and organization. Still, the most essential factor is that they are a direct representation of your organization’s idea of success.
Strategies for Tracking Progress Toward Nonprofit Goals
As you begin defining and tracking your organization’s goals, take the opportunity to implement practices that will make the process easier in the future.
Leverage Your Team
As a nonprofit team member, you understand the crucial role each person plays in growing your mission. So when it comes to tracking progress toward your goals, team member involvement is critical. Check in with them regularly to ensure they understand:
How the goals apply to the mission
What their role is in achieving the goal
How they should be measuring progress
Stakeholders, from the board and donors to employees, can help prioritize goals and allow leaders to zero in on the ones that are most critical to success moving forward.
Use Technology
Technology is another key element in tracking progress toward nonprofit goals. You can use accounting software, fundraising tools, CRM’s, and other services to collect and analyze data. With this data, you can make more informed decisions for your organization.
Be Flexible
Things change and it’s okay if your goals need to change as well. If you notice you’re continuously off-track with your goals, identify the areas you are falling short and make adjustments.
Remember not to see these changes as a failure but as a step toward pushing your organization where you hope it can be.
Reach Your Nonprofit Goals
Without clear, achievable goals, it’s easy to see how an organization can drift away from its core mission and values.
Fortunately, with the right resources, it’s simple to:
Set goals
Develop a plan to reach them
Monitor your progress along the way
However, it can be tough to find time for this kind of long-term planning in the busy world of a nonprofit, especially new or growing organizations.
That’s why The Charity CFO team is here. Our experienced and highly skilled accountants can help you set meaningful, but achievable nonprofit goals to get your organization tracking your way to success.
Contact us today to learn more about the financial services we offer nonprofit organizations!
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Charity-Articles-2-5-2.png6301200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2023-07-03 13:43:012025-07-20 07:55:30How to Define and Track Your Nonprofit Goals
What nonprofit fundraising strategies are you using to keep your organization healthy?
As nonprofit organizations rely heavily on donations to support their operations, programs and missions, fundraising is an essential component to their continued success. Organizations must be strategic and thoughtful in their fundraising efforts. Here we’ll explore some nonprofit fundraising strategies to effectively raise money for your organization.
Fundraising is More Than Money
When beginning the task of building a nonprofit fundraising strategy, you must first consider the underlying philosophy of fundraising. At its core, fundraising is about building relationships with supporters who share your organization’s values and vision. Effective fundraising is about more than just asking for money; it’s about engaging donors in a meaningful way and demonstrating the impact of their support.
To achieve this, nonprofit organizations should prioritize transparency, authenticity, and accountability in their fundraising efforts. This means being open and honest about your organization’s financial situation and how donations will be used and getting in the habit of regularly communicating with donors to keep them informed about your work and the impact of their support.
Remember, donors are individuals, with their own motivations, interests, and priorities. Therefore, fundraising cannot be a one-size-fits-all approach. The diversity of your donors should match the diversity of your fundraising strategies. Organizations should tailor their messaging and approach to the specific interests and needs of their donors. This requires getting to know your donors on a more personal level and building strong relationships with them based on a common interest: your mission.
10 Nonprofit Fundraising Strategies to Consider
With this foundation in mind, here are some great nonprofit fundraising strategies that your organization can use when developing your plans and determining how best to engage donors and raise funds.
Individual Giving
This is the most common form of giving to nonprofits. To fundraise at the individual level requires understanding your target donor and how best to reach them. This type of outreach can take the form of direct mail campaigns, online giving, major gifts etc. Regular communication with donors is imperative to support the efforts toward individual giving. Demonstrating the impact of their donations can help donors feel valued and appreciated and entice them to continue giving in the future.
Corporate Giving
This involves soliciting donations from businesses and corporations by way of sponsorships, cause marketing partnerships, and/or employee giving campaigns. Successful corporate giving efforts require organizations to identify businesses that share their values and work to develop mutually beneficial initiatives. Building these foundational relationships may require highlighting the ways in which the nonprofit’s work aligns with the company’s values, or offering opportunities for employee engagement or brand visibility.
Grant Writing
Submitting proposals for grants from foundations, government agencies, and other organizations can help secure funding for specific projects or programs. These can be highly competitive and time-consuming, but the efforts can be greatly rewarded with significant funding when done well. Successful grant-writing is a specialized skill and requires the grant writers to have a clear understanding of the grant requirements and how the organization’s proposed project or program aligns with the funder’s priorities.
Events
A fun and effective way to engage donors and raise funds, events can come in many different forms and can be tailored to different donor sets depending on their interests and needs. These can include galas, auctions, walks, and many other exciting fundraising ideas. The most successful events prioritize engagement and relationship-building. They should create opportunities for donors to connect with each other and with the nonprofit’s mission, as well as offer unique and memorable experiences that excite potential donors and encourage them to give.
Major Gifts
These are large donations from individual donors, typically in the range of $10,000 or more. This type of fundraising is highly dependent on building strong personal relationships with donors and identifying those who have the capacity to make significant contributions. Once identified, these relationships can take time and must be cultivated. Donors that make large contributions involve a bit more work than your average individual donor. To build and solidify these types of relationships consider inviting these donors to exclusive events, providing them with personalized updates on the impact of their support, and offering opportunities for recognition and engagement.
Planned Giving
Securing future donations through estate planning and other legacy gifts is a great way to ensure longevity in your organization. These types of donations can include bequests, charitable trusts, and other arrangements that allow donors to make significant contributions over time. Success in this type of fundraising strategy requires nonprofits to educate donors on the benefits of planned giving and to provide them with clear information about how to make a planned gift. This could involve working with outside support such as estate planning attorneys or financial advisors to provide donors with personalized advice and guidance.
Online Fundraising
A rapidly growing area of fundraising and one that will be incredibly important as younger generations enter the workforce and have the capacity and funds to select and support organizations that align with their values. Using digital strategies such as crowdfunding, peer-to-peer fundraising, and social media campaigns is crucial to growing your nonprofit’s fundraising strategy. To be successful in digital spaces, your organization will have to leverage the power of storytelling and social proof to engage donors and build momentum for online campaigns.
Donor Stewardship
The benefits of building long-term relationships with donors and demonstrating the impact of their support can not be overemphasized. Building donor stewardship requires prioritizing transparency, authenticity and accountability in donor communications by providing regular updates on your work, highlighting the impact of donors’ support and offering personalized recognition and engagement opportunities.
Community Fundraising
An organization that is deeply rooted in the community should not be underestimated. The power of community is powerful and tapping into the local community can provide incredible fundraising opportunities for an organization. To begin utilizing this power an organization must engage with supporters and local stakeholders in ways that benefit and support them. An organization can provide training and resources for community fundraising efforts and build partnerships with local businesses and organizations.
Capital Campaigns
These tend to be large-scale fundraising efforts that focus on raising funds for a specific project or initiative, such as a new building, program expansion, or endowment funds. Capital campaigns typically involve a multi-year fundraising effort and may require significant planning and coordination.
Overall, creating a nonprofit fundraising strategy is a complex and multifaceted process that requires careful planning, execution, and ongoing relationship-building with donors and supporters. By prioritizing transparency and communication and tailoring your strategies to the interests and needs of specific donor sets, your organization can create successful fundraising campaigns that make a lasting impact on the world. There are many strategies that nonprofits can use to raise funds and build a strong network of supporters who share their values. Taking a holistic approach to fundraising and focusing on engagement and building relationships can support nonprofits in creating a sustainable and impactful fundraising strategy to effectively support their mission.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Charity-Articles-4-5.png6301200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2023-05-08 14:44:332025-07-20 07:55:31Nonprofit Fundraising Strategies to Consider
Growth: likely a key point in any strategic plan and something that is the top of mind for many leaders. How to grow your nonprofit is, after all, the key to strengthening your work, achieving your mission, and making an impact.
Strategy decisions ultimately come down to being able to continually operate your programs and execute on your goals. Growth can mean many different things to different people. In the case of non-profits though, the thought of growth often invokes an immediate jump to development. However, many nonprofits are missing out on a key component of modern growth: marketing.
In the nonprofit realm, marketing tends to come as an afterthought, and as something that limited resources shouldn’t be devoted to. There is a prevailing idea that marketing doesn’t make money in the nonprofit world. If you stop to think about the billions of dollars spent on marketing every year by for-profits; it begs the question, why would marketing not work for nonprofits?
With roughly 1.8 million nonprofits in the US vying for position and donor dollars, organizations must find ways to differentiate themselves to ensure they are recognizable, receiving donations, and expanding their impact; marketing may be the key. We’ve rounded up 5 marketing strategies on how to grow your nonprofit and get you thinking about how your organization might benefit from a marketing strategy.
How to grow your nonprofit with marketing
Commit Resources
Resources can be very limited in nonprofit organizations. Committing what resources you may have may seem like a big ask. However, when done properly, marketing efforts can prove to be well worth the effort. Brands who invest time and money into their brand and marketing are able to grow their presence and capture larger portions of the market, attracting and engaging donors.
Marketing resources can come in many forms of both time and money. The key to embarking on a marketing strategy is to be honest about where you are in the lifecycle of your organization and develop a growth strategy that fits. Developing a marketing plan doesn’t have to break the bank. When exploring your options consider the following:
Talents and skills of those within your organization
A marketing generalist can be a good place to start as you understand and build
Outsourced marketers can be experts in their field and cost-saving options
When budgets are tight, we know marketing can be the last thing on your mind, but if you spend the resources to do it right, it can pay back in huge dividends.
Be Intentional
The best marketing strategies are incredibly intentional and suited specifically to your organization’s goals and needs. There is no one size fits all. When creating a strategy, meet your organization where it is and build from there.
Identify your target audience for marketing campaigns
Narrow in on your nonprofits special niche and tie it to your mission
Develop meaningful goals and metrics to track progress
Hire specifically for your marketing effort
Start small and specific with your campaigns and efforts
Curate Your Brand
Once you’ve begun your strategy with intention, it’s time to lay the groundwork for building a successfully marketed organization. The main difference between for profits and nonprofits is that nonprofits are generally working towards a greater mission. Lean into this with your marketing and use it to help others relate to and care about your mission. Before launching your first marketing campaign, be sure that you have a solid foundation in the following areas.
State your mission: Make sure that what you do is clear on your website and on anything that is externally facing. Ask yourself, would it be easy for an outsider to understand what we do here?
Brand it: Once you’ve ensured that you are clear and concise on what you do, brand it well. Working with professionals in this space can be one of the most important steps you take in your marketing process. In the modern day, consumers are inundated with millions of messages per day; your brand needs to be clear and memorable. There is an art to this process, and a good brand will support future visibility and growth.
Pick your platforms: Use your brand as a starting point to begin diving into social media. You can’t be everywhere and do everything; consider the right platforms for your organization and be active on them, showcasing your professional brand and clear mission. People connect with a good brand, make sure you connect with them where they are.
Stay Consistent
Once you’ve tailored your plan to your organization’s needs, goals, and current operations, give it some time to start working. Marketing won’t turn things around overnight. It takes time and effort to work its magic.
If you stick to your strategy, continue putting in the efforts, and optimize the resources you have, you should start to see some results. Especially in areas such as social media, marketing really takes consistency to work over time. So once you’ve decided to start on this journey, commit to your strategy and watch your efforts unfold.
Measure Results
If you’re being consistent with your plan, the only way to know that it’s working is to track metrics. Make sure to develop SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) goals and document them. As you continue through your marketing journey you can begin to assess the effectiveness of your strategy. After some time, you’ll be able to gain insights into what’s working well and what’s not and then make some tweaks to really let your strategy start to work for you and provide the monetary results that you’re looking for.
BONUS TIP: Try New Things
Marketing may be the new thing your organization is trying, and that’s great! But don’t be afraid to think outside of the box as it relates to the types of campaigns that your organization is running. One benefit of being in an industry that runs on tight resources, is that people tend to get creative, like these examples in Forbes. Use this creativity! Unusual and interesting marketing campaigns can stand out from the crowd and get your brand on the map. If something doesn’t work, don’t get discouraged. Marketing has been proven to work time and time again. So regroup, adjust your strategy and keep going.
Getting the right people in the right places and enacting a strategy that works for your organization’s time and budget is the key to a successful marketing strategy. If you want to learn more about how to begin this work and really dive into developing your organization’s marketing plan, check out this podcast with marketing consultant, Emily Heck.
Overall, nonprofits with a clear brand and marketing strategy are the ones people remember and engage with the most. And when it comes time for giving, donors will give to those brands they can remember. Make sure they know it’s you!
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/41.png6301200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2023-03-20 15:05:372025-07-20 07:55:32How to Grow a Nonprofit: 5 Marketing Strategies
Many nonprofit organizations tend to let their financial management slip on the backburner as they get busy fulfilling their mission. Sure, your mission should be a priority, but managing finances can’t be neglected either.
Maintaining healthy financial management is critical for the organization’s sustainability, stability, and flexibility, now and in the future. Without a good grasp of your finances, your nonprofit risks:
Exposure to fraud
Collaboration issues
Misuse of funds and poor investments
Poor financial reporting
Destruction of physical assets
Tax issues and non-compliance with regulatory requirements
So, how can you guarantee that your organization is not exposed to any of these risks? Well, the answer lies in understanding and implementing these 7 essentials of nonprofit financial management.
1. Policies for Good Financial Management
Your nonprofit needs to have clearly defined policies and procedures to ensure everyone is on the same page. These rules or principles should reflect your organization’s values and culture. They should clarify the roles, authority, and responsibilities for essential financial management activities and decisions.
Consistent policies will ensure:
Clear assignment of authority
Better information dissemination
Accountability for everyone involved
Unbiased decision-making
Streamlined administrative and operational procedures
Improved transparency for stakeholders
Timely reporting
Viability of various projects
When creating these policies, make sure they’re regularly reviewed and updated to keep up with changing circumstances, technological advances, and regulations.
Here are some policies that your nonprofit should implement to maintain proper financial management practices:
Gift acceptance policy
A written gift acceptance policy will guide you on the type of gifts you can accept. The point of creating a nonprofit acceptance policy is to:
Offer guidelines to staff and board
Educate the staff and board on critical issues triggered by certain gifts
Help manage donors’ expectations respectfully.
Maintain discipline in gift acceptance and administration
Avoid unnecessary risk, expense, and liability
Comply with IRS regulations
Asset management policies
Your organization has physical assets, including cash, investments, and other tangible property. You must have a policy that outlines who is responsible for the management of these assets.
Conflict of interest policy
You must strike a balance between the organization’s interests and those of its staff, board, volunteers, donors, and supporters. A conflict of interest policy can help you avoid any misunderstandings or disputes by laying down rules and guidelines for self-dealing, nepotism, kickbacks, bribery, and other related activities.
Nonprofit fiscal policy
These policies outline all internal controls necessary for the management of financial resources. They provide a framework for the oversight and governance of financial operations and activities. When creating your fiscal policy, ensure that it complies with the Generally Accepted Accounting Principles (GAAP).
2. A Nonprofit Budget
A nonprofit budget is a planning document that helps predict expenses, allocate resources, and monitor ongoing operations throughout the year. It documents goals, priorities, and expectations for the financial year and serves as a reference guide to evaluate performance.
A well-formulated budget should focus on the goals and objectives of your organization. It should make a strong statement about your organization’s intentions and aspirations. This will help you make informed decisions and achieve your desired outcome.
This financial planning tool will:
Help you focus on short and long-term strategic goals
Keep your donors informed
Make board members accountable
Act as your roadmap throughout the year
Increase transparency in your financial dealings
Allow you to make more informed decisions
Your nonprofit budget should include the following parts:
Estimated Revenue: Revenue sources include member dues and fees, events, merchandise, donations, grants, sponsorships, corporate giving, crowdfunding, fundraising, program income, loans, and program-related investments.
Expenses: Typical expenses include salaries & benefits, insurance, consultant fees, office fees, travel, professional development, utilities, marketing and advertising, program expenses, and fundraising expenses.
3. Nonprofit Financial Management Statements and Reports
Financial statements are a set of reports that summarize the financial position and activity of a nonprofit. These include:
Statement of financial position
Statement of activities
Statement of functional expenses
Statement of cash flow
Statement of financial position (Nonprofit balance sheet)
A statement of financial position provides a snapshot of the financial health of your nonprofit. It measures the nonprofit’s assets, liabilities, and net assets at a particular point in time.
This tool provides several insights:
The overall financial situation of your organization
The level and composition of assets
Your organization’s ability to pay its debts
Sources of your organization’s income and expenses
Your capacity to launch new initiatives and programs
Any potential risks related to financial stability
Changes in the financial position of the nonprofit over time
Statement of activities (Income statement)
This statement provides a birds-eye view of your organization’s financial activities. It tracks the flow of money coming in and out of your organization during a particular reporting period. It also reflects the changes in your organization’s net assets resulting from income and expenses during that period.
It is split into 3 sections:
Revenue
Expenses
Net assets (difference between revenue and expenses)
SOA helps to:
Identify programs that need tweaking if they’re not working optimally
Ease the tax reporting
Bring GAAP compliance
Create transparency and accountability required by the board and IRS
Distribute funds appropriately between departments, initiatives, and programs
Gauge the effectiveness of fundraising efforts
Statement of functional expenses (SOFE)
This statement shows how much money is being spent on each function or program within the organization. Your donors, funders, and the IRS are particularly interested in this statement as it provides insight into how funds are being spent.
SOFE helps answer questions related to:
How much money are you spending on fundraising efforts?
What percentage of your budget is going towards administration costs?
How effective are your programs at achieving intended outcomes?
Are funds being allocated appropriately and efficiently?
Is there a need to invest more in particular projects or initiatives?
Cash flow statement (CFS)
This is a document that outlines all of your organization’s cash inflows and outflows over a period of time. It reports the total amount of cash available to your organization at the end of the reporting period.
4.Annual Report and Form 990
While you can simply use form 990 as your annual report, creating a more comprehensive annual report that includes financial information as well as programmatic and other activities is highly recommended. It helps to:
Market your mission
Tell your organization’s story
Highlight the impact on your community
Thank your donors
Appreciate volunteers
Summarize last year’s initiatives
Drum up support for upcoming programs and initiatives
The annual report should include the following:
Executive summary
Financial statements
Program reports
Donors and sponsors list
Management and board report
Photos and messages from beneficiaries
Links to your social media channels
5.Proper Organizational Structure
It is important to have a robust organizational structure and policies in place to ensure your nonprofit runs efficiently. These include:
Policies for financial management, human resources, and privacy
Roles and responsibilities of board members and staff
Processes for approving new programs, initiatives, and expenses
Risk management strategies
6.Financial Responsibility
As a nonprofit leader, you have the responsibility to ensure that your organization’s assets are appropriately managed and used for their intended purpose.
This involves ensuring compliance with all accounting, reporting, and disclosure requirements. It also involves staying up to date on the latest auditing standards, tax regulations, and IRS filing requirements.
This can be achieved by conducting periodic internal audits, appointing a CFO or finance officer to oversee the financial health of your organization, and adhering to GAAP best practices in nonprofit accounting.
7.Interdependence
Financial management is an organization-wide effort. It is not just about the money–it’s about strategy, governance, and leadership. Keeping everything connected should be at the heart of your approach to financial management. Communicate regularly with key stakeholders to ensure that everyone is on the same page.
Always Be Report-Ready With Accounting Solutions Built for Nonprofits
Accounting for nonprofits does not have to put an excessive strain on your resources. You can access high-end accounting solutions specifically built for nonprofits to help you streamline your financial management processes. This can help save time, money, and resources in the long run and ensure accuracy and transparency.
At TheCharityCFO, we provide bookkeeping services, budgetary reconciliation, real-time tracking of your financial health, and specialized data analytics to help you make informed decisions. Our expert team of CFOs can provide guidance on best practices and help you stay compliant with IRS regulations.
A nonprofit organizational chart is essential for the company’s success and growth. The internal structure or hierarchy of the organization must be organized and efficient to ensure that there are adequate resources and personnel in place to achieve its goals and mission.
A nonprofit organization chart, also known as an org chart or organogram chart, is a useful tool that is used to create a graphical representation of the structure of the organization and its various departments. It provides an effective way to organize, plan, and manage resources within the nonprofit structure.
Org charts are also used as a management tool to improve team performance, streamline processes, and reduce friction between departments. This can help with internal communication, problem-solving, conflict resolution, and growth acceleration.
With its organization-wide uses and benefits, it only makes sense to have a well-thought-out organogram for your nonprofit organization. So, what do you need to know and consider when setting up a nonprofit organizational chart?
Let’s find out.
What are Nonprofit Organizational Charts?
An organizational chart is a diagram that displays the internal structure of a nonprofit organization. It shows the relationships between different levels and positions in the nonprofit organization. These diagrams can include information about job titles, responsibilities, job roles, reporting relationships, and communication channels between different departments or divisions
Organizational charts can be used to illustrate various touchpoints in your nonprofit organization’s structure. They are usually used to make a statement, through design, on the organization’s culture, beliefs, values, and philosophies.
A well-designed org chart acts as a lifeline for new employees, helping them understand where they fit into the overall structure during onboarding. They can help to create a shared understanding of roles and responsibilities among teams, which in turn improves communication and collaboration between departments.
Organizational charts are also useful tools when it comes to developing strategies, setting goals, establishing policies, and making decisions. Every stakeholder should understand the structure of the organization and the goals it seeks to achieve. You don’t want any team member just skating by.
Why do you need an organizational chart?
An up-to-date org chart serves several important functions for your nonprofit:
Helps the entire organization understand the chain of command
Helps potential donors, grantors and volunteers understand who is steering the ship
Helps new hires to know their colleagues and managers
Provides an overview of how tasks and projects are distributed throughout the organization
Ensures that each department understands its mission, roles, and responsibilities, hence strengthening and optimizing collaboration
Helps the management or HR to anticipate skill and talent gaps, leadership needs, training needs, and future staffing needs
Helps increase organization-wide productivity and performance
Org charts give an eagle-eye view of the whole organization and juxtapose functions against each other, giving the management a clear picture of the expenses, overhead costs, and other operational issues.
We recommend building your nonprofit org chart based on functional areas such as administration, operations, programs, strategy, governance, fundraising, and development. Then further subdivide within each area, depending on the purpose and goals of your nonprofit. This will create a structure for your nonprofit that is flexible and allows for changes to be made as, and when needed.
Types of Organizational Charts
Most people are only aware of the classic hierarchical box-style org chart that shows a clear chain of command, with each position directly reporting to the one above it. But there are actually several different types of organizational charts. Depending on your nonprofit’s location, structure, and needs, you can choose among the following types:
The top-down chart
This is perhaps the easiest to understand, as it follows a traditional business model with an executive team at the top and all other positions directly reporting to them.
Flat chart
This chart structure has fewer layers and a limited hierarchy. It’s useful for small organizations that need to be agile and make decisions quickly. The day-to-day decision-making is made by individual staff members running their own functions and reporting to the board of directors. This type of organizational chart can be useful in terms of accountability, cost savings, and internal communication.
Functional org chart
A functional chart shows the relationship between the departments and their managers and organizes them according to their duties and responsibilities. It starts with the management, followed by department/team leaders, followed by other staff members.
Cross-functional org chart
If you have small teams spread through various departments, you can use a cross-functional org chart. This structure focuses on how various roles and tasks are related, instead of showing who reports to whom. It’s useful for collaborative projects, as it makes it easier to understand how teams are organized and who is responsible for what.
The matrix chart
The matrix organizational structure is a cross-functional structure that allows you to create two or more reporting relationships for each employee. The matrix chart is created by linking the different departments of your organization on a chart. It’s often used when an organization has multiple products, services, or projects that need to be managed. By linking these departments on a chart, you can easily see how each department interacts with the others. This helps to create an efficient and effective workflow for your nonprofit organization.
How to Set Up Your Nonprofit Organizational Chart
Once you’ve chosen the type of organizational chart that best suits your nonprofit, it’s time to set it up.
1.Understand your structure
The first step is to gain a clear understanding of how your nonprofit operates and the roles and responsibilities of each team. This will help you create an organizational chart that reflects your current structure and makes it easier to identify areas for improvement.
Here are several things you’ll need:
A comprehensive list of the executive, employees, and volunteers
Recent pictures of each individual
A detailed rundown of the roles and responsibilities of each position
A solid understanding of the organizational structure and chain of command
2.Design the chart
Use tools such as Photoshop, Indesign, Canva, Airtable, or Microsoft Office to idealize and create your chart. Or you could use an online template from websites like Lucidchart, Creately, or Gliffy to drag and drop elements and create a professional org chart.
3.Add employees and volunteers
Once you’ve created the chart, it’s time to add all your employees, volunteers, and executive members. Include their name, position, department, and recent pictures to make the chart more engaging and easier to read. Some must-have roles to include are CEO, board of directors, executive team members, departmental heads such as Chief Finance Officer (CFO), and administrative staff.
After you’ve added all the members, double-check to make sure that everyone is in the right place and their roles are accurately represented.
4.Make it visible and accessible
Once the organizational chart is complete, make sure to display it in the work area or the lobby of your organization. This will help everyone quickly grasp the structure, roles, and responsibilities of each department, and who reports to whom. It’s also a great way to introduce new members and volunteers to the organizational structure.
Need a CFO for Your Organization?
Organizational charts are an essential tool for nonprofits. They can help create a clear understanding of the roles and responsibilities within an organization, and give stakeholders a better idea of how decisions are made.
Obviously, most nonprofits will have the executive team all set up and forget or struggle to fill important positions such as the program officer, director of events and projects, grant writer, and chief financial officer (CFO). This complicates the organization chart and makes it harder to visualize the chain of command.
Finding a qualified and experienced CFO can be particularly difficult, expensive and out of reach for small nonprofits with limited resources. Fortunately, there are organizations such as The Charity CFO which specializes in providing industry-leading accounting and bookkeeping solutions, specifically for nonprofits.
If you’re looking for a CFO to help manage financial operations and fill the vital role of Chief Financial Officer on your org chart, we are the perfect choice for your organization.
We provide a comprehensive, affordable, and audit-ready financial management system to nonprofit organizations just like yours. Our team consists of experienced CFOs, CPAs, bookkeepers, and financial advisors who understand the complexities of running a nonprofit— so you won’t need to hire a full-time CFO for your organization. Contact us today to learn how our services can help you achieve your financial goal and deliver impactful results.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Charity-Articles-2-2-1.png6301200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2022-12-14 15:03:132025-07-20 07:55:34How to Set Up Your Nonprofit Organizational Chart
Churches often want to help those in need, especially among their congregation. But if you’re not careful, you could be accepting pass-through gifts that could cost the entity’s 501(c)(3) tax-exempt status.
Pass-through gifts are donations given with the expectation that they will be used to benefit a specific individual or organization.
These types of gifts can come from individuals or organizations and often are made with the intent to support a specific person or group. This type of gift is not tax deductible for the original donor and it does not count as a charitable donation to the church.
When pass-through gifts come into play, churches often have little control over the funds and how they are used. That’s why it’s important for religious organizations to make sure they understand what these donations mean and that they don’t accept them without proper safeguards in place.
Let’s look at a few reasons why your church should step back from pass-through gifts.
Reasons Why Your Church Shouldn’t Take Pass-Through Gifts
1.Pass-through gifts can lead to tax implications.
Pass-through gifts are one of the most common ways for churches to lose their 501(c)(3) exemption. The IRS is always looking for any signs of non-conforming activity, and pass-through gifts are a red flag.
The reason? By giving funds to an individual or organization directly, the church is essentially sidestepping the normal process of applying for and receiving 501(c)(3) status. This can lead to serious repercussions, including the revocation of the church’s tax-exempt status and hefty fines.
2.Pass-through gifts can be misused.
Even if pass-through gifts are given with the best of intentions, there’s no guarantee that the funds will be used properly. If a church accepts a pass-through gift, they are essentially handing over the funds without any control or oversight.
This can open up the possibility of misappropriation and open the church up to legal liability. Donors can sue if they feel that their gift has not been used as intended.
3.Pass-through gifts can become a distraction.
When pass-through gifts are accepted, it can create a disconnect between the church and its mission. Instead of focusing on their core values and purpose, churches can be pulled into a situation in which they are responsible for funds that should be managed by others.
This can lead to a decrease in the overall effectiveness of the church and a lack of focus on its core mission.
4.Pass-through gifts can lead to other ethical issues.
Churches that accept pass-through gifts can also find themselves enveloped in ethical dilemmas. For example, if the funds are given to help a certain individual, what happens if the funds are not used as intended?
This can lead to debates over how and when to use the funds, let alone questions about transparency. These ethical considerations can be difficult to navigate and often create a divided church.
5.Pass-through gifts can be difficult to manage.
Pass-through gifts can require a lot of oversight, paperwork, and tracking to ensure the funds are used properly. This can be an overwhelming task for churches that don’t have the staff or resources needed to handle it.
Even if your church does have the resources to manage pass-through gifts, there’s no guarantee that the money will be used as intended. Without proper oversight and controls, donors may not be assured that their funds are being used for their intended purpose.
Case in Point Example
John and Mary are congregants at your church. Their house was razed in a fire, and they had nowhere to turn. In response, you ask other members of your church to donate so that John and Mary can rebuild a new home.
You advise the members to donate to the church’s benevolence fund but with explicit instructions: all donations will be given to John and Mary, and so the checks should be made out directly to them and not the church.
Unfortunately, the donations made out to John and Mary are considered pass-through gifts, which the IRS will tax. This means that John and Mary will have to claim the donations as taxable income when filing taxes.
So what should you do next? Well, while your intentions were good, it is important to know that taking pass-through gifts can be a costly mistake for your church and John and Mary as well.
Instead, you should consider setting up a special fund to help those in need.
Creating a special fund
By creating a special fund and collecting donations into it, your church can provide tangible help to those in need without worrying about tax implications. This is because donations made into the special fund are not considered pass-through gifts, so the donations are tax-exempt.
Additionally, setting up a special fund can help your church gain recognition from the IRS. As long as the money collected is used solely for charitable purposes, your church will be eligible to receive tax exemptions on all donations made to the fund.
By setting up a special fund, you are able to meet the needs of those in need while protecting your church from tax liabilities.
A gift is considered charitable if it’s:
A donation or contribution to, or for the use of a church
Made “without any condition or restriction
Claimed as a charitable deduction on the donor’s tax return
Within the limits specified by the IRS
Substantiated by a receipt or other reliable written record
Certainly, taking pass-through gifts can be tempting. After all, what could be easier than having congregants make donations directly to those in need? But when it comes to tax liability, the risks outweigh the rewards. Setting up a special fund is the best way for your church to help those in need without having to worry about pass-through gifting.
By providing a safe and tax-exempt way for congregants to provide charitable donations, your church can ensure that the money goes towards helping those in need without any tax liability.
Protect Your Tax Exempt Status with The Charity CFO
Churches and other nonprofits are subject to strict state and federal tax laws. As a church, understanding the rules can help you protect your tax-exempt status while helping those in need.
At The Charity CFO, we understand that your church’s tax-exempt status is important to you. We can help you navigate the complexities of tax law on pass-through gifts and provide you with the necessary guidance to ensure that your church is compliant and protected.
With our team of experienced and knowledgeable tax professionals, you can feel confident that your church’s status as a nonprofit is secure. We are committed to helping your church maximize its charitable impact and stay compliant with state and federal tax laws.
Don’t let pass-through gifts put your church at risk. Contact The Charity CFO today and let us help you find the right solution for your church. We look forward to helping you protect your tax-exempt status and reach more people in need.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Charity-Articles-2-1-1.png6301200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2022-12-01 10:00:432025-07-20 07:55:34Why Your Church Shouldn’t Take Pass-Through Gifts
Without a clear understanding of income and expenses — it’s impossible to deliver on your organization’s mission, vision, and goals effectively.
That’s why it’s important to start thinking about your budget for 2023 now. By taking the time to assess your current financial situation and map out your anticipated income and expenses for the year ahead, you can make sure that your nonprofit is on track to meet its goals.
Budgeting should go beyond simply tracking money in and money out.
A well-crafted budget can be a powerful tool for decision-making, helping you to prioritize spending in line with your strategic goals. It can also be a valuable communication tool, providing clarity for staff, volunteers, and donors about where their money is going and how it’s making an impact.
A nonprofit budget helps your organization:
Stay fiscally healthy
Allocate resources
Set spending priorities
However, if you’re not careful, it’s only a document.
Only through regularly reviewing and updating a budget does it accurately reflect your nonprofit’s current financial situation. Using the budget, not only creating it, gives you a clear roadmap to follow and ensures your organization stays within the precincts of its tax-exempt status.
Intro to Budgets for Nonprofits
Budgets differ greatly between nonprofits and for-profits. The biggest distinction is that nonprofits don’t exist to make a profit; they exist to further their missions. Therefore, their budgeting process must be geared towards achieving mission-related goals, rather than maximizing financial gain.
A nonprofit budget is typically a planning document that shows how the organization plans to raise and allocate its money to support its programs and operations. The budget will include both income and expenses and will be based on the organization’s strategic plan.
The budgeting process should involve all members of the organization, from the Board of Directors and committees, to the staff and volunteers. Everyone should have a clear understanding of the organization’s financial situation and be able to provide input on where money should be spent.
The budget should be reviewed and updated regularly, at least on an annual basis. As your organization’s financial situation changes, so too should your budget.
There are two main types of nonprofit budgets: static and dynamic.
A static budget is a detailed plan that uses predicted amounts for a given period. It does not change regardless of deviations in revenue and expenses and is typically used for short-term planning. A static budget is ideal for small nonprofits with simple financial structures.
A dynamic budget is more flexible and can be adjusted to reflect changes in income and expenses. It allows nonprofits to respond quickly to fluctuations in their funding and better manage their resources. A dynamic budget is a good choice for larger nonprofits with more complex financial structures.
There is no rule that a budget must be one type or the other; it can be a mix of both. The important thing is to use the type of budget that makes the most sense for your organization and its specific needs.
During your budgeting process, you should constantly monitor your situation and make adjustments as needed. The goal is to have a budget that is realistic and achievable so that you can stay on track and deliver on your mission.
7 Steps to Your Budget
1. Determine a timeline
We are approaching the end of the year, so you may want to start thinking about your budget for 2023 now. By taking the time to assess your current financial situation and map out your goals, you can ensure that your budget is well-crafted and accurate. Allow time for review and discussion, set a target date for board approval, and ensure that everyone understands the budget and their role in it.
2. Clarify context and articulate goals
Assess the current alignment of organizational values, reflect on successes and failures, identify opportunities and challenges, and set goals for the upcoming budget year. These goals should be specific, measurable, achievable, relevant, and time-bound (SMART). Input from various stakeholders will be critical at this stage. The budget should reflect the collective vision of the organization, and everyone should have a chance to provide input.
3. Decide on the budget structure
What is the primary purpose of your budget? Is it a monitoring tool, a funder compliance roadmap, or a blueprint for change? Your answer will determine the structure of your budget. A results-based budget, for example, focuses on outcomes rather than inputs and is often used to demonstrate impact to funders.
On the other hand, an activity/program-based budget is more commonly used to track expenses and income related to specific programs. Other budget structures you can adopt include time-based, source-based, impact-based, and cash-flow budgets.
4. Develop a draft income budget
This is where the rubber meets the road. Once you have decided on the structure of your budget, you can begin to fill in the details. Begin with a list of all income, including both one-time and recurring items. Project income for the upcoming year based on past performance, current trends, and any known changes. If your organization is expecting any grant funding, make sure to include the conditions of the grant in your budget.
5. Create a draft expense budget
Articulate the direct and indirect costs associated with each goal. Indirect costs, also known as overhead costs, are those that cannot be assigned to a specific program or activity. They include items such as rent, utilities, and administrative salaries and should be allocated in a fair and reasonable manner. Once all expenses have been accounted for, compare your total income to your total expenses to ensure that you are not overspending.
6. Review and revise the budget
Discuss potential risk areas, including any potential changes in funding, unanticipated expenses, or unrealistic income projections. Make any necessary changes to the budget and get feedback from key stakeholders. Create a consolidated budget spreadsheet that addresses values, goals, and named priorities. Revise the budget to make sure that it is achievable and realistic.
7. Finalize the budget
Present the budget to the board for approval, get sign-off from the executive director, and distribute the budget to staff. Make sure that everyone understands the budget and their role in achieving the organization’s goals.
Ensure that all decision-making processes and rolling forecasts are documented for easier monitoring. Ensure that you review and update the budget regularly to account for any changes in funding, new programs, or unanticipated expenses.
Specialized Nonprofit Budgeting Help
Budgeting for a nonprofit organization can seem daunting, but it doesn’t have to be. The most important aspect is to identify all possible sources of income and expenses. Once you have a clear understanding of the organization’s finances, you can begin to develop a budget that meets the needs of the organization.
Having a well-thought-out strategic forecast and budget can help your nonprofit gain better visibility with donors and funders, manage expenses more effectively, and make sound financial decisions. These are all important factors in ensuring the long-term sustainability of your organization.
But with all the moving parts of a nonprofit organization, it can be difficult to know where to start. That’s where we come in. Our team at The Charity CFO has extensive experience in nonprofit budgeting and can help you develop a budget that meets the specific needs of your organization. Having worked with over 150 nonprofits, we understand the challenges you face and can offer tailored solutions to help you overcome them.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Budget-1.png6301200Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2022-11-17 15:08:412025-07-20 07:55:35Budgets for Nonprofits: Get ready for 2023
If you know only one thing about 501(c)(3) nonprofit organizations, you probably know that they don’t pay federal taxes on their income.
But what if I told you that’s not always true?
It’s true that due to their uniquely valuable societal contributions, such as charitable actions or educational priorities, nonprofits receive tax exemption for income from activities substantially related to their primary purpose.
However, as detailed in Publication 598 of the Internal Revenue Service, income not directly related to their declared charitable purpose is subject to federal taxation. This is called the unrelated business income tax, or UBIT.
So how do you know if your nonprofit organization has taxable unrelated business income?
We’ll review the core principles of unrelated business income tax (UBIT) rules below, along with examples of income subject to taxation, to help you understand what it is and whether or not it applies to your organization.
What is Unrelated Business Income Tax (UBIT)?
Both federal tax exemption and the eligibility to receive tax-deductible contributions help your nonprofit achieve its charitable goals. But while these benefits have a positive impact on society, they can pose a temptation for some organizations looking to take financial advantage for personal gain.
As a result, Congress implemented the UBIT in 1950 to eliminate the unfair advantage tax exemption gave to nonprofits competing against for-profit entities in the same sector. The tax limits the advantage of nonprofits to their specified charitable purpose and prevents them from exploiting their benefits in the commercial sector.
For example, the UBIT prevents an entity such as a church from using its exempt status to open a store purely for profit with no charitable purpose. This is true even if the church uses those funds to fund programs in the community.
It is not, however, prohibited for your exempt organization to earn unrelated business income. If you receive gross income from an unrelated business reaching $1,000 or more, you simply need to complete and submit IRS Form 990-T and pay the required taxes.
If your organization expects it will need to pay $500 or more in tax for the year, then you must pay a quarterly estimated tax. The Form 990-W helps determine the required amount of estimated tax to pay.
Form 990-T and Form 990-W are in addition to your organization’s annual information return (Form 990, Form 990-EZ, or Form 990-PF).
IRS UBIT Requirements
UBIT rules apply to most organizations that gain tax exemption from section 501(a) of the Internal Revenue Code (IRC). The three main criteria for your tax-exempt entity’s activity to be considered an unrelated business are as follows:
Your activity is a trade or business that produces income via the selling of goods or services. Even if these activities occur under a greater umbrella of the organization’s tax-exempt purposes, they maintain their identity as unrelated trades or businesses as long as they generate gross incomes from distributing or producing goods or services.
The activity is regularly carried on, meaning that the organization pursues them with frequency and continuity, similarly to the manner in which non-exempt organizations pursue comparable commercial activities.
The activity is not substantially related to furthering the organization’s exempt, charitable purpose.
Special Cases & Exceptions
Most tax-exempt organizations must follow the UBIT requirements, including those in social welfare, advocacy, trade, veteran groups, labor organizations, and employee benefits.
However, some special cases fall under modifications, exclusions, or exceptions to unrelated business income, such as:
✔️ Volunteer labor ✔️ Convenience of members ✔️ Sale of donated merchandise or in-kind gifts ✔️ Corporations organized under Acts of Congress and are instrumentalities of the United States ✔️ Some charitable trusts not subject to private foundation taxes ✔️ Dividends ✔️ Interest ✔️ Certain investment income ✔️ Royalties ✔️ Certain rental income ✔️ Certain research activity income ✔️ Gains or losses from property disposition ✔️ Certain bingo games
It can get a bit complicated, but the Form 990-T Instructions give you more specifics on what constitutes an exception and what does not.
What Is Considered Excessive Unrelated Business Income?
Although nonprofits can earn profits from unrelated business activities, these profits can only make up a certain percentage of the nonprofit’s overall income.
This limit is not clearly defined, however. Instead, it is up to the IRS to determine if your percentage of total income coming from UBI is too high. In cases where the IRS is evaluating unrelated business income to determine adequacy, it considers various factors specific to the situation at hand.
Examples of Taxable and Non-Taxable Business Income
Example 1: Selling food and beverages
Related business income: If an organization sells food and beverages to its members, it would be considered part of the entity’s regular operations to further its purpose. The money earned goes towards paying back the expenses used to obtain the food for its members to work on their mission.
Unrelated business income: If the same organization sells food to non-members regularly to make additional profits without working towards its non-exempt purpose, then the income is unrelated and taxable.
Example 2: Charging for parking
Related business income: If an organization has a parking lot and it charges members to use during working hours, then this income is not taxable. The money earned goes toward paying the lot lease and provides a service to members who use their parked time for furthering the purpose of the organization.
Unrelated business income: However, if the entity decides to take advantage of its non-working hours by regularly opening the lot to non-members to turn a profit, then this income is subject to the UBIT. The money is no longer from and for members and is not necessary for furthering the organization’s purpose.
Example 3: Providing pay-for-entry entertainment
Related business income: Consider an organization such as a church that charges admission for a small fair or arcade in which themed games and activities educate the children of members on the church’s views and purpose. This activity specific to members and to the purpose of the church would not fall under UBIT rules.
Unrelated business income: If the same church ran a general arcade next door open to the public and with no educational aspect, then the resulting income would be subject to the UBIT.
Other forms of income which would be susceptible to the UBIT include proceeds from the liquidation of assets, the sale of resources found on the property of the exempt entity, income from paid advertising in the organization’s newsletter or publications, or the sale of unrelated merchandise to the public.
Each of these examples and those described above involve various factors that, if changed, could change the exempt status of the activity in question.
Not Sure If Your Nonprofit Income Is Taxable Or Not?
You should always consult your legal counsel or a qualified accounting professional before making decisions that could cost you a lot of money down the road.
But as a nonprofit, sometimes it’s not easy to find someone to answer your questions. We frequently hear stories of CPAs that don’t return their nonprofit clients’ phone calls or emails. Often, nonprofits get stuffed at the bottom of the pile.
If you’re tired of being the last priority of the financial professionals in your life, consider outsourcing your bookkeeping and accounting to The Charity CFO. We’ll modernize and optimize your accounting system to get you audit-ready financial reports every month.
And our team of former nonprofit CFOs and auditors are available to answer all your most challenging questions about tax liabilities, transparency, compliance, budgeting, and more.
Reach out to us today to see if outsourcing your bookkeeping and accounting can save you time, money, and stress.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Blog-Featured-Image-13.png6751080Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2022-09-14 16:01:142025-07-20 07:55:36Understanding Unrelated Business Income in Nonprofits
I’m sure you’ve heard about the “Great Resignation” that’s been taking place over the last year or so. Not surprisingly, this above-average employee turnover impacted nearly every industry, but it has hit nonprofits and financial professionals particularly hard.
However, nonprofit accountant turnover is not a new problem in the sector. It’s an ongoing issue that’s merely exacerbated by the Great Resignation. Unfortunately, the issue seems to be getting worse rather than better, and it’s one of the biggest problems that many of our nonprofit clients face today.
In this article, we’ll talk about “accountants” because the financial roles in nonprofit organizations are notoriously vague. But we’re actually talking about high-level accountants, directors of finance, CFOs, and a variety of financial leadership roles in the nonprofit world.
Why Do Nonprofit Accountants Quit?
It’s hard to identify just one factor causing the high turnover rate of nonprofit accountants, treasurers, and chief financial officers. However, in a recent podcast with us, Trina Owens talked about the reasons that so many nonprofit accountants quit their jobs, such as:
Limited growth opportunities
Low salaries
Underfunded financial departments
Inflexible or antiquated accounting systems
Toxic or unhealthy work environments
Of these issues, the issue of underfunded departments is probably the one that accounts for the most turnover. And it’s often the driving factor behind the other factors, like low salaries and unhealthy work environments.
To cut corners, nonprofits often force nonprofit accountants to handle various responsibilities, including HR, payroll, and bookkeeping. Some CFOs and nonprofit treasurers even find themselves in charge of handling administrative tasks and operational issues, which really shouldn’t be in their area of responsibility.
In underfunded organizations, it’s not unusual to task your nonprofit treasurer or CFO with everything that falls outside of fundraising or programs. When this happens, your accountant gets spread too thin, frustrated that they’re not able to do anything well, and overwhelmed and unfulfilled in their role.
Overworked, Unchallenged, and Burned Out
The best accountants, treasurers, and CFOs want to be in a role where they are growing, succeeding, and doing work they enjoy. But nonprofit budget constraints often force organizations to task the CFO with handling multiple roles, including specialized skills beyond their training.
For example, in many organizations, a financial director or CFO is forced to take on Human Resources, which creates some unique challenges.
First, it’s not their area of expertise or what they do best. So your critical financial professional must put in a lot of work to learn the job and spend much of their time on projects they don’t enjoy. Beyond that, it can expose the organization to legal problems and lawsuits, as HR is a specialized field with unique requirements and demands.
When you give your financial professional too many responsibilities, they spend most of their time working long hours on projects that don’t maximize their skillset. It’s not what you paid them for. Eventually, they get burned out, frustrated with their lack of development, and they quit.
The Unseen Cost of Nonprofit Accountant Turnover
To make things worse, if that person was handling all the bookkeeping, accounting, tax filings, payroll, and HR, they throw your entire operation into disarray when they leave.
To make things worse, hiring a new financial director is a time-consuming task. It’s hard to find good people with nonprofit experience, and the price is often higher than nonprofits can pay.
So you end up hiring someone who is underqualified or doesn’t have nonprofit experience. The new hire struggles to decipher the old accountant’s systems, and you overload them with responsibilities. Within a few years, you’re accepting their resignation and hunting for a reliable financial professional once again.
This endless carousel of recruiting, hiring, training, and then recruiting again drains resources from your organization. That’s why many nonprofits have started seeking alternative solutions to tackle their accounting needs.
Fixing the “Do-It-All Nonprofit CFO” Model
You can see that the Do-It-All CFO model is clearly broken and a core factor in the crisis of nonprofit accountant turnover. The challenge, of course, becomes how your nonprofit can allocate all of the work that previously was handled by a CFO, director of finance, or senior accountant.
There are three primary ways that you can do this:
Create multiple roles. This would mean, for example, having an accountant, a bookkeeper, and an HR professional. This lets each employee focus on what they do best. However, due to limited budgets, these often are part-time roles and can be challenging to fill. And without a true CFO, your organization may lack the high-level financial expertise you need.
Hire support teams for your CFO. Another solution is adding more accounting and bookkeeping support to help your CFO with less advanced tasks. This can help ensure your CFO can focus on the most important things and isn’t overwhelmed by too many basic duties and responsibilities, but it gets expensive quickly.
Outsource to a qualified financial partner. When you outsource bookkeeping and accounting to a professional nonprofit accounting team, you ensure your finance needs are met by a dedicated service team of highly skilled accountants, bookkeepers, and nonprofit financial experts. And you pay a fixed monthly fee that fits within your budget.
Want to eliminate accountant turnover once and for all?
According to a report by the Society for Human Resource Management (SHRM), the average cost-per-hire is $4,693. Plus, turnover in your financial department can result in frustrated vendors, blown budgets, lost grant funding, and even worse.
So you can’t afford to get caught on the accountant hiring carousel.
At the Charity CFO, we understand your need for an effective and sustainable solution that you can count on. That’s why we’ve assembled the industry’s best team of nonprofit financial professionals to help nonprofits just like yours.
Our team will help you update outdated accounting systems, optimize your processes, and get the timely financial statements and tax filing you require. Because our team works only with nonprofit clients, we understand the challenges you face every day. And we know the intricacies of nonprofit accounting—things like accounting for in-kind gifts, fund accounting, and donor-restricted assets—better than anyone.
Our unique outsourced model gives you both a dedicated service team and access to CFO-level guidance when you need it. It’s a modern and flexible accounting solution that ensures you’ll never have to deal with the nightmare of accountant turnover again.
After years of dealing with accountants quitting, today’s modern nonprofits have started to quit their accountants. When they do, we’re there as a qualified financial partner to fill that gap. Contact us today to learn more or to start working with our team.
No time to read this article now? Download it for later.
https://thecharitycfo.com/wp-content/uploads/2025/05/Blog-Featured-Image-12.png6751080Paul Cook/wp-content/uploads/2025/03/fileuploads_222926_8055634_252-8e05624973e20b5de823aebdbcfd37df_LogoLeftAligned.pngPaul Cook2022-09-02 13:15:282025-07-20 07:55:36How To Avoid Nonprofit Accountant Turnover
We may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.
Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.
Essential Website Cookies
These cookies are strictly necessary to provide you with services available through our website and to use some of its features.
Because these cookies are strictly necessary to deliver the website, refusing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.
We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.
We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.
Other external services
We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.
