How to Create a Nonprofit Operating Budget

/in , , /by

Whether you’re a new organization or an established one working to get its finances under better control, there are few more important things to get right than your nonprofit operating budget. 

It serves as the backbone of your nonprofit’s spending, fundraising, and much more. But if you need some help putting one together, you’re not alone. 

Read on as we break down the process step-by-step and answer some critical questions many nonprofit leaders often have.

Understanding the Basics of a Nonprofit Operating Budget

All operating budgets can be broadly split into two categories – revenue and expenses. 

For nonprofits, revenue comes from:

  • Fundraising
  • Grants
  • Membership fees
  • Investment income
  • Any other activity that brings money into the organization

Expenses are more varied but cover your charity’s basic work to carry out its mission (program expenses) and costs associated with fundraising, as well as administrative expenses for salaries, rent, utilities, and similar bills.

Nonprofit operating budgets differ from regular for-profit business budgets in key ways. 

For one, they’re designed to reinvest any extra money back into the organization rather than take it out as income for business owners.

Additionally, for-profit budgets often have expenses closely linked to revenue, like the cost of goods sold or employee wages. That’s not the case for most nonprofits, which have separate arms for raising money and carrying out their missions.

Gathering Essential Information

Before you can figure out where your nonprofit is going, it’s vital to figure out what happened in the past. Take time to collect financial data from previous years as best as possible. Identify and log sources of revenue and common or recurring expenses. 

This can provide a baseline for future budgeting, allowing you to tweak as needed for your goals rather than starting from scratch. Simply collecting this crucial data can go a surprisingly long way toward identifying and solving organizational problems.

Creating Revenue Projections

Now, take some time to consider where your revenue is headed in the quarters or years ahead. Step back and assess your fundraising strategies and how potential changes could affect your expected contributions. Consider the impact of any grants or sponsorships, including both new ones you may win and current ones that may shrink or dry up. 

This is also where you should estimate any earned income or program fees if they apply to your situation. Think broadly about other revenue streams as well.

  • Is your organization receiving investment income?
  • Does it own property that could be rented or sold?

While you should consider everything, be as realistic as you can in setting revenue projections. While it might be less than ideal to underspend when your organization has the capacity to spend more, it’s far worse to overestimate fundraising or grants and end up scrambling to cover costs.

Determining and Allocating Expenses

The next step to creating your nonprofit operating budget is to figure out where the money you’ve raised will be spent. As mentioned above, expenses will primarily fall into one of three categories:

  • Program expenses
  • Fundraising expenses
  • Administrative expenses

While program expenses are the core of your organization’s mission, fundraising and administrative costs also need to be properly accounted for to keep the lights on. Therefore, it can be helpful to establish these first and figure out what’s left.

Be sure to consider whether your costs are fixed, like rent (staying the same no matter how you operate), or variable, like salaries and expenses for fundraising events (growing or shrinking as your operations do.) 

This is also a crucial step of the process because you’ll be setting your nonprofit’s priorities and goals by determining which get funded and which don’t.

Factoring in Contingencies and Reserves

Anyone who’s run a nonprofit or any other organization knows the one thing you can expect is unexpected expenses. That’s why it’s vital to set aside part of your budget for these contingencies and reserves. 

Work to identify potential risks to your operations and create basic contingency plans that can make dealing with problems more straightforward when they occur. Your organization should also determine its policy on reserves, including the ideal long-term level as well as how much and when to contribute or draw them down.

Reviewing and Adjusting the Nonprofit Operating Budget

Congratulations – you now have the basics of your nonprofit operating budget! But the work isn’t over. 

Regular budget reviews on a quarterly or yearly basis are essential to see if you’re hitting your expected benchmarks in both revenue and expenses. 

Looking over your budget with new hard data will allow you to make any tweaks as necessary and head off serious potential problems.

Seeking Professional Assistance for Your Nonprofit Operating Budget

With these easy steps, you’re well on your way to creating a workable, up-to-date budget to help your organization thrive. 

By simply gathering your data, making revenue and expense projections, and regularly reviewing and updating your budget, you’ve conquered a key part of the business of running a nonprofit. 

But if you need a hand or are looking for some expert advice, The Charity CFO is here to help. Contact us today to learn more about how we can help your organization unlock its full potential by getting its budget on track.

 No time to read this article now? Download it for later.

From Necessary Evil to Mission Fuel: The Strategic Role of Nonprofit Financial Statements

/in , , /by

Nonprofit financial statements. Is this just a necessary evil just to meet compliance requirements, and make sure there’s enough cash in the bank? Or can your financial statements be a lens to view your organization and fuel the mission?

In this post, we’ll walk through the most important financial statements, and explain the strategic benefit you can gain by pulling the maximum value from the data. 

Nonprofit Financial Statements

You are likely familiar with the different nonprofit financial statements that are typically included in a reporting package:

  • Statement of Activities
  • Statement of Financial Position
  • Statement of Cash Flows
  • Statement of Functional Expenses

But we’d like to dive beyond the surface. This article explores the multifaceted uses of these financial statements and highlights their significance in enabling financial transparency, informed decision-making, and organizational effectiveness for nonprofit entities.  

Remember, these uses are not mutually exclusive, and some applications may overlap across the categories. The categorization of uses may vary depending on the specific context and goals of your nonprofit organization.

Statement of Activities

Financial Uses

  • Assessing Revenue Sources: Analyze the various revenue sources of a nonprofit, such as donations, grants, program fees, and investment income. This information is crucial for financial planning, budgeting, and identifying potential areas of revenue growth.
  • Evaluating Expenses: Evaluate the expenses incurred by the nonprofit, such as program expenses, administrative costs, fundraising expenses, etc. It enables financial analysis to identify cost-saving opportunities, manage expenses, and ensure efficient resource allocation.

Strategic Uses

  • Financial Planning: Provides insights into the financial health of the organization. Can help in identifying trends, forecasting future revenues and expenses, and making informed decisions about resource allocation, fundraising efforts, and program expansion.
  • Performance Evaluation: By comparing the revenues and expenses on the Statement of Activities with the nonprofit’s strategic goals and objectives, it becomes a valuable tool for assessing performance. It allows management to measure the effectiveness of programs, evaluate cost-efficiency, and make strategic adjustments to enhance overall performance.

Operational Uses

  • Program Evaluation: Evaluate the financial performance of individual programs or activities conducted by the nonprofit. By analyzing revenues and expenses associated with each program, it helps in assessing program viability, resource allocation, and identifying areas for improvement or expansion.
  • Stakeholder Communication: Serves as a transparent communication tool for stakeholders, including donors, board members, and grant-making organizations. It provides an overview of the nonprofit’s financial activities, highlighting its financial stability, sustainability, and the impact of its programs.

Statement of Financial Position

Financial Uses

  • Assessing Financial Health: Provides information about its assets, liabilities, and net assets, allowing stakeholders to evaluate solvency, liquidity, and overall financial position.
  • Analyzing Financial Structure: By presenting the organization’s assets and liabilities, the statement assists in analyzing the financial structure, including the composition of assets (e.g., cash, investments, receivables) and liabilities (e.g., accounts payable, loans). This analysis supports decision-making regarding debt management, investment strategies, and asset allocation.

Strategic Uses

  • Financial Planning and Budgeting: Provides insights into the organization’s available resources and financial capacity, enabling strategic decision-making regarding resource allocation, capital investments, and long-term financial sustainability.
  • Assessing Financial Viability: By examining the organization’s assets, liabilities, and net assets, the statement helps provide information on the organization’s ability to meet its financial obligations, support ongoing programs, and sustain its mission over the long term.

Operational Uses

  • Managing Cash Flow: By analyzing cash and cash equivalents, accounts receivable, and accounts payable, it helps monitor liquidity, plan for short-term financial needs, and ensure the smooth operation of the organization.
  • Evaluating Working Capital: Supports operational decision-making by evaluating the organization’s working capital and helps determine whether the nonprofit has sufficient working capital to cover day-to-day operational expenses and short-term obligations.

Statement of Cash Flows

Financial Uses

  • Cash Position Assessment: Assessing cash inflows and outflows, allows stakeholders to evaluate the availability and adequacy of cash resources, which is crucial for financial planning and decision-making.
  • Cash Flow Analysis: Assists in analyzing the sources and uses of cash within the organization. It provides insights into cash generated from operating activities, investing activities, and financing activities. This analysis supports financial analysis, budgeting, and investment decision-making.

Strategic Uses

  • Strategic Planning: Contributes to strategic planning by providing information on the organization’s cash flow patterns. It helps identify trends, fluctuations, and cash flow drivers, which are important for long-term financial sustainability and strategic decision-making.
  • Capital Expenditure Planning: Assists in planning for capital expenditures and major investments. By examining the cash flows related to investing activities, it helps assess the organization’s ability to fund capital projects, acquire assets, and allocate resources strategically.

Operational Uses

  • Cash Management: Aids in cash management by providing insights into the organization’s cash inflows and outflows on a detailed operational level. It helps monitor cash flow cycles, anticipate cash needs, and manage working capital efficiently.
  • Liquidity Assessment: Supports operational decision-making by evaluating the liquidity of the nonprofit. It provides information on the organization’s ability to meet short-term obligations and fund day-to-day operations.

Statement of Functional Expenses

Financial Uses

  • Expense Analysis: Helps analyze and categorize expenses by their functional nature, such as program services, management and general, and fundraising. By providing a breakdown of expenses, it allows stakeholders to assess cost structures, monitor expenditure trends, and identify areas for cost management and optimization.
  • Financial Reporting: Provides a comprehensive view of the organization’s expenses. It ensures compliance with reporting standards and provides transparency to stakeholders about how resources are allocated and utilized.

Strategic Uses

  • Program Evaluation: Aids in evaluating the financial performance and effectiveness of individual programs or services offered by the nonprofit. It helps assess the allocation of resources, cost-efficiency, and the impact of programs on the organization’s overall mission and strategic objectives.
  • Decision-Making: By analyzing expenses across different functional categories, the statement supports strategic decision-making. It helps identify areas where resources can be allocated or reallocated to align with the nonprofit’s strategic priorities and maximize the organization’s impact.

Operational Uses

  • Budgeting and Planning: Supports operational budgeting and planning by providing insights into historical expense patterns. It helps in setting realistic budgets for various functional areas, monitoring actual expenses, and ensuring effective resource allocation.
  • Cost Control and Efficiency: Assists in monitoring and controlling expenses on an operational level. By analyzing expenses within different functional categories, it helps identify cost-saving opportunities, manage spending, and improve operational efficiency.

Nonprofit financial statements fuel your mission

Financial statements play a crucial role in the financial management and governance of nonprofit organizations. By leveraging these financial statements and their diverse uses, nonprofit organizations can pursue their mission with confidence.

Additionally, adhering to compliance obligations reinforces credibility and trust among donors, board members, and regulatory bodies. As financial reporting standards and accountability expectations continue to evolve, nonprofit organizations must prioritize accurate and transparent financial reporting practices to thrive in an increasingly complex landscape. By harnessing the power of financial statements, nonprofits can navigate challenges, drive mission-driven impact, and foster sustainable growth for the betterment of their communities. 

The Charity CFO specializes in nonprofit accounting and bookkeeping. If you want to dig deeper, you can learn more in our Financial Statement Guide here.

No time to read this article now? Download it for later.

What to expect from nonprofit payroll services

/in , , /by

Managing payroll for nonprofit organizations comes with unique requirements and considerations. Ensuring that your nonprofit payroll services are up to the task of withholding payroll taxes, complying with grant regulations, and ensuring compliance and transparency can be a huge lift. 

Finding the right person or organization to handle the monumental task of payroll services will enable you to rest easy knowing that this task is in good hands and that your employees and donors are confident and happy with the results. 

In this article, we will explore the distinct payroll requirements for nonprofits. Understanding these nuances will help your organization effectively manage its payroll processes and avoid potential pitfalls.

Unique Payroll Requirements for Nonprofits

Withholding Payroll Taxes

While nonprofit organizations are generally exempt from federal income tax, they still have payroll tax obligations as it relates to their employees. Nonprofits must withhold and remit payroll taxes on behalf of their employees, including federal income tax, Social Security, and Medicare taxes in order to remain compliant with tax regulations. 

Using Grants to Pay Employees

Organizations often rely on grant funding to support them in carrying out their mission. Sometimes portions of these grants are awarded specifically for personnel costs, or can be allocated to those if employees are directly working on the grant-related projects. In these scenarios, it is cruel to effectively track, document, and allocate timesheets and grant-funded payroll separately to ensure transparency, accuracy and responsible use of grant funds.

Reviewing Executive Salaries

Nonprofit organizations must carefully manage executive compensation to maintain public trust and meet the legal requirement of the IRS to pay executives a “reasonable” salary. Organizations should establish a formal process for reviewing and determining the executive salary based on industry benchmarks.

Minister Pay

In religious or faith-based organizations, paying ministers and clergy involves specific considerations as well. They may often be classified as self-employed for tax purposes. However, the organization may still be required to report compensation and file appropriate forms depending on circumstances. 

Form 990

Filing your annual information return can be a huge undertaking and also requires the completion of important payroll details from throughout the year including payroll expenses, employee benefits and executive compensation. Accurate and thorough completion of Form 990 is crucial for nonprofits to maintain their tax-exempt status and showcase their commitment to transparency and accountability.

Common Mistakes and Problems

Processing Errors

Misclassifying Employees

Understanding employee classifications (as an ‘employee’ or ‘contactor’ and further either ‘exempt’ or ‘nonexempt’), at both the federal and state levels, can be a confusing issue that can have serious legal and financial implications. According to the council of nonprofits, misclassifying a worker can result in the nonprofit owing significant penalties, back taxes, and backpay. 

Miscalculating Payroll

Mistakes in calculating payroll can result in underpayment or overpayment of employees, leading to dissatisfaction and potential legal issues. Implementing a reliable payroll software and ensuring your payroll service provider is an expert in nonprofit payroll can help to mitigate such errors and avoid costly mistakes. 

Missing Payroll Deadlines

This can have significant consequences, such as delayed payments to employees or non-compliance with tax regulations. Nonprofits must adhere to strict timelines for processing, remitting and providing the necessary payroll documentation to employees. 

Should my organization outsource payroll?

Outsourcing payroll can be an incredible relief to an organization as the burden of understanding all the nuances of this process is large. However, the additional layers of compliance, reporting, and allocations that nonprofits must adhere to makes the task even that much more complicated. When considering the prospect of outsourcing, ensure that you are working with a service that understands the intricacies of a nonprofit organization and will be on top of your compliance, reporting and payroll needs. Keep in mind what services you will need and what will be the most helpful support for your organization. Many services can complete a number of tasks including:

  • Recording employee timesheets
  • Performing payroll tax calculations on wages, vacation pay, termination pay, and banked time
  • Calculating organizational filings
  • Withholding employee deductions and making remittances to the government
  • Processing direct deposits of checks
  • Submitting employee tax forms
  • Preparing payroll journal entries

Overall, be aware that payroll management for nonprofit organizations requires careful attention to detail and thorough understanding of the specific requirements applicable to the sector. Charity CFO has experts that can help navigate the intricacies of nonprofit payroll and ensure that your organization is properly withholding payroll taxes, effectively utilizing grants for employee compensation, conducting comprehensive reviews of executive salaries, adhering to regulations concerning minister pay, and accurately completing your Form 990. 

This process helps ensure compliance, maintain transparency and demonstrate responsible stewardship of resources. By implementing best practices and seeking professional guidance when needed, non-profit organizations can streamline their payroll processes and focus on advancing their missions while remaining compliant with relevant legislative and regulatory obligations.

 No time to read this article now? Download it for later.

Tips for cash management for a nonprofit organization

/in , , /by

Cash management for a nonprofit organization is possibly the most important consideration for success.

In a previous article, we discussed the benefits, risks, and compliance requirements of outsourcing bookkeeping for nonprofit organizations. In this article, we will build upon that knowledge and delve more specifically into the topic of cash management. Cash management is essential for maintaining financial stability, complying with regulations, and ensuring effective decision-making.

What is cash management?

When hearing the term “cash management,” many people will jump straight to the Statement of Cash Flows as the primary source of understanding. However, when speaking about cash management there is much more to the story. Cash management, at its core, refers to the process of effectively and efficiently handling and controlling the cash resources of your nonprofit organization. It involves monitoring, tracking and optimizing the inflow and outflow of cash to ensure that the organization maintains adequate liquidity and can meet its financial obligations. Cash management for a nonprofit organization encompasses various activities and strategies to manage cash flow.

Importance of tracking cash flow

Tracking the flow of cash in and out of a nonprofit organization is vital for its success and sustainability. Not only does it fulfill compliance requirements, but it also plays a crucial role in achieving the organization’s mission. By monitoring cash flow, nonprofits gain visibility into their financial health and can make informed decisions about resource allocation, budgeting, and planning. Moreover, tracking cash flow enables organizations to identify potential financial challenges in advance and take proactive steps to mitigate them. It also helps build and maintain cash reserves, which provide the necessary financial cushion to continue operations during lean periods or unforeseen circumstances.

Cash management strategies

Cash flow monitoring: monitoring cash inflows and outflows on a regular basis. This involves tracking revenue from various sources (donations, grants, program fees, investment income etc.) and expenses from various sources (salaries, rent, utilities, program costs, etc.). This supports informed decisions about spending, budgeting, and resource allocation. 

Budgeting and forecasting: outlining projected income and expenses for a specific period, typically annually. Developing accurate financial forecasts can help nonprofit organizations anticipate cash flow fluctuations and plan accordingly, thus avoiding cash shortages, managing their financial commitments and allocating resources effectively. 

Cash reserves: maintaining an appropriate level of cash reserves to serve as a financial buffer. Cash reserves can provide stability and flexibility during periods of uncertainty or unexpected expenses. Organizations should establish reserve policies that determine the target amount of cash to be held based on their own individual needs, operating expenses, and compliance requirements.

Cash flow optimization: strategies to optimize cash flow for an organization’s specific needs and ensuring efficient cash management. Optimizing cash flow may include negotiating payment terms with vendors, implementing efficient invoicing and collection processes, and exploring cash flow enhancement techniques such as short-term investments or revenue diversification.

Risk Management: assessing and mitigating financial risks associated with cash flow, such as liquidity, current and interest rate risks, Nonprofit organizations should have risk management strategies in place to address potential disruptions.

Overall, effective cash management strategies are essential to nonprofits to maintain financial stability, meet their financial obligations and support their mission. When strategically implemented as a part of an organization’s financial strategy and other fundamental financial requirements, cash management helps to support a holistic picture of the health and prosperity of an organization and their future abilities to maintain their mission. 

Supporting fundamental financial processes

By monitoring and maintaining your cash flow, you can set your organization up for easier and smoother financial reporting processes. Understanding your cash position and consistent monitoring and tracking can help with 

  • Accurate Recording of Financial Transactions
  • Preparation of Financial Statements
  • Resource Allocations 
  • Budgeting and Forecasting
  • Financial Analysis and Decision-Making

Effectively managing your cash flow, compliance, regulations, and reporting requirements can be overwhelming, especially without a team specializing in each of these areas. Having a second set of eyes on financials is a prudent practice for nonprofit organizations. It involves engaging an external expert, such as a professional bookkeeper or accountant, to review and analyze financial records. 

This serves as a form of independent validation, ensuring accuracy, transparency, and adherence to best practices. A second set of eyes can identify potential errors, inconsistencies, or irregularities that might have been overlooked internally. It adds an additional layer of accountability, reduces the risk of fraud, and enhances the overall integrity of financial reporting.

Overall, tracking cash flow, understanding an organization’s current financial position and accurate bookkeeping and reporting are essential for financial stability, compliance, and effective decision-making. 

By diligently tracking cash flow, nonprofits can ensure financial health, maintain cash reserves, and weather unforeseen challenges. Adhering to bookkeeping fundamentals and preparing accurate financial statements demonstrates transparency and facilitates sound financial management. 

Additionally, the inclusion of a second set of eyes provides an extra layer of scrutiny, improving accuracy, accountability, and the overall integrity of financial records. By embracing these practices, nonprofit organizations can enhance their financial management processes and support their mission with confidence.

Prioritize cash management for a nonprofit organization

The Charity CFO is a finance and accounting firm specializing in serving nonprofit organizations. If you need help simplifying and organizing your cash management, we’d love to help. Click here to set up a free consultation and see if we can help your nonprofit.

No time to read this article now? Download it for later.

Outsourced bookkeeping for a nonprofit

/in , , /by

Bookkeeping is a critical component of running a successful nonprofit organization. It involves the management of financial transactions and the maintenance of accurate records to ensure that your organization remains financially healthy and compliant with the law. However, managing bookkeeping in-house can be time-consuming and expensive, which is why many nonprofits are turning to outsourced bookkeeping services. 

A study by the Stanford Social Innovation Review found that nonprofits that invested in strong financial management practices, including bookkeeping, were more likely to achieve their mission and grow their organization. Strong financial management can come in many forms and there is no one size fits all for any nonprofit organization. As a leader, you’ll have to determine what is right for your nonprofit. In this article we’ll help you get started by exploring the benefits, risks and other considerations regarding outsourced bookkeeping for nonprofits. 

Benefits of Outsourced Bookkeeping for Nonprofits

Cost Savings

Outsourced bookkeeping has the potential to offer significant cost savings, depending on the complexity of your organization and your needs. When utilizing outsourced accounting services, you only pay for the services you need and you may have access to more premium software than you could purchase on your in-house budget.

Labor Costs

You will have the ability to obtain services when you need them without worrying about flexibility, vacation days, or geographical location. You can source the best services for your needs, exactly when you need them.

Expertise and Experience

Industry specific specialists can help your nonprofit organization minimize risk by providing professional tailored advice. As regulations surrounding nonprofits can be incredibly complex, expert guidance on financial matters, including compliance with tax laws and regulations, is key. This can be especially helpful if you don’t have a dedicated staff-person with the expertise level required. A few common areas where in-house staff may not be able to handle growing complexities are:

  • Audit experience – if your nonprofit is audited by the IRS, an outsourced bookkeeping service can support you in this process
  • Complex tax preparations – while nonprofits are tax-exempt, they are still required to file their Form 990, which in some cases can be incredibly confusing and complex
  • Key dependencies – if someone is out of the office, or unexpectedly leaves your organization, it may be difficult to backfill this position or understand all of the organizational knowledge they held

Scalability

While your in-house staff may be able to handle the day-to-day, as requirements increase and your organization grows, an outsourced service can support and grow with you, while also adding additional services that may not have been necessary before. Outsourced accounting services for nonprofits can handle a whole spectrum of accounting tasks for your organization:

  • Processing payables, receivables, and cash transactions
  • Reconciling accounts at month-end
  • Preparing financial statements, budgets and forecasts
  • Assisting with tax and grant-reporting requirements
  • Adequately communicating financial matters to your board
  • Accurately submitting state and federal filings

Time to Focus on Mission

Outsourcing your accounting could free up time for personnel to focus on the mission rather than keeping up with ever-changing accounting requirements, filings, and reporting. These requirements are typically too large for just one person to handle, thus making this endeavor more of a team effort. If there are many people stretching themselves to get this done, you might not only be utilizing their time inefficiently, in an area where they lack expertise, but you may also be taking away from their mission-critical efforts. Outsourced bookkeeping can provide peace of mind knowing experts are on top of the accounting so your staff can focus on what matters most.

Access to Premium Accounting Software

Accounting software comes in many shapes and sizes, but many times the software organizations start with is not tailored and cannot grow with them. As your organization grows, access to the appropriate software can become a large unforeseen expense. Using the scalability mentioned above, outsourced accounting services typically have access to these softwares to ensure that your accounting, reporting and filing is done accurately and efficiently. 

Risk of Outsourcing Nonprofit Accounting

While there are many benefits to outsourcing your bookkeeping, we would be remiss not to mention the potential downsides. Many organizations are close to the heart of their leadership, and letting go can be difficult. There are some potential downsides to outsourcing and it will be up to you to determine whether the benefits outweigh these for your organization. 

Loss of Control

Entrusting the financial management of your organization to an external party can feel difficult and like you are losing control of a key component that makes your organization run smoothly. Ensuring that your bookkeepers are transparent, experts and trustworthy can help ease this fear. Properly evaluate each company and their credentials before letting go of your financial data. 

Timeliness and Accessibility

Access is another common fear. Not having up to the minute transparency into your finances can be daunting. Make sure that you find a partner in your service provider and ensure that your access and communication channels are clearly defined. You may also choose to outsource certain aspects of your accounting that may require less immediate access.

Security Concerns

The financial data of an organization is incredibly sensitive. Ensure that your provider has proper security measures in place and ask to see these in action before proceeding.

Communication Challenges

As part of your diligence in selecting the right provider, you’ll need to consider what your communication preferences are, for both you and your staff. A bookkeeping or accounting service that is right for you will be able to accommodate your needs.

Transitioning

Transitioning from in-house to outsourced accounting services can be complex and time-consuming. You’ll need to have a solid plan outlining:

  • How financial data will flow
  • What are the communication channels and expectations
  • What software will be used and who will have access
  • Who will train the provider on your accounting processes and procedure
  • How quickly can they respond in a crisis
  • How long will this transition take

Compliance Requirements in Nonprofit Bookkeeping

Ultimately, you will need to evaluate the pros and cons of an outsourced nonprofit accounting service. By weighing the benefits you can take a look at where your organization might gain efficiencies and expertise while evaluating the best course of action. Remember, nonprofit accounting comes with a slew of special regulations, standards, and reporting requirements. There is no one size fits all solution. When determining your needs, be sure to consider what your complete financial package looks like and where you might need some help. Keep in mind:

  • Nonprofit accounting standards
  • Donor tracking 
  • Fund Accounting
  • IRS Regulations
  • GAAP Standards
  • State-specific requirements
  • Tax Filing
  • Grant Requirements 

By considering outsourced bookkeeping for your nonprofit, you can be on your way to more accurate reporting, more satisfied and less burnt-out employees, and, most importantly, more time to do the organizational work that really makes an impact on your mission. 

If you’ve decided the outsourced bookkeeping is right for your organization, get in contact with us and see how Charity CFO can help!

No time to read this article now? Download it for later.

What to expect from accounting firms specializing in nonprofits

/in , , /by

Is there an advantage to working with accounting firms specializing in nonprofits?

Nonprofit organizations play a crucial role in addressing social, environmental, and cultural issues in our society. However, running a nonprofit comes with unique challenges that require specialized expertise, particularly in financial management and accounting. Fortunately, there are accounting firms that specialize in nonprofits and can help navigate all of these specific requirements with their vast industry knowledge and expertise. In this article, we’ll explore in more detail what you can expect from these firms and how they can support your nonprofit:

  • Nonprofit Accounting and Compliance
  • Financial Management and Reporting
  • Audit and Assurance Services

Nonprofit Accounting and Compliance

Nonprofit accounting is different from accounting for for-profit organizations in a number of ways. Firms that specialize in nonprofit accounting have in-depth knowledge and experience in accounting for the unique needs and requirements of nonprofit organizations. They understand the complexities of nonprofit accounting, including fund accounting, grant accounting, and compliance with IRS regulations. They also understand the importance of transparency and accountability, which are crucial for building trust with donors and stakeholders.

Fund Accounting

Fund accounting is a method of accounting used by nonprofit organizations to track and report on restricted and unrestricted funds. Unlike for-profit accounting, where all revenues and expenses are combined into one account, nonprofits must track each fund separately to ensure that donations are used in accordance with the donor’s intent.

When setting up your fund accounting system, you must ensure that it meets the unique needs of your organization. This system should then be able to support your organization in maintaining accurate records of each fund, tracking revenue and expenses, and preparing financial reports that show how each fund is performing.

Grant Accounting

Many nonprofit organizations rely on grants to fund their programs and services. However, managing grant funds can be complex and time-consuming. Expertise is imperative to help manage your grant funds by:

  • Tracking grant funds separately from other funds
  • Preparing grant proposals and budgets
  • Managing grant disbursements and tracking grant expenditures
  • Preparing grant reports and ensuring compliance with grant requirements

Compliance with IRS Regulations

Nonprofits are subject to complex regulations at both the federal and state levels. Accounting firms specializing in nonprofits can help you comply with these regulations. They can help you prepare and file your IRS Form 990, which is required for most tax-exempt organizations. They can also help you navigate state-specific regulations and comply with grant reporting requirements. By working with an accounting firm, you can be confident that your nonprofit is meeting all legal and regulatory obligations.

Financial Management and Reporting

Financial management is critical for the success of any nonprofit organization. Accounting firms that specialize in nonprofits can help your organization with financial management and reporting. They can help you develop budgets, financial projections, and cash flow forecasts to ensure your nonprofit is financially sustainable. They can also provide financial reports that show how your organization is performing and how it compares to industry benchmarks. These reports can help you make informed decisions and identify areas for improvement.

Budgeting and Forecasting

Developing a budget is essential for managing your nonprofit’s finances. It can help you plan for expenses, identify potential funding gaps, and make informed decisions about resource allocation. When developing your budget, you must make sure that it is  realistic and aligns with your nonprofit’s mission and goals. Financial forecasting services can also help you plan for the future.

Financial Analysis

Financial analysis can provide valuable insights into your nonprofit’s financial performance. Executing on these analyses can help you understand how your organization is performing, identify areas for improvement, and make informed decisions about resource allocation.

Cash Flow Management

Managing your cash flow by developing cash flow projections, monitoring cash flow on a regular basis, and obtaining advice from experts on cash flow management strategies is crucial to your short and long-term success. Experts can identify potential cash flow issues and develop solutions to ensure your nonprofit has the cash it needs to operate effectively.

Auditing and Assurance Services

Auditing and assurance services help to ensure the accuracy and transparency of nonprofit financial statements. These services help your organization meet regulatory requirements and provide assurance to donors and stakeholders that your financial statements are accurate and reliable.

Financial Statement Audits

Financial statement audits provide an independent and objective assessment of your nonprofit’s financial statements. Nonprofit accounting firms can conduct financial statement audits to ensure your financial statements are accurate and reliable. They can also provide recommendations on how to improve your financial reporting processes.

Single Audits

Single audits are required for nonprofits that expend more than $750,000 in federal funds in a single fiscal year. Specialized firms can provide single audit services to ensure your organization complies with federal regulations and guidelines.

Internal Control Reviews

Internal control reviews assess your nonprofit’s internal control processes and provide recommendations for improvement. Firms can help conduct internal control reviews to ensure your nonprofit has effective controls in place to prevent fraud and ensure the accuracy of financial reporting.

Running a nonprofit organization is challenging, and financial management and accounting can be particularly complex. Accounting firms that specialize in nonprofits can provide invaluable support to help your organization succeed. By leveraging their expertise in nonprofit accounting, financial management and reporting, and auditing and assurance services, you can ensure that your nonprofit is financially healthy, compliant with regulations, and transparent to donors and stakeholders.

The Charity CFO has extensive experience in working with nonprofits, a deep understanding of your organization’s needs, and a commitment to delivering high-quality services.

No time to read this article now? Download it for later.

How to maximize efficiency with nonprofit accounting software

/in , , /by

How can nonprofit accounting software help your organization with efficiency?

We’re in the age of technology, and it seems that for every process or transaction, there is a corresponding technological solution designed to make our lives easier and our work more efficient. 

In today’s digital age, technology has revolutionized almost every aspect of business operations, including accounting and finance. For-profit companies have long used accounting software to track their financial transactions and monitor their bottom lines. However, nonprofit organizations face unique accounting challenges and not all commercial accounting software may be equipped to handle.

Where to start with nonprofit accounting software

Nonprofits have to comply with strict financial accounting standards. Meeting these requirements is crucial to the organization’s survival and to maintain donors’ trust. To help meet these requirements, many nonprofits are turning to accounting software that is specifically designed for their needs. When products are designed with nonprofit accounting in mind, you can expect some of the features to be available:

    • Fund accounting: Easy management and tracking of funds, tracking revenues sources and expenses for restricted and unrestricted funds separately. The software should also be able to generate reports that show the balances and activity for each fund. 
    • Incoming and outgoing payments: Record incoming payments, such as donations and grants, and outgoing payments, such as expenses and salaries. Might also include the ability to track pledges, payments received, and pledge balances.
    • Budgeting: Tools for creating and managing multiple budgets for different funds or projects and budget to actual reporting. Some tools may also provide forecasting based on historical data. 
  • Reporting requirements: General financial statements and other reports that are compliant with nonprofit accounting standards as well as reports that are required by grantors, donors and other regulatory bodies. 
  • Grant tracking: From application to closeout, including the ability to create budgets for each grant, track grant expenditures, and generate reports that show the status of each grant. Some tools will also include reminders for reporting deadlines and other grant-related tasks. 
  • Accepting donations: Tools typically include online donation forms and the ability to accept recurring donations. 
  • Donor Tracking: Allows organizations to track contact information, giving history, and communication preferences. Some tools may also allow you to segment donors into different groups based on criteria such as giving level or engagement level and ability to generate trend reports over time. 

How to evaluate nonprofit accounting software

One of the benefits of nonprofit accounting software is its ability to help organizations manage many elements of their finances in one place. It even helps automate some recurring tasks, reducing the chance of errors and duplication, and saving valuable hours each week. However, no one solution will be able to handle the vast needs of nonprofit accounting. Some good questions to keep in mind when evaluating a tool to support your accounting needs:

  • Is the system easy to learn? Is there support available?
  • How quickly do you need the software to be set up?
  • What specialized features will you need? These features might include a platform to file your Form 990-N or the ability to create custom reports.
  • Do you need integration with other systems?
  • How secure is the system?

“Talk to a customer service representative from each software provider you’re considering to get answers to these questions,” says Katie Gray, the Content Manager for the all-in-one nonprofit software provider Springly. “They can clarify these points so that you don’t have to go searching on their website.”

Software won’t do it all

It is important to note that while nonprofit accounting software is powerful, it is not a cure-all. Technological tools have their limitations and many of them are additions to tools made for for profit businesses. This introduces an element of uncertainty as to whether they will be kept up to date on all things nonprofit or are accurately configured for the standards that nonprofits must adhere to. It is not a substitute for the expertise of a professional accountant or bookkeeper.

These professionals can help ensure that the organization is meeting all the legal and regulatory requirements, and make sure that the software is being used effectively. Nonprofit organizations can benefit greatly from engaging an accountant with specific industry experience for several reasons:

  • An understanding of nonprofit accounting standards. They should be knowledgeable about these standards and can ensure that the organization’s financial statements are prepared in accordance with them.
  • Experience with grant and donor reporting,including compliance with federal and state regulations and reporting to grantors and donors.
  • Knowledgeable about compliance with tax exemption requirements to ensure that the organization remains in compliance with them.
  • Assistance with fundraising, budgeting, forecasting cash flows, and providing financial insights that can help the organization make informed decisions about fundraising and donor management.
  • Understanding of nonprofit financial statements and the unique financial reporting requirements of nonprofit organizations, including the Statement of Financial Position, Statement of Activities, and Statement of Cash Flows.

At the end of the day, all of these technologies are great and can truly make your operations run more smoothly, provide more insights in a quicker manner, and streamline your processes. However, there will always be the need for the human element. While technologies are getting much much better at reading data, the humans that are closely tied to your organization can make the minute and fine decisions that a technology doesn’t have the capability to understand. Having someone to talk to through issues, discuss problems and solutions, and analyze and decide what is ultimately best for your organization can not be replaced. 

Engaging an accountant with specific nonprofit industry experience combined with the power of technological tools is a powerful duo to set an organization up for success and ensure efficient and effective management of your finances. 

No time to read this article now? Download it for later.

7 Keys to Nonprofit Financial Management

/in , , /by

Nonprofit financial management is one of the primary concerns for organizations.

Nonprofits are special types of organizations, in both their structure and their purpose. They live in the hearts of many as symbols of good in the world. This meaning is the driving force behind what nonprofit organizations do day in and day out. 

However, in the midst of all the support for nonprofits, it may be lost that nonprofits are still organizations that need to be run. The mission can only live on to serve its purpose by having backing from a successfully managed organization. This is why at The Charity CFO, we strive to provide relevant resources and support to ensure that your organization runs smoothly and efficiently. This week, we’ve rounded up 7 keys to nonprofit financial management. If you’d like to dive deeper into any of the topics, we’ve included relevant links to further your knowledge. 

In order to successfully manage the financial health of your nonprofit organization, here are 7 key concepts you should understand:

Compliance and Audit Requirements

Compliance is the act of ensuring the public that nonprofits are abiding by the rules that allow them to take advantage of tax exempt status and other financial incentives. Compliance requirements vary by state and funding sources. Confirming an organization’s compliance can include compliance checks and/or audit requirements, but maintaining compliance is the responsibility of the organization at all times. 

Accounting Standards

In the United States, all organizations must adhere to the Generally Accepted Accounting Principles (GAAP). For nonprofits, however, there is an additional and specific set of standards that organizations must follow, as set out by the FASB 117. This establishes core accounting standards for nonprofits which help with accountability and transparency. It is important that nonprofits understand the accounting standards they are required to adhere to and how these standards differ from for profit accounting. 

Financial Statements

Knowing what goes into and how to properly compile financial statements will greatly support the ability to make decisions, comply with regulations and audits, and provide insights and transparency to donors and supporters. Nonprofit financial statement requirements are a bit different than for profit. They include:

Understanding an organization’s financials is like unlocking a door to the health of an organization, and can help track progress and goals over time.

Budgeting 

Nothing says healthy financial management quite like a robust and well-thought out budget process. Creating, tracking, and adjusting a budget throughout the year can be the difference between achieving organizational goals or falling short. Budgets also support your efforts to complete the above requirements, like maintaining compliance and preparing financial statements. Intentional budgeting can empower employees, inform executives, and drive critical change. While it may seem time-consuming and overwhelming, it’s always worth the effort and you will continue to reap the benefits. 

Taxes

Yes, taxes. Even though nonprofits are regarded as tax-exempt organizations, it is still incredibly important for nonprofit leaders to have an understanding of what this status means and the requirements behind it. Understanding what tax and reporting requirements your organization may have is critical to maintaining that tax exempt status. While 501 organizations are tax-exempt, it does not mean they do not have to file taxes. Requirements may vary depending on the type of 501 organizational category you fall into:

  • 501(c)(3): Charitable, Religious, or Educational Organizations
  • 501(c)(4): Community social welfare organizations
  • 501(c)(6): Business leagues, professional associations, real estate boards, and board-of-trade organizations.

It’s imperative to stay on top of your tax filing and reporting in line with your organizational status.

Employees

While employees might not seem directly related to successful nonprofit financial management, they can have a huge unintended impact. When understanding how employees affect your financial health, consider:

  • Organizational chart – ensuring that you have the right people in the right positions can make an organization run smoothly. Utilize your employees’ skill sets and expertise to your advantage. This is especially true for your finance team, but also applies to teams with indirect impact on the  finances of the organization, such as the fundraising, donor, or grant teams. 
  • Filing and Forms – whether an organization finds themselves able to hire full time employees or relies on contractors, the filing requirements are important to understand. The types of people and the work they do for your nonprofit will determine whether you need to complete a W2 or 1099 come tax season.
  • Payroll Expense – In many organizations, nonprofit and for profit alike, salaries and payments to contractors make up the largest expense. Therefore, it tracks that you will want to understand the structure and the employees that make your organization run and take a look at how these expenses are falling.

Interdepartmental Communication

The final key to successful nonprofit management is to understand your organization as a whole. Open communication can provide you with insights that might otherwise be missed. These can help drive the budget process, financial goals, and strategic decisions. Functions such as marketing or fundraising can show you where money is being spent, the expected results, and how they plan to implement changes to boost donations. 

They can also provide details of change drivers that the finance team may be unaware of. Keeping the lines of communication open across the organization and allowing for transparency, feedback, and support may be the most important key here. This also extends beyond the organization. Having a holistic view, open communication, and an open mind might be the key that unlocks the door to successful and efficient financial management. 

Partner for Streamlined Nonprofit Financial Management

Overall, there are many aspects that make an organization tick, and the financial management function is the engine driving it all. Taking the time to holistically look at your finances, understand the meaning behind them, make realistic adjustments, and maintain compliance can make all the difference in the success and longevity of your organization.

The Charity CFO specializes in helping nonprofits simplify their finances so they can be confident. Reach out to us here for a free consultation.

 No time to read this article now? Download it for later.

Nonprofit Compliance Requirements

/in , , /by

In order to confidently run your organization, it’s important to have a strong understanding of nonprofit compliance requirements.

Running a nonprofit is no small feat. In addition to the many struggles of running a business, nonprofits have additional hurdles to overcome as it relates to their mission, employment strategy, accounting, and compliance. While this last one, compliance, can tend to fall to the bottom of the priority list, it is actually one of the most important aspects to consider when running a successful and lasting nonprofit. 

However, compliance is not always very straightforward and it can be a huge task to undertake on your own. We’re here to provide you with background, information, and support to ensure that you’re on top of your compliance requirements.

 

What Does Nonprofit Compliance Mean?

Compliance is the act of assuring the public that nonprofit organizations are obeying the appropriate laws, contracts and commitments that they enter into as a nonprofit organization. Compliance laws protect the public and ensure that nonprofit organizations are eligible to receive the financial advantages offered and that they do not abuse these advantages.

Depending on your state, funding and other factors, your compliance and audit requirements might vary. Requirements at the federal and state levels also vary. 

Noncompliance can lead to dire consequences for your nonprofit organization, including

  • Fines
  • Lack of funds / Reduced funding
  • Diminishing donor/supporter trust
  • IRS audits
  • Revocation of tax exempt status 

Compliance Checks

Compliance checks may also vary by organization and can come in different forms. 

Compliance reviews: A less exhaustive, non-examination format for the IRS to check on the proper reporting of certain items. Compliance checks or compliance check questionnaires tend to be simpler than a full audit and are limited in scope. 

  • Recordkeeping and information reporting requirements
  • Consistency with tax exempt purpose

Audit: Can be conducted by the IRS if sent a letter, or may be required to be completed based on your federal funding status or other obligations. A field audit tends to be comprehensive and looks at: 

  • Timeliness
  • Completeness and accuracy 
  • Exemption status
  • Annual tax returns / Employment tax returns / Form 1099 series information returns
  • Proper payment of tax liabilities
  • Disclosure requirements for applications for exemption, for Form 990 series returns, and for fundraising solicitations and events.

If you are preparing for an external audit, it’s a good idea to properly prepare and gather all of the appropriate documentation. This can be a long and lengthy process. A great way to stay on top of these tasks is with an Audit Checklist.

Staying Compliant

The first step in staying compliant is understanding and being prepared.

Your Organization’s Compliance Requirements

The best thing you can do to ensure your nonprofit organization is always in compliance is first to understand, document, and distribute what those compliance requirements are in the various areas of your organization

  • Corporate requirements – your incorporation process, annual filings and fees
  • Fundraising requirements – registration to solicit donors in all states, countries and territories that your nonprofit operates in
  • Operational requirements – adherence to your bylaws and other operational duties
  • Accounting requirements – filing your Form 990 and adhering to proper accounting practices
  • Employment requirements – proper classification of employee exemption statuses
  • Record-keeping requirements – retaining the appropriate records to be easily accessed and for the required period of time
  • Private grant requirements – specific requirements as outlined in grants that your organization received
  • Restricted funds compliance – if restricted donations are received
  • Workforce health and safety – dependent upon state and federal requirements
  • Data security and privacy – following the laws in your areas of operation especially if you operate in the digital/web space with a website, app, or services
  • Local and state zoning and licenses – certain activities your organization may engage in could require permits or licenses

Labyrinth Inc., experts in charity state registrations, provides a great starting point to begin to research and understand some of these requirements. 

Accounting, Recordkeeping and Forms

The accounting and reporting function of an organization will play a crucial role in ensuring that you remain compliant. Having a CPA as a resource, whether internally or outsourced will be crucial to understanding the basics of nonprofit accounting. Generally, you will want to know that you are engaging with someone who has a deepening knowledge of the following:

  • Nonprofit accounting 
  • Unrestricted, temporarily restricted, and permanently restricted funds
  • Fund accounting
  • Cash and accrual basis accounting
  • Presentation of financial statements 
  • Accounting for donated assets
  • Filing the proper forms at local, state and federal levels
  • Reviewing accounting standards and updates
  • Proper internal controls

Compliance Questions 

Even if you’re new to compliance or aren’t an expert, there are a few questions that you should always ask and direct to those who are responsible for your compliance

  • Have you filed your IRS 990 every year?
  • Have you properly withheld payroll taxes? Without issues, notifications or penalties?
  • Has the department of labor audited your nonprofit for misclassifying employees?

If you do not know the answers to these questions, it’s best to seek help and find out sooner rather than later before compliance becomes a larger issue. 

Ongoing Maintenance

Once you have a handle on your compliance with good processes in place, the best way to avoid issues is constant maintenance. 

  • Keep up with new regulatory developments
  • Regularly review your organization’s financial statements
  • Conduct periodic internal audits
  • Setup a process for monitoring compliance
  • Evaluate the effectiveness of internal controls, financial policies, and procedures
  • Assess risks and make necessary changes to mitigate them
  • Create procedures for taking corrective action when necessary

The Charity CFO can help you stay in compliance with our expert teams with nonprofit experience. 

No time to read this article now? Download it for later.

Independent audit requirements for a nonprofit

/in , , /by

The word audit can invoke instant fear and dread. Whether it’s an IRS audit, external audit, or even an internal audit, the process can feel burdensome and worrying. However, with the right tools and preparedness, there’s no need to worry. 

Contrary to popular belief, most audits are not conducted to detect a problem. They are actually useful tools to ensure that an organization is in compliance and can also be used to identify potential problems before they become too big. 

The IRS does not require nonprofit audits in most cases, however, they may periodically request an audit (examination) or a compliance check. 

Should My Nonprofit Obtain an Independent Audit?

If the IRS doesn’t require an audit, you may wonder why you might put your organization through this process, as cumbersome and time consuming as it can be. However, there are a few reasons why you might need to conduct an independent audit to remain in compliance with your organization’s other obligations. 

  • Bylaws: The bylaws of your organization may have been outlined to require regular audits to ensure transparency, security and confidence in the financial standing of the organization. 
  • State Governments: Depending on the state you operate in and the funding you receive, you may be required to conduct an independent audit.
  • Federal Funding: If your organization receives $750,000 or more in federal funding, you are required to have an independent audit conducted.
  • Private Foundations: Some may require nonprofits to conduct an independent audit
  • Grant Recipients: If your nonprofit has received funding from grants, some may require audits to ensure that they can have confidence in the financial aspects of the organization that they have provided this money to. 
  • Proof of Financial Status: Additionally, other funding sources or applications might require proof of financial management, solvency, transparency and compliance. While they may not specifically state that an audit is required, this is a great way to fulfill that obligation. 

Selecting an Audit Firm

Once your organization has decided to obtain an independent audit, the real work begins. Taking steps to make sure that you are working with the right audit Firm is important. Do your research and select Firms that specialize in nonprofits. 

  • Outline your requirements – be detailed about what you are looking for from an external audit firm.
  • Send out RFPs – select three to five Firms that you believe could conduct the audit properly and send them an RFI/RFP to determine their qualifications, approach, and fee structure.
  • Interview potential Firms – give your organization and your accounting team the opportunity to interact with the potential auditors to determine if they are a good fit.
  • Make your selection – select the Firm that you believe can fulfill your specific audit requirements and are aligned with your goals to provide accurate, transparent, and clean financial statements.
  • Sign an engagement letter. This should include:
    • An outline of services to be performed
    • Responsibilities of staff and auditors
    • Fee Structure
    • Start date, milestones, and end-dates

How to Prepare for an Audit

In the nonprofit world, audits are a normal course of business and should not be something to be nervous about. With appropriate planning, they can go smoothly. As soon as you know that you will be obtaining an independent audit, begin the planning process. 

  • Conduct pre-audit meetings with the auditor, the oversight committee, and any staff that will be involved in and responsible for items requested throughout the audit. 
  • Receive a listing from the Firm of documentation that they will require
  • Pull and obtain the documentation before the start of the audit to the best of your abilities to avoid delays and confusion.
  • Have staff readily available to answer questions and provide clarification to auditors. 
  • Stay ready year round and with an audit checklist and roadmap.

After the audit, make the appropriate adjustments and continue to keep up with the suggestions that are made.

Implementing and making changes to your processes and internal controls after an audit can help make future audits even more successful and ease the stresses that these can cause. These changes can also provide the following benefits. 

  • Transparency: Communications regarding your audit and the changes that are being made can boost confidence and assurances in your donors and supporters. They can feel good knowing that you are properly taking care of and using their contributions appropriately. 
  • Accountability: Regularly scheduled audits keep your organization accountable for consistent accurate reporting
  • Improvements: Finding opportunities for improvement in policies and procedures is an added benefit to audits that can result in additional efficiencies and better usage of resources. 

Other Types of Audits to Support Compliance

While the independent external audit is the most familiar to nonprofit organizations, the following can also support your compliance efforts.

Internal Audit

These are conducted by staff within your organization and can help identify opportunities for improvement in many different areas. Internal audits allow organizations to remove themselves from everyday tasks and take a look at the big picture to more effectively and efficiently manage their operations and achieve their mission. 

Financial Audit

Financial audits are useful in evaluating your organization’s financial statements and reporting. They can help understand and showcase the health of your organization and work to improve it. These can also examine your internal controls to ensure financial security and stability.

Compliance Audit

Compliance audits are conducted to review adherence to regulations and requirements set by your bylaws, the federal, state, and local governments, as well as other compliance requirements. Ensuring that you remain in compliance is an important task, as noncompliance can have huge risks. 

Operational Audit

These can assess your organization’s systems, productivity, staffing, IT, HR, and other functions and can provide operational insights that are invaluable to the growth and success of your nonprofit. 

Whether or not an audit is required, they can be useful tools in determining the financial health of your organization, providing transparency and assurances, and discovering process and efficiency improvements to make sure your organization is performing its best to fulfill its mission. If you need audit support, The Charity CFO and its experts are always available. 

No time to read this article now? Download it for later.

What to look for in nonprofit accounting financial statements

/in , , /by

Nonprofit accounting financial statements may seem like a chore. They can be meticulous and time-consuming to prepare. However, the benefits of these statements far outweigh any possible inconvenience. Nonprofits use financial statements to comply with IRS regulations, build trust with donors, and plan for the future. 

You may think that nonprofit financial statements are the same as those at for-profit companies, but this is not the case. The financial statements used by for-profit companies are typically the income statement, balance sheet, statement of cash flows, and statement of owner’s equity. While nonprofit financial statements have some overlap with these, there are key differences. 

Here are the main nonprofit accounting financial statements:

  • Statement of activities
  • Statement of financial position
  • Statement of cash flows
  • Statement of functional expenses

Let’s take a closer look at each. 

Statement of activities

This is the nonprofit equivalent of the income statement. As with the income statement, the statement of activities presents all revenue and expenses for a reporting period, but the goal is different. A for-profit company measures how much money they are making because they want to earn a profit. Nonprofits want to make money, but not to earn a profit. Expenses are subtracted from revenues to show the change in net assets, rather than net income. The money nonprofits make is reinvested into their programs and services. 

The statement of activities is exactly what it sounds like. It looks at all of your organization’s activities so you can see what is working and what isn’t. Common revenues for nonprofits include contributions, grants, and investment income. Common expenses include administrative expenses, fundraising, and program services.

The statement of activities looks a bit different from the income statement. Separate columns classify revenue based on whether it is restricted or unrestricted. Restricted revenue is funds that are for a specific purpose. If your nonprofit receives grant money, there may be stipulations over how it is used. On the other hand, unrestricted revenue can be used as the nonprofit wishes. 

Statement of financial position

As with the balance sheet, the statement of financial position is a snapshot of your nonprofit’s finances at a specific point in time. The balance sheet follows the basic accounting equation, which is:

Assets = Liabilities + Owner’s Equity

Instead of owner’s equity, the statement of financial position looks at net assets. Therefore, it displays assets (what you own), liabilities (what you owe), and net assets (your value).

Like the statement of activities, the statement of financial position sorts net assets based on whether or not they are restricted. 

Statement of cash flows

The nonprofit statement of cash flows is very similar to that of a for-profit company. It looks at cash inflows and cash outflows, which is cash coming in or leaving your organization. These cash flows are then sorted into the below categories:

    • Operating activities: Occur during the normal course of business
    • Investing activities: Buying or selling long-term assets
  • Financing activities: Funding, such as loans

Statement of functional expenses

This statement is unique to nonprofits. It is required for nonprofits to report expenses based on their functional classification and their natural classification. This may sound confusing at first, but it’s actually pretty straightforward. 

Classifying expenses by their function demonstrates what they were used for. Functional classifications include program costs, management and general costs, and fundraising costs.  Natural classifications look at the type, or nature, of the expenses. These include salaries, rent, utilities, and so forth. 

Getting maximum value from nonprofit financial statements

Now that you know what goes into the main nonprofit financial statements, it’s time to learn how to use them! While financial statements are required for reporting purposes, there is much more to it than that. The financial statements can help you assess how your business performed for the period. Your nonprofit probably has financial goals it wants to achieve. With these goals in mind, you can look at each of your financial statements and see whether or not you’re on track to achieve them. If not, you can always make adjustments. 

You should set goals, create a budget, and compare the budget to the actuals from your financial statements. 

Let’s take a look at how each of the financial statements we discussed can provide value for your organization. 

  • Statement of activities: You may find that your net assets are not as high as you want them to be. To make changes, you might need to find ways to cut back on expenses or find new funding opportunities to boost revenue. 
  • Statement of financial position: This broad overview of your nonprofit’s financial health gives you a quick look at your assets, liabilities, and net assets. As with the statement of activities, you may need to adjust your operations if your net assets are too low. You can determine if you’re paying off your liabilities and measure liquidity. 
  • Statement of cash flows: You can determine if there’s enough cash available to pay off expenses. If not, you can quickly make changes in your nonprofit’s operations to avoid running out of cash!
  • Statement of functional expenses: The main purpose of this statement is to comply with IRS regulations. It is part of Form 990. However, it is also beneficial to provide transparency to donors so they can see how you are using your funds. 

Need help with nonprofit accounting financial statements?

Nonprofit financial statements can be confusing. It’s important that they are accurate and are properly interpreted for use in future planning. Consider partnering with a firm to connect data to your goals and provide insights on where your nonprofit is going. 

The Charity CFO works exclusively with nonprofits to help with accounting, including preparing financial statements and providing CFO-level guidance. Contact us today to help your nonprofit succeed in its mission.  

 No time to read this article now? Download it for later.

How to Grow a Nonprofit: 5 Marketing Strategies

/in , , /by

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.

Nine Fundraising ideas for nonprofits

/in , , /by

Fundraising ideas for nonprofits are one of the more exciting ways to add needed momentum to your mission. 

The idea behind nonprofits is to support the public good. With over 1.3 million nonprofits in the United States, there are countless organizations available to provide shelter, medical assistance, and education, you name it! While this all sounds nice, there is a nagging question. 

How do these organizations have the money to operate? 

Even though nonprofits are not concerned with earning a profit, money is necessary for their success. Nonprofits need funds for the day-to-day services they provide, as well as to cover employee salaries, office space, and other administrative expenses. 

Fundraising ideas for nonprofits to fuel the mission

So, how do nonprofits make money? Common ways include donations, grants, and fundraising. This article will explore the latter in greater detail. 

Below are 9 fundraising ideas for nonprofits:

  • Sporting event

This could include a 5K, charity golf tournament, bowling event, tennis tournament, and many others. Your nonprofit may be able to partner with the facility the event is being hosted at, such as the golf course or tennis courts, to get discounted playing rates. However, keep in mind that hosting charity tournaments can be very expensive. It can be helpful to obtain sponsorships to offset costs. 

  • Auction

Attendees bid to win items, and the proceeds will go to your organization. Auctions are popular because the prizes are attractive to attendees. If your nonprofit is small, it may seem overwhelming to think about hosting an auction. Fortunately, auctions can be large or small, and hosting your auction online can be another way to cut costs. To choose items to auction off, you should consider the profile of your donors, such as age and the size of their donations. You should use this information, as well as following current trends, to come up with a list of items. 

  • Bake sale

The logistics of hosting a bake sale is often easier than some other fundraising ideas because most, if not all, of the items to be sold are donated. People may donate cookies, cakes, or brownies. Your organization will need volunteers to facilitate the event and sell the items. Instead of a bake sale, similar food-related events you could host include a chili cook-off or barbecue.

  • Themed gala

A gala is often an annual event that raises a lot of money and allows for donors to mingle with your nonprofit’s staff. Hosting a gala can require a lot of planning and costs, but the funds you raise can make it worth it. Also, while a gala is often thought of as a formal black-tie event, you can host a more informal event to cut costs. Having a theme for your gala can make the event seem more attractive to attendees. 

  • Craft fair

This is similar in concept to a bake sale, since the inventory is all donated. Many crafters want to raise the visibility of their own small business, so they are often eager to participate in this type of event. The proceeds from the sold items go to your nonprofit. While hosting a craft fair can seem fairly straightforward, keep in mind that you will need to find a location and determine the layout of the vendors. 

  • Benefit concert

While hosting a benefit concert may sound intimidating, it doesn’t have to be. A benefit concert is when you host a performance of either one or more performers to raise money for your nonprofit. It can range in size and expense. You will need to book acts to perform, and for most nonprofits, a reasonable approach is to ask local musicians. Musicians will often be eager to perform at this type of event because in addition to raising funds for your organization, it is a way to increase the size of a musician’s audience. Money can be raised through ticket sales, concessions, and merchandise. 

  • Trivia night

Trivia nights are popular due to their entertainment value for existing donors and the overall community. It is relatively inexpensive to organize a trivia night, but you will still need to select a venue, determine a format, and come up with trivia questions. The planning can seem difficult, but after the first time, it will be much easier to plan similar events in the future. 

  • Email/Social media

Email and social media campaigns can be highly effective, and relatively easy, ways to raise money. When sending a fundraising email, make it personal, provide testimonials of your organization’s impact, and include a call to action. For social media campaigns, tell the story of your organization, be consistent, and use hashtags. 

  • Virtual event

Consider hosting events virtually to reach a greater audience. Many of the events previously discussed, such as a gala or auction, can occur in an online format. 

Fundraising ideas will impact your accounting

When raising money through fundraising, you need to consider how this affects your nonprofit’s accounting. The way revenue and expenses are recorded can differ for GAAP purposes and tax purposes (Form 990). 

When selling tickets to a gala or benefit concert, the ticket price is often higher than normal due to the added contribution. For tax, this excess amount is reported as a contribution, and for GAAP, it can be reported as either a contribution or special event revenue. When a venue donates space for your event, such as a golf course or concert hall, under GAAP you will report the fair market value of this donation. It will not be reported on Form 990. 

If items are donated to be auctioned off, you will need to report this as contribution income at fair market value. These are just a few examples of best practices when accounting for fundraisers, and there are also many others. 

The Charity CFO can help you sort out the accounting considerations of hosting a fundraiser. Specializing in nonprofits, we can be a helping hand to boost your nonprofit’s success. Schedule a free consultation today. 

No time to read this article now? Download it for later.

Does the accounting industry have a diversity problem?

/in , /by

As with many long-standing professions and institutions, the short answer is “yes.” The accounting industry currently and historically does have a diversity problem.  According to the most recent AICPA Trends Report (2021), 41% of accounting graduates are nonwhite while only 23% of professional staff identify as nonwhite. Moving up the ladder, among partners, only 18% are nonwhite. This unfortunate trend persists throughout the report citing similar gaps for bachelors, masters and doctoral candidates of varying groups as well as the existing demographics of CPA firms nationwide. 

Primed for change 

That being said, many Firms in the accounting industry have taken up diversity initiatives in recent years and we are seeing positive trends. While the progress is painfully slow, changes between the 2018 and 2020 AICPA Report show that diverse hiring of graduates has increased from 28% to 32%

In a time when the industry is seeing decreasing interest and high turnover, it might be time to rethink how things have always been done. Increasing diversity in the workplace can have a monumental impact on how employees show up at work, collaborate with each other, and interact with clients. 

According to the CPA Journal, a recent report found that “workplace belonging” leads to a 56% increase in job performance and a 50% reduction in turnover risk. The more diverse your organization, the more employees feel comfortable showing up as themselves and putting in their best work. 

Diversity creates a stronger organization

Starting a journey to truly engage in this work and build a diverse organization that is respected by employees, clients and the industry is no small task, but the rewards can be great at all levels from leadership, to client engagement, to employee wellness and satisfaction. An organization with a strong DEI commitment can see many benefits. According to The Nova Collective, “Organizations who invest in DEI not only stand to gain a loyal workforce, they also have the opportunity to increase its bottom line and attract more customers.” Other ways diversity can strengthen an organization: 

  • Internal enrichment and satisfaction when employees feel they are a part of a group, rather than an outsider. Seeing themselves in others, employees increase drive and initiative to excel. 
  • Diverse employees expands access to diverse clients, talent pools, lines of business and partnerships that you may have been unaware of before. 
  • Innovation and DEI are intricately linked, opening up more room for ideas, collaborations, challenges, and voices, according to the Harvard Business Review.
  • Diverse workforces create a more equitable distribution of wealth. 
  • Enhanced customer service across industries as employees and the organization as a whole have a wider perspective and understanding of the global world 

Where to start?

Building a diverse workforce doesn’t come easily and isn’t something that can be done by posting a statement and changing a few images. According to a workplace report by Glassdoor, 66% of employees and job seekers trust employees the most when it comes to understanding what diversity and inclusion really looks like at a company. Especially in an industry with historically low nonwhite employees, the work needs to be done. 

  • Encourage mentorship and engagement of young accountants and CPAs of all backgrounds. As the statistics above show, there are a large number of nonwhite graduates looking to break into the industry. Support them by providing guidance, tips, and introductions along the way. 
  • Evaluate where your organization currently stands and where you need to improve. Be honest about the results and the work that needs to be done.
  • Create a plan to build a supportive and trusting workplace by intentionally cultivating DEI in the workplace
  • Understand that there is no one size fits all approach and you will constantly need to adjust and change your plans as you move forward and discover what works for your organization and its employees.

Building momentum is the hardest part. But once you begin to implement these practices, you can really start to see the impact within your organization. The Move Project Metrics Report notes that academic studies and management consultants agree that “when people with a shared identity become at least a third of a group, the group has a dynamic shift. Each person with that identity, once the 33% is achieved, is seen less as representing that identity, and more as speaking on the basis of their own expertise and experience.” 

Representation matters, and real change and growth takes time. So laying the foundation now for an inclusive, welcoming and strong organization is imperative to the future success of an organization in an ever changing and ever global environment. 

The future of the industry

The accounting industry will always be needed, yet it’s continuously losing more and more people due to its bad reputation. By being at the forefront of changing an antiquated industry, from recent graduates all the way up to senior leadership and the Board of Directors, by committing to diversity with intention, impact and financial resources, an organization can be in a prime position to attract high quality professionals, grow their firm, and become a leader and an example of how great the accounting profession really can be. 

Charity CFO is passionate about representation and providing opportunities to underrepresented sectors. We are helping to create an environment and culture where people have opportunities. And we’re hiring! Check out our list of open positions

 No time to read this article now? Download it for later.

Nonprofit treasurer duties: Where you should focus

/in , , /by

Does your organization get bogged down with nonprofit treasurer duties?

Nonprofits don’t exist for the purpose of earning profits. With that being said, money is central to a nonprofit’s success. Salary costs and other administrative expenses are unavoidable. Also, there can be a lot of cash inflow from fundraising and grants, and it’s important to know how to use it. 

How does a nonprofit manage its money? One of the most important board members for a nonprofit is the treasurer. The treasurer role encompasses a wide array of responsibilities, mainly concerning financial management and oversight. 

You may be wondering what a treasurer can do for your nonprofit, or you may be interested in becoming a treasurer yourself. Read on to learn about a nonprofit treasurer’s duties.

What does a nonprofit treasurer do?

First things first: Treasurers aren’t accountants. A position to oversee finances may sound a lot like an accountant, but there are important distinctions between the two. Many nonprofits do not have in-house accountants and choose to outsource instead. The tasks of nonprofit accountants include more of the day-to-day bookkeeping tasks, while treasurers are more concerned with the bigger picture. 

Tosha Anderson, CPA and CEO of The Charity CFO, discusses the do’s and don’ts of a treasurer in a recent episode of the “A Modern Nonprofit” Podcast. 

The major tasks of a treasurer can be summed up as follows:

  • Operations management
  • Oversight and compliance
  • Strategic decision-making

Operations management

The operational tasks of a treasurer concern financial management. These tasks include organizing financial data into helpful reports to be presented to the other board members. In addition to financial reporting and presentation, the day-to-day duties of a nonprofit treasurer may consist of signing checks, approving expenses, investing funds, paying bills, and so on. Some of the operational responsibilities of a nonprofit treasurer may overlap with that of the operations manager. However, the treasurer focuses more heavily on finance, while the operations manager has a broader scope of duties. 

Oversight and compliance

In order for a nonprofit to be financially healthy, the right policies and procedures need to exist to guide financial duties. Potential oversight tasks could include establishing processes for budget review and selecting an auditor. Other important policies that should be in place are proper internal controls. These are measures put into place to guard your nonprofit’s assets and provide protection against any potential wrongdoings. Examples could be requiring two signatures on checks and maintaining a paper trail. 

When discussing oversight responsibilities of a treasurer, Form 990 must be included. The IRS requires all nonprofits to submit this form each year. Form 990 is used to ensure that an organization meets the requirements for tax exemption by collecting a nonprofit’s financial data. The treasurer should make sure this form is submitted on time each year for compliance purposes. 

Strategic decision-making

Above oversight are the even bigger-picture strategic duties. Strategy involves using financial data and reports to make sound decisions. Long-term financial planning is critical to the success of your nonprofit. A treasurer needs to look at financial options for meeting future goals, and they should ensure that the nonprofit’s finances are in line with the overall mission. 

What are the qualifications for nonprofit treasurer duties?

As previously mentioned, a treasurer is not the same as an accountant. Treasurers may have a background in accounting, such as being a CPA or having education in nonprofit management, but this is not a requirement. A treasurer doesn’t need to have an accounting background, but they should be willing and capable of learning how to manage financial systems and reporting. 

Other qualities that a treasurer should have are great communication skills, and even creativity. Treasurers aren’t just numbers people. They need to be able to clearly present the nonprofit’s finances to the rest of the board, so they should be clear communicators. Creativity is also a necessary trait when it comes to strategic decision-making. A treasurer should be someone who is willing to look at a variety of options from different angles to make well-informed choices. 

A new treasurer can face a steep learning curve, especially if they do not have a background in accounting. Even for a treasurer who has worked in accounting or finance, there can be a lot to learn, since nonprofit finance is much different than that of for-profit companies. A nonprofit’s executive director and other board members should support the new treasurer as they get up to speed in their responsibilities. Without the support of others in leadership, a treasurer’s role can be very overwhelming at first.

Nonprofit Treasurer Duties: A Recap

The nonprofit treasurer is critical to the financial success of an organization. Duties include financial reporting, compliance, and financial strategy, although they are not involved in day-to-day bookkeeping tasks. Accounting tasks are either performed in-house or are outsourced.

It can be difficult at first for a treasurer to learn about all the duties that are part of their new role, but with support and guidance from other board members and leadership, a good treasurer can be the key to your nonprofit’s success. 

Support for your nonprofit treasurer duties

If you are looking to add support and bandwidth to your nonprofit organization’s support staff, The Charity CFO is here to help. Contact us today for a free consultation on how we can serve your mission.

No time to read this article now? Download it for later.

Nonprofit Budgeting Best Practices

/in , , /by

Nonprofit budgeting best practices are often the difference between success and failure for the organization.

Budgeting is a crucial element of understanding the financial health of your organization. Budgeting for nonprofits is very different from for profits, and a well-developed budgeting process can provide meaningful insight into the strength of your organization and your progress toward your mission. It also allows for better communication and transparency with employees who are striving for the same goals.

While nonprofit budgeting can seem daunting and complex, it doesn’t have to be. We’ve outlined some nonprofit budgeting best practices to enhance your budgeting skills and help you strategically and effectively plan your programming and reach your goals. 

Nonprofit Budgeting Best Practices

Understand the purpose 

Understanding the purpose of your organization and, by extension, your budget is the most important thing you can do when creating your annual budget. What is your mission and what goals and programs are going to help you get there?

As nonprofits must specifically account for the use of every dollar, keeping your purpose as your north star will help you tremendously when creating your budget. From there you can further determine how the budget will be used, who needs to be included, and how you can utilize the budget to make strategic decisions moving forward. Knowing the answers to these questions will help you focus and create an effective budget. 

Start early and plan often

Planning is key. It takes time to get a budget right. Starting your budgeting process early will save a lot of headaches. By thinking about your budget early on, you can identify key people in your organization to provide information regarding the data, activities, income and expenses necessary to create a nonprofit operating budget.

Put calendar invites in place to begin discussions, ensuring that when the time comes to compile the budget and present to the Board, proper thought and care has been put into the assumptions used. 

Involve the right people

Another benefit to planning early is that you have time to make sure the right people are properly included. In addition to the Board and leadership, it’s important to include other key employees in the process. These are usually the ones who have their hands on the pulse of the organization. They operate in the day to day and are able to provide insight into how specific programs and initiatives are going. 

By being transparent and including key employees in the process, you can identify areas of improvement and pain points, creating a more effective budget. This also provides opportunity to discuss with the Board strategic opportunities, making the most use of all the time you’ve spent creating your budget. 

Evaluate historical information 

If you’ve been operating for a while, then you should already have a great start in creating your nonprofit’s budget. Using historical information is the best starting point to begin your budgeting process. Take the information from prior year actuals and expand upon it, using the takeaways gathered from key employees. By combining historical data with real time assumptions you are in a great place to pull together a first draft of your budget. 

If you’re starting from scratch, check out our Beginner’s Guide to Nonprofit Budgeting.

Make note of your assumptions

Using historical information is a great place to start, but it’s important to keep track of what assumptions you are using to calculate the actual number you are presenting. Tracking these assumptions makes it easier to identify what happened when actual numbers don’t match your estimates. Understanding these assumptions makes budget analysis and strategic decision-making much easier.

Track, analyze and adjust regularly

Once you’ve created a budget, it’s important that you don’t just sit on it until next year. Take the time to track your budget to actuals and analyze the variances monthly. Looking at your assumptions can be helpful in explaining any discrepancies, as you now have more information regarding how the year is progressing. Variances should be expected. It’s wise to adjust your budget based on actuals and create an updated projection for the remainder of the year. Budgets are only as good as the information available and, as the year goes on, you gain more insight into operations.

Be realistic 

While the last few years have seen huge upticks in donor giving, it’s still important to remain realistic. With over 1.5 million nonprofits in the US alone, there’s still steep competition. Understanding your organization’s place in the current environment, knowing your donor profile, and setting realistic goals, both financially and programmatically, puts you on more solid ground, ensuring that your organization can continue doing good now and in the future. 

These nonprofit budgeting best practices are high level and we know there’s a lot that goes into nonprofit budgeting. If you’re looking for help in creating an efficient and effective budget, The Charity CFO has resources and professionals to support you, so you can focus on your mission. 

No time to read this article now? Download it for later.

Nonprofit Tax Filing: 7 Steps to Peace of Mind

/in , , , , , /by

Most people dread filing taxes. The piles of paperwork, long hours, and complicated tax codes can be truly overwhelming. Nonprofit leaders have an especially hard time understanding, preparing and filing their returns. They’re ever busy trying to make a positive difference in their communities, which is why tax filing often comes as an afterthought.

You see, a 501 nonprofit corporation is recognized as tax-exempt by the IRS but this doesn’t mean they are exempt from filing taxes. Most still need to file a tax return to maintain their nonprofit status and keep their organization tax compliant.

Fortunately, filing taxes for a nonprofit doesn’t need to be stressful. By following these 7 steps to nonprofit tax filing, you can sail through the process and get your taxes done quickly and easily.

Start With the Fundamentals of Nonprofit Tax Filing

Non-profit organizations operate in many areas of society, including education, healthcare, sports, and social services. While dozens of nonprofit exempt statuses exist, they generally fall under 5 types of nonprofits, including;

  • Religious and church
  • Charitable
  • Private foundations
  • Political organizations
  • Miscellaneous nonprofits such as charitable risk pools,  Federal Credit Unions, hospital service organizations, and retirement funds

These nonprofit categories fall under the following tax-exempt status:

  • 501(c)(3): Charitable, Religious, or Educational Organizations
  • 501(c)(4): Community social welfare organizations
  • 501(c)(6): Business leagues, professional associations, real estate boards, and board-of-trade organizations.

Each has its own set of tax laws, regulations, and forms to fill out. As you prepare to file taxes, make sure your organization falls into the correct classification.

But why is this really important?

  • To ensure that you don’t lose your tax-exempt status, which allows your organization to have an exemption from paying taxes.
  • To avoid late filing penalties that can quickly add up depending on the amount the organization has received during the calendar year.
  • To stay compliant with various state and federal regulations.
  • To maintain good governance practices and requirements
  • To demonstrate financial transparency to your donors, members, and the public

To make sure that your organization complies with the taxman, you should file IRS Form 990 by May 15 each year. This form allows the IRS and the general public to track a nonprofit’s finances, management practices, and governance structure.

The type of Form 990 to be filed depends on the gross receipts of the organization within that filing year. These forms include:

  • Form 990 or 990-EZ: Filed by large organizations with gross receipts of more than $50,000
  • Form 990-N (e-Postcard): Filed by small organizations with gross receipts of $50,000 or less
  • 990-PF: Filed by private foundations

Take a Year-Round approach

Many nonprofits make the mistake of waiting till the last minute to prepare and file their taxes. Unfortunately, if you wait until the last minute you are more likely to make mistakes, overlook important information, and experience unnecessary stress and anxiety.

Instead, develop a year-round strategy for filing taxes that keeps your organization on track throughout the entire tax filing process. This includes:

  • Tracking all income and expenses
  • Making sure your accounting matches your bank statements
  • Keeping up with deadlines
  • Reviewing your past tax returns to identify any mistakes
  • Staying up-to-date on the latest changes in tax regulations
  • Preparing an accurate budget and financial statements

Tracking expenses

Tracking expenses help nonprofits to maximize their resources and solve more challenges for the communities they serve. Careful tracking also makes tax filing easier by allowing organizations to quickly find the information they need when filling out their forms.

Invest in the correct processes, policies, and technologies to ensure all expenses are tracked and recorded accurately, including:

  • Reconciling all bank account and credit card statements
  • Ensuring that receipts are collected for all expenses
  • Run policy checks on specific project expenses
  • Categorizing each expense correctly

Tracking Revenue

Another measure to avoid stressful filing is by keeping up with the organization’s revenue streams. NPOs should track all donations, grants, and investments made to their organization to make sure they are properly accounted for.

Nonprofits should also keep records of when these donations are made and what type of payment was accepted (cash, check, or credit card). This will help when preparing the tax returns, as well as ensure that donations are properly recognized and acknowledged.

You’ll also need to understand how and when to recognize different revenue streams. Proper revenue recognition is a core accounting principle that ensures proper financial reporting, ensuring that you remain compliant and maintain donor confidence.

Monthly Financial Reporting

Maintaining accurate and timely financial reporting is one of the most effective ways to keep your organization in compliance and ready for tax filing.

Monthly financial statements can have a clear view of your financials and stay on top of your organization’s future expenses. This complete visibility of financial information at all times is necessary to maintain a strong cash inflow and help make informed economic decisions.

According to GAPP, some of the most recommended financial reports that you should generate monthly include:

  • Statement of activities
  • Statement of cash flows
  • Statements of financial position
  • Statement of functional expenses
  • Donor reports
  • Marketing reports

Pay Quarterly Estimates

Most nonprofits do not have to pay federal or state income taxes, but they may still have to pay quarterly estimates if they engage in activities that generate unrelated business income.

According to the IRS, a nonprofit organization must pay quarterly estimated tax on unrelated business income if it expects its annual tax to be more than $500. This Unrelated Business Income Tax, or “UBIT”, is calculated on the organization’s net income from unrelated activities and is due each quarter.

Use Form 990W to determine your estimated tax payments. It’s important to ensure that your organization is paying the correct amount of taxes each quarter. Failing to pay estimated taxes on time can result in huge interest and penalties that could jeopardize your nonprofit’s financial health.

Work with a Trusted Expert for Peace of Mind

Filing taxes for a nonprofit organization can be challenging, time-consuming, and worst of all, stressful. You don’t want to make any mistakes that could trigger an audit or even the loss of your 501(c)(3) status.

That’s why it’s important to work with an experienced tax professional who understands the specific needs of nonprofit organizations. A trusted expert can help guide you through the filing process and make sure all of your documents are accurate and complete.

At TheCharityCFO, we have experienced professionals that help nonprofits just like yours stay on top of their taxes and meet filing deadlines. Our team can provide comprehensive tax and financial guidance to help your organization remain in compliance with all state and federal regulations.

Contact us today to learn more about our services and how we can help you achieve peace of mind with your nonprofit’s tax filing. 

 No time to read this article now? Download it for later.

How to Comply with Accounting Standards for Nonprofits

/in , , , , , , , /by

Accounting standards for nonprofits are probably not the first thing you think about, but are crucial for your organization to succeed.

Nonprofit organizations distinguish themselves from for-profit entities through their purpose and mission. Their mission is usually anchored on a cause or social purpose, not on the generation of profits.

Because of their unique structure and operational model, nonprofits must comply with various accounting standards that are, in many ways, different from for-profit organizations.

In the United States, these Generally Accepted Accounting Principles (or GAAP) are set by the Financial Accounting Standards Board (FASB). NPOs must adhere to these accounting policies to remain compliant with the law and maintain their tax-exempt status.

The consequences of not adhering to accounting standards can be severe, leading to:

  • Inaccurate financial reporting
  • Hefty fines and penalties
  • Reputation damage
  • Loss of confidence from donors and stakeholders
  • Funds being frozen or withheld
  • Highest risk of failure and even closure
  • IRS audits
  • And in some cases, the revocation of the organization’s tax-exempt status

Here’s what you need to do to remain compliant:

Understand the Basics of Nonprofit Accounting

Nonprofit accounting is a unique process of planning, recording, and reporting the financial activities of a nonprofit organization. The goal is to create an accurate and comprehensive record of all transactions that can be used for both internal and external reporting, including audits and tax returns.

In the FASB 117, the IRS establishes the core accounting standards for nonprofits, which include:

  • Unrestricted, temporarily restricted, and permanently restricted funds
  • Fund accounting
  • Cash-basis and accrual-basis accounting
  • Presentation of financial statements such as statements of functional expenses, cash flow statements & statements of cash flows
  • Accounting for donated assets

Ideally, these standards should help your nonprofit maintain transparency and accountability with donors, grant funders, and the public. They also help the nonprofit to allocate their resources properly, keep them organized and only spend on expenses that are essential to the organization’s mission.

This is fundamentally different from for-profit accounting, which is geared towards generating profits and returns for its owners (stockholders). Another difference is in fund accounting. Whereby nonprofits must track their funds separately according to unrestricted, temporarily restricted, and permanently restricted categories.

Section 501 (c)(3) organizations must also adhere to specific tax-filing requirements that are uniquely different from for-profit entities, as outlined in the Internal Revenue Code.

Some of these include:

  • File Form 1023 with the IRS to apply for recognition of the organization’s 501 (c)(3) tax-exempt status after incorporation by the state
  • File form 990 (990-N for nonprofits with less than $50,000 in annual revenue and form 990-EZ for those with between $50,000 and $200,000) that discloses your revenue, expenses, and changes to net assets
  • File Form 8868 to request an extension for filing form 990
  • Pay federal tax Unrelated Business Taxable Income (UBTI) that’s more than $1,000

Identify Relevant Accounting Standards 

The truth is, you can’t truly comply with accounting standards without first identifying which ones are applicable to your organization.

First, nonprofits must follow GAAP, the Generally Accepted Accounting Principles. GAAP’s main objective is to ensure that all financial information is reported accurately, consistently, and transparently. This includes financial statements such as:

  • Income statements
  • Balance sheets
  • Statements of cash flows
  • Statements of functional expenses.

In addition to GAAP, nonprofits must also comply with FASB 117, the Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 117 (FASB 117). FASB aims to develop and issue accounting standards through an inclusive and transparent process intended to promote useful information and decision-making by the NPO board, donors, grant funders, and other stakeholders.

There are ongoing efforts to establish International Financial Reporting Standards (IFRS) for nonprofits, which, if successful, could result in greater consistency and comparability of financial information across countries.

The Chartered Institute of Public Finance and Accountancy (CIPFA), together with Humentum, are working to develop these standards under a project titled  “International Financial Reporting for Nonprofit Organizations (IFR4NPO)” and has already released an Exposure Draft to establish a framework for their use.

Implement Internal Controls 

To ensure compliance with accounting standards, you must have proper internal controls in place. Internal controls are a set of written policies, processes, procedures, and systems of authorization, reconciliation, documentation, security, and separation of duties.

These financial practices:

  • Promote accountability
  • Ensure the integrity of financial and accounting information
  • Help improve operational efficiency by improving the accuracy and timeliness of financial reporting.
  • Help protect against fraud, embezzlement, and mismanagement of assets and resources.

Internal controls also provide reasonable assurance that things won’t go sideways and mitigates human error or malicious activities. For example, having one person responsible for recording expenditures and another approving the payments ensures that someone continually monitors all financial transactions.

Other common nonprofit internal controls include:

  • Establishing financial policies and procedures
  • Implementing an audit process
  • Creating a risk assessment process
  • Setting up a system for tracking expenses.
  • Generating and storing critical supporting documentation
  • Segregation of duties (SOD)
  • Access rights and roles to critical financial applications
  • Multilevel review of financial statements and other reports
  • Monthly bank and credit card reconciliations
  • Periodic review of vendors receiving fees/checks from the nonprofit
  • Background checks for employees and board members

Monitor Compliance 

Compliance monitoring is a continuous process of tracking and evaluating data to ensure that your nonprofit complies with accounting standards. This can be achieved by:

  • Keeping up with new regulatory developments
  • Regularly reviewing financial statements
  • Conducting internal audits
  • Setting up a process for monitoring compliance
  • Evaluating the effectiveness of internal controls, financial policies, and procedures
  • Regularly assessing risks and making necessary changes to mitigate them.
  • Creating procedures for taking corrective action when necessary.

Depending on the organization’s size, you can have a single person (such as a CFO) or an audit committee to monitor compliance.

Work with Compliance Experts

Complying with accounting standards is critical to ensure your nonprofit’s credibility, sustainability, and stability. But this can be hard, especially if you don’t have requisite accounting experience.

To ensure that your organization is properly complying with accounting standards, it’s important to work with experienced compliance experts, such as The Charity CFO.

Our experts give you an independent, third eye visibility, and objective review of your financial practices to ensure you remain compliant. Our qualified compliance experts can advise you on best practices and provide support to ensure your nonprofit organization follows industry-specific accounting.

Contact us today to learn more about our services and how we can help your nonprofit organization stay compliant for years to come. 

 No time to read this article now? Download it for later.

Revenue Recognition for Nonprofits: 4 Mistakes to Avoid

/in , , , /by

Revenue recognition for nonprofits may seem fairly straightforward, but has unique complexities with important compliance consequences.

Nonprofits rely on a mix of sources for their income, from fundraising, grants, and investments to earned income and individual contributions. All these sources must be carefully managed to ensure compliance with Generally Accepted Accounting Principles (GAAP) and guidelines.

Understanding how and when to recognize different revenue is perhaps one of the most important but difficult aspects of managing a nonprofit’s finances.

Revenue recognition is an accounting process of properly identifying when income has been earned. This accounting principle outlines specific criteria that must be met before revenue can be recorded in financial statements. Failing to recognize revenue properly may lead to inaccurate financial reporting, which could result in penalties,  restrictions, and audits.

Here are four common mistakes to avoid with revenue recognition for nonprofits:

4 Revenue Recognition for Nonprofits Mistakes

Not Recognizing Revenue at the Right Time

When it comes to nonprofit revenue recognition, timing is everything. It’s important to recognize revenue when it’s earned and not before or after. If you recognize revenue too early, you could be in violation of Generally Accepted Accounting Principles (GAAP).

Your organization’s accounting method really impacts the timing of recognizing transactions. For example, if your organization uses the accrual method of accounting, you must recognize revenue when it is earned, and the obligation has been fulfilled.

When using the cash basis method,  revenue is only recognized when cash or its equivalent is received.

This means that if you receive a pledge from an individual or organization but haven’t received the money yet, you won’t be able to recognize revenue until the cash is received. This makes it easy to handle multi-year pledges, where you can recognize the revenue for each year as cash is collected.

Not Understanding the Difference Between Cash and Accrual Accounting

Cash accounting is a method of recording income and expenses when they are actually received or paid out, while accrual accounting records income and expenses when they are earned or incurred. Nonprofits must understand the difference between these two methods in order to record their revenue properly.

When using the cash method of accounting, financial information is presented solely based on the cash received. As a result, it is important to accurately track all sources of income and not assume that just because an individual or organization has promised to donate, the money has been received.

This is a more straightforward option since it only follows money actually going in and out of your accounts. It is mostly recommended for small organizations with simple transactions that don’t require a detailed understanding of revenue recognition.

The cash method of accounting is generally preferred for:

  • Small nonprofits with under $100,000 in revenue
  • Nonprofits that do not have set programs
  • Nonprofits that do not have paid staff
  • Nonprofits that don’t have accounting professionals

Conversely, the accrual accounting method records transactions when they are incurred, not just when cash is received. This method allows you to recognize revenue that has been pledged or earned but not yet collected. You also recognize expenses when they’re incurred, not just when the money is paid. This method of accounting provides a more complete picture of your finances and is required by most states for organizations over certain income thresholds.

Accrual accounting allows you to match your expenses to the revenue they generate, so you can make more informed decisions and better projections. This explains why it is the most recommended option required by Generally Accepted Accounting Principles (GAAP) for nonprofits.

This method is an excellent option for nonprofits that:

  • Have significant amounts of funding and funding sources
  • Receive grants
  • Employ paid staff
  • Undergo annual financial audits
  • Want to ensure accuracy and full transparency

Not Documenting Donations Properly

Donations are a major source of revenue for nonprofits. This is why it’s important to understand how to properly record each donation to remain in compliance with GAAP. You must include the donor’s name, date of the donation, donation amounts, and any restrictions on how the money can be used.

In particular, restrictions by a donor can affect the timing of your revenue recognition. For example, if a donor restricts their donation to be used for a specific purpose and the money has not been spent yet, the revenue cannot yet be recognized.

It is important to document these restrictions and create a plan for how the money will be used in order to properly recognize the revenue. You should also keep records of all donor acknowledgments and correspondence as required by the IRS for tax purposes.

Ideally, have a dedicated person or team to manage donation tracking, acknowledgments, and compliance. This will help ensure that your revenue recognition is accurate and you remain compliant with the IRS. A  donation management system can make this process a lot easier and can help you keep track of donations more efficiently.

Not Tracking Unrestricted Funds Separately

Unrestricted funds are those that can be used for any purpose by the nonprofit organization, while restricted funds must be used for specific purposes as designated by the donor.

Unrestricted funds can be used for overhead costs like expanding staff, training and professional development, equipment, emergency expenses, technology acquisition, etc.

It’s important to track unrestricted funds separately from restricted funds so that you don’t accidentally use them for something other than what was intended by the donor.

But how do you track these funds? The best way is to use an accounting system that segregates your accounts and allows you to easily categorize donations as either unrestricted or restricted. This will help you keep track of donations and ensure that revenue is allocated correctly.

Trust The Charity CFO Revenue Recognition for Nonprofits

Revenue recognition can be tricky, which is why it’s important to have an experienced finance professional handle the accounting for your nonprofit.

The Charity CFO offers a team of experienced CFOs and accountants who specialize in helping nonprofits manage their finances. Our experts have extensive knowledge of GAAP and can help you ensure that your revenue recognition is accurate and compliant.

We understand the complexities of revenue recognition for nonprofits and can help you manage your finances more efficiently. Contact us today to learn how our services can help your nonprofit organization.

No time to read this article now? Download it for later.

Financial Statements Nonprofit: What You Really Need

/in , , , /by

As a nonprofit leader, your financial stewardship is important to remain compliant with the IRS. One way to ensure you remain within the confines of your tax-exempt status is to file and share a number of financial statements.

You have a primary responsibility to your donors, grantmakers, and other stakeholders to find ways to share these statements while still following the highest accounting standards.

Not only that, these statements need to be sound and easy to understand so as to provide a window into the financial health of your nonprofit.

This helps build trust and transparency-the two single most important assets for your organization.

But what are the financial statements?

Financial statements are a set of reports that demonstrate how your nonprofit is doing financially. They include:

  • Statement of financial position
  • Statement of activities
  • Statement of functional expenses
  • Statement of cash flow. 

Interestingly, these statements mirror for-profit financial statements but offer different insights specific to the roles and responsibilities of a nonprofit.

Let’s discuss them in detail so you can know what you need to do to stay compliant and accountable.

Statement of Financial Position

A statement of financial position is a balance sheet for nonprofits, except that the net assets section takes the place of the equity section in a for-profit organization. It gives you a birds-eye view of what your organization owns (assets), its debt and liabilities, and its overall worth (net assets).

Knowing how to record these entries will help you create a sound and well-organized report that gives a true picture of your organization’s financial health, current cash flow, and stability.

1. Assets

This is anything that belongs to the nonprofit, including property, cash, equipment, investments, receivables, prepaid expenses, and pledged donations.

Assets can be broken down as follows:

  • Current assets (Investments, pledged donations, bank balances, etc.)
  • Fixed assets (Land, vehicles, fixtures, large equipment, etc.)
  • Non-current assets (Trademarks, patents, endowments, long term investments, etc.)

2. Liabilities

This includes anything that is owed or due to others.

They are categorized as either:

  • Current liabilities (payable within a year, such as short-term loans, lines of credit, outstanding bills, accrued expenses, and payroll tax liabilities)
  • Non-current liabilities (long-term liabilities, such as long-term loans and mortgages)

3. Net assets

Ideally, this is the true value of your organization. It’s everything belonging to you after deducting all liabilities.

For clarity:

Total Assets- Total Liabilities = Net assets

Let’s assume:

  • Money raised= $10,000 in a given month
  • Property = $350,000
  • Accounts = $100,000
  • Liabilities=$20,000

What’s the net asset?

Net assets = ($350,000+$100,000 + $10,000 – $20,000) = $440,000

This means that your nonprofit has $440,000 that can be deployed to further its goal and mission.

Your nonprofit’s statement of financial position provides several insights:

  1.   The overall financial health of your organization
  2.   Your organization’s liquidity to take on additional risks, such as expansion and hiring staff
  3.   Your ability to pay back existing debts
  4.   Your capacity to launch new programs and initiatives
  5.   The statement of financial position also helps your stakeholders understand how your organization is funded, how it uses its resources, and what its future financial position may look like. 

Statement of Activities

A statement of activities is similar to a for-profit income statement and is used to show the revenue and expenses between two different reporting periods. It shows how you’ve spent your donations and what you’ve achieved with the available resources.

It provides accountability and transparency to your board and donors. This financial report contains three segments:

1. Revenue

How much money did you bring in? What were the earned revenue, donations, grants, government funding, and money received through fundraisings and special events?

GAAP requires that you separate revenue as either:

  • Restricted: This includes all donations that the donor has given directions on how and when you can spend the funds.
  • Unrestricted revenue: these are funds that you are free to use for any mission-oriented purposes, including paying salaries and expenses. 

2. Expenses

These are all liabilities necessary to achieve your goals and mission. Proper accounting practices dictate that you split your expenses as either administrative/operation, program-based, or fundraising.

To achieve your mission, it is important that you keep your administrative expenses as low as possible and only increase the cap as you grow and expand.

3. Change in net assets

This gives a snapshot of how much money you’ve made between the reporting periods. Did you make more than you gave out? This is your bottom line and acts as a buffer during a slow fundraising quarter. It is calculated by subtracting your expenses from the net revenue.

You should monitor the change in net assets constantly to identify trends and changes in revenue and expenses. This will help you recalibrate your approach to cover any deficits and find solutions to fix the shortfalls.

Why is a statement of activities important?

  • It helps you comply with GAAP standards and IRS regulations
  • It helps you maintain the transparency and accountability required by the board donors and the taxman
  • Helps you identify the need to tweak an ongoing program or project that’s not running optimally
  • Help financial leaders show where funding is going and determine the long-term viability of various programs.
  • Helps you make informed decisions on the organization’s critical areas, such as whether to cut expenses, secure additional funding or provide membership discounts
  • Makes it easy to file Form 990 by providing well-organized financial records 

Statement of Functional Expenses (SOFE)

A statement of functional expenses is a financial report used to show how expenses are incurred in your organization’s functional areas. It is also described as a matrix as it shows expenses across the three functional areas of your nonprofit – management and administration, fundraising, and programs.

Your donors, board members, and stakeholders want to be sure that their money is being spent wisely in achieving your organization’s mission.

This ancillary report provides a breakdown of how much money is spent in each area and makes sure that the funds are used only where necessary.

  • The SOFE helps you answer questions like:
  • Are we spending more than we allocated for fundraising? 
  • Are our programs running at optimal cost? 
  • Is there room to cut administrative and operational expenses without compromising our mission? 
  • Is there a need to invest more in programs or fundraising? 

 Cash Flow Statement

The Cash Flow Statement (CFS) keeps track of and records cash inflows and outflows in a given period. It reports the change in an organization’s cash and cash equivalents during an accounting period.

A CFS report has three sections:

  • Cash flows from operating activities: Shows change in cash other than those reported in the financing and investing sections.
  • Cash flow from investing activities: Shows amounts spent and received from long-term assets such as vehicles and equipment.
  • Cash flow from financing activities: This section shows amounts received from borrowing and repayments.

Work with Financial Statements Nonprofit Expert

As a nonprofit leader, making sense of all these financial reports can be difficult, especially if you don’t have a rich background in finance. Working with an experienced and qualified partner can provide credibility to your financial statements, deliver consistent reporting practices over time, and protect your 501(c)(3) or 501(c)(4) tax-exempt status.

At The Charity CFO, we help you understand the ups and downs of your organization’s financials, help you stay on top of IRS regulations, and provide detailed financial statements that can be filed and shared with confidence.

Contact us today to learn more about our services and start getting the personalized nonprofit CPA support you need. 

 No time to read this article now? Download it for later.

How to Set Up Your Nonprofit Organizational Chart

/in , , , , /by

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.

Best Practices when Accounting for Grants

/in , , , , , /by

Grants are the lifeblood of nonprofits, giving them the much-needed cash injection to market the organization, fund a project, or get an initiative off the ground. Having a full grant pipeline increases your nonprofit’s chances of success and improves your visibility and credibility. But in order to get the most out of these grants, you need to understand how to properly manage and account for them.

The IRS has strict regulations on how to handle grants and charitable contributions, so it is essential that you understand the best practices when accounting for them.

Why?

Because accurate nonprofit accounting can help with reporting and auditing requirements, and ensure that the funds are being used in accordance with the grantor’s wishes. Besides, proper accounting gives you a clear picture of your organization’s fiscal health and helps you to make informed decisions on how to allocate resources.

Nonprofit leaders can use the for-profit world’s valuable practice of engaging in succinct and clear grant reporting. You really don’t want to be red-flagged by the government because of incomplete, unorganized, or inaccurately recorded grant information.

What is a Grant?

A nonprofit grant is a type of financial assistance that your organization receives from government agencies, foundations, corporations, businesses, individuals, or educational institutes for a nominated project, program, or initiative. It is usually given in exchange for specific deliverables and outcomes.

It encourages collaboration between your nonprofit and the funder, and gives the funder some control over how the funds are utilized and sets the ground for future funding. Responsible stewardship of grant funds will usually lead to raising more grant money from the same or other funders.

Grants may include:

  • Investments relation to programs
  • Prizes
  • Awards
  • Scholarships
  • Fellowships
  • Research
  • Training
  • Mentoring programs
  • Outreach initiatives
  • Loans for charitable purposes

A grant will not include donations or contributions for unrestricted use or general operating support as these are not exchanged for any specific deliverables. Since they are project specific, they cannot be used to pay employees, compensate your board, or cover your organization’s operating costs.

According to the Financial Accounting Standards Board (FASB) guidelines, a grant should be recognized as revenue when all eligibility requirements have been met by the recipient and there is reasonable assurance that the revenue will be collected.

Major Types Of Grants

The three major types of grants are unconditional grants, conditional grants, and reimbursable grants.

  • Unconditional grants are those which do not require the recipient to provide a specific deliverable or outcome in exchange for the funds. The recipient is under no obligation to fulfill any conditions or submit any reports.
  • Conditional grants have designated deliverables or outcomes that must be met in order to receive the funds. Recipients are usually required to submit periodic reports on their progress and results.
  • Reimbursable grants are those which require the recipient to provide evidence that it has already incurred costs before receiving reimbursement. Reimbursement is usually provided after the recipient has provided evidence that it has met all conditions, or completed the deliverable.

8 Best Practices When Accounting For Grants

The following are some best practices that all nonprofit leaders should follow when accounting for grant funds:

1. Make sure your team is on the same page

Set clear and consistent expectations with your team when it comes to accounting for grant funds. This means that everyone should understand the procedures, deadlines, and any other expectations related to accounting for grants. Establishing clear roles and communication protocols can help ensure that all team members are in alignment when it comes to grant accounting.

2. Put the necessary controls in place

Accounting for grants should be approached with an abundance of caution. Establishing sound internal controls is essential for ensuring the financial security, accuracy, and completeness of your records related to grants. This includes having a separate bank account for grant funds, segregating duties among different team members, and having adequate documentation of all grant-related transactions.

3. Track expenses diligently

When accounting for grants, it is important to track expenses diligently. This means having effective systems and processes in place for tracking grant expenditures, documenting grant-related activities, and making sure all expenses are properly classified. Doing this ensures that you can demonstrate compliance with grant requirements and provides a clear audit trail for any future reviews.

4. Develop strong financial reporting procedures

An efficient tracking and reporting system is a must-have in order to ensure accuracy and compliance when accounting for grants. Think routine summary reports, budget vs. actual reports, and variance analysis—all of these can help your team identify any discrepancies or issues related to grant accounting.

5. Keep up with changing compliance rules

Grant accounting can be complicated, and regulations are always changing. It is important to stay on top of any new compliance regulations by regularly reviewing the grant agreement, monitoring any developments in the industry, and proactively addressing potential issues. If you don’t have sufficient internal capacity and resources, you may want to consider hiring a nonprofit accounting professional to help manage your grant accounting.

6. Use the grant in a manner that complies with all applicable laws and regulations

It is important to keep in mind that grant funds must be used for their intended purpose and in accordance with all applicable laws and regulations. Grants should not be used in any way that could be perceived as fraudulent or unethical. As the grant recipient, you are responsible for understanding and following all applicable laws and regulations.

7. Be transparent in all financial matters related to the grant

Transparency is key when it comes to grant accounting. Make sure that your team is open and responsive to questions related to the grant account. Provide regular updates to the grantor, and be sure to document all decisions related to the use of grant funds.

8. Conduct regular audits

Regular financial audits can help ensure the accuracy of your financials, determine your fiscal health and compliance, and identify any potential issues. Having an independent audit team review your records related to the grant can help protect your organization from any unforeseen problems. These audits can also help identify opportunities, such as potential areas of cost savings.

What Are The Main Challenges Of Grant Accounting?

Grant accounting can be challenging, especially for smaller organizations with limited resources. Some of the main challenges that organizations may face include:

  • Keeping up with changing grant regulations and compliance requirements
  • Staying organized when dealing with multiple grants from different sources
  • Meeting reporting deadlines and ensuring the accuracy of reports
  • Differentiating between grants and other sources of income
  • Tracking expenditures against budgeted amounts
  • Understanding accounting rules, such as those related to matching funds, split funding, and indirect costs
  • Knowing which expenses are allowable under the grant
  • Managing cash flow during long grant cycles 

These challenges can be daunting, but proper grant accounting practices can help organizations overcome them and ensure successful grant management. With the right processes in place, your organization can benefit from increased accountability and transparency, improved grant performance, and more efficient use of funds.

Feeling Stuck? Outsource Your Grant Accounting Needs To A Professional

Rolling all the responsibilities to an inexperienced person not only jeopardizes the organization’s fiduciary responsibility but also the sustainability of the organization.

If your team lacks the resources to effectively manage grant accounting, you may want to consider outsourcing these responsibilities. Experienced nonprofit accounting experts can help you develop and manage an effective grant accounting system and processes and provide guidance on best practices to ensure compliance and properly handle grant accounting responsibilities.

At The Charity CFO, we understand the complexities of grant accounting and bring our expertise to help your organization manage its grants in a way that complies with all regulations and provides maximum benefit for the organization.

By partnering with us, your organization can be assured that its grant accounting and financial management are in safe hands. We provide timely, accurate, and reliable services with high fidelity to your organization’s mission and values. Our team is dedicated to helping you achieve greater fiscal health, greater transparency, and improved service delivery for your organization.

Contact us today to learn more about how we can help with your grant accounting needs so you can focus on driving your mission and making an impact!

No time to read this article now? Download it for later.

Why Your Church Shouldn’t Take Pass-Through Gifts

/in , , , , /by

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.

Budgets for Nonprofits: Get ready for 2023

/in , , , , , /by

Financial planning and budgeting are vital for the success and sustainability of any nonprofit organization. 

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.

Contact us today to learn more about our nonprofit budgeting services. We’ll be happy to discuss your specific needs and provide a no-obligation proposal outlining how we can help you achieve your goals and mission.

No time to read this article now? Download it for later.