Your Finance Committee Might Be Broken: How to Build One That Actually Helps
Learn how to build a nonprofit finance committee that actually helps your organization thrive. Discover common pitfalls, red flags, and expert advice from The Charity CFO.
Tag Archive for: accounting
What Every New Nonprofit CEO Should Ask Before Taking the Seat
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How to Build a Grant Strategy That Actually Works
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Why Your Fundraising Strategy Isn’t Working (and How to Fix It)
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Why It’s So Hard to Trust Marketing Numbers (and What Nonprofits Can Do About It)
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Scaling Nonprofits Through Systems, Not Stress
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What Every New Nonprofit CEO Should Ask About the Finances (Before It’s Too Late)
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Nonprofit Networking That Works: How to Prepare, Connect, and Follow Up for Real Results
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Teamwork and Integrity: Lessons in Strong Nonprofit Leadership
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Leading Through Scarcity: How Nonprofit Leaders Can Find Clarity
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Shoestring Marketing Hacks for Nonprofits: AI, Video & Thought Leadership
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Restricted Grants: How They Help, How They Hurt, and How to Release Them Strategically
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Leading with Purpose: Why Women Are the Future of Nonprofit Leadership
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The Difference between a Bookkeeper, an Accountant, and a CFO
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When most people think of an organization’s financial department, they think of accountants. But did you know there are a variety of financial professionals that are essential to the financial well-being of an organization?
Bookkeepers, accountants, and Chief Financial Officers (CFOs) all serve critical roles in managing an organization’s finances. This guide will walk you through the function of each role and how they compare to one another.
What is a Bookkeeper?
A bookkeeper is a financial professional responsible for recording and managing a nonprofit’s daily financial transitions. Their primary role is to ensure that all transactions are entered into the accounting system with accuracy and consistency. Common nonprofit bookkeeping tasks include:
- Recording donations
- Entering accounts payable and receivable
- Organizing and reviewing bank statements
- Maintaining the general ledger
These everyday financial duties help bookkeepers provide a clear and up-to-date picture of the nonprofit’s financial status. An accurate bookkeeper helps a nonprofit maintain financial transparency and accountability by making it easy to track how funds are received and spent.
What is an Accountant?
Accountants run reports to help determine if the bookkeeping is done correctly. An accountant’s role goes beyond simple record-keeping and might include:
- Creates reconciliations of account balances
- Reviews general ledger activities for accuracy
- Prepare basic financial reports
- Ensures that accounting follows generally accepted accounting principles (GAAP)
Nonprofit accountants use their advanced knowledge of accounting principles and regulations to ensure an organization’s financial practices are sound. They also help nonprofit leaders maintain compliance with legal standards and tax regulations. Properly managing an organization’s taxes helps ensure the nonprofit maintains its exempt tax status.
What is a Chief Financial Officer (CFO)?
A Chief Financial Officer (CFO) is a senior executive in charge of the strategic direction and goal setting of a nonprofit’s accounting and financial management. The CFO role generally includes:
responsible for the strategic direction and goal setting of a nonprofits accounting and financial management. Responsibilities typically include advanced analysis and reporting, budgeting, etc.
- Advanced analysis and reporting
- Budgeting and forecasting
A nonprofit CFO oversees all financial operations to ensure the organization’s financial practices align with its long-term goals and mission. As an executive-level role, the CFO is in charge of guiding the overall financial strategy of the organization.
Nonprofit CFOs are also responsible for clearly and accurately reporting financial data to the board of directors. They will also help guide and advise other key stakeholders such as the nonprofit executive director.
Comparing the Roles of Bookkeeper, Accountant, and CFO
Bookkeepers, accountants, and CFOs all play important roles in the financial health of an organization. Each role provides a unique set of skills and fills various financial needs of an organization.
Let’s take a closer look at the responsibilities, scope of work, and educational requirements for these nonprofit financial roles.
Level of Responsibility
Generally, a bookkeeper has the most direct responsibilities in an organization. Their job is to maintain accurate records of daily transactions. The bookkeeper’s focus on accuracy forms the foundation for all financial activities in the organization.
An accountant takes on a higher level of responsibility than a bookkeeper. Accountants interpret and analyze the financial data provided by bookkeepers to prepare reports and ensure the accuracy of bookkeeping.
The CFO is the top level of responsibility in the financial department of an organization. Thus, the nonprofit CFO carries the most significant responsibility out of the three by overseeing the entire financial strategy and management of the nonprofit. They’ll need to provide strategic planning, financial forecasting, and risk management while working with the board of directors.
Scope of Work
The scope of work for each financial role in a nonprofit reflects the role’s distinct responsibilities and expertise. A bookkeeper’s scope of work is primarily transactional and administrative. For example, recording the day-to-day transactions.
Accountants often have a broader scope of work that involves checking the bookkeeping for accuracy. If mistakes or inaccuracies are found, the accountant often is tasked with correcting issues.
At the highest level, the CFO’s scope of work includes strategic management and leadership. The CFO generally works on high-level projects, such as creating a yearly operating budget.
Educational and Professional Requirements
Most nonprofit bookkeeper roles require a high school diploma or similar, as well as proficiency in accounting software and attention to detail. Some organizations may prefer bookkeepers to have a degree in accounting or related fields. Many nonprofit bookkeepers complete additional on-the-job certification or training programs.
An accountant generally holds a bachelor’s degree in accounting or finance. Some nonprofit accountants are also Certified Public Accountants (CPA), though it’s typically not required.
Educational requirements for a nonprofit CFO often include a bachelor’s degree or higher in accounting, finance, economics, or a related field. However, possessing analytical and strategic thinking skills–along with extensive experience in the nonprofit financial industry–are often more important for CFOs than degrees. Leadership skills are also essential for a CFO, and some nonprofits look for a CFO with an MBA.
Which Financial Professional Does Your Nonprofit Need?
Finding the right financial professional–or combination of professionals–for your nonprofit helps ensure your financials are accurately and efficiently managed. So, do you need a bookkeeper, accountant, or CFO?
The answer is most nonprofits need all of the skills of a bookkeeper, accountant, and CFO in some capacity. Although about 80% of nonprofit accounting work is transactional and can be handled by a bookkeeper, only hiring a bookkeeper means losing 20% of their accounting needs. On the other hand, hiring a CFO to handle all of the day-to-day transactional work of a nonprofit typically leads to burnout and high turnover.
Hiring individuals for each role isn’t feasible for many nonprofit organizations. The solution for many organizations is to outsource their financial needs to a trusted nonprofit accounting firm.
Firms like The Charity CFO provide comprehensive bookkeeping, accounting, and fractional CFO services. Our service team includes an Accounting Associate to handle the day-to-day work and a CFO to handle the strategic side of things. We specialize in nonprofit accounting, so you can be sure we understand the needs and challenges of the nonprofit industry.
Learn more about our nonprofit financial services by contacting us today!
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Why Nonprofits Need to Switch from Cash-Basis to Accrual-Basis Accounting
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The type of accounting your organization uses could be holding you back from getting the most out of your accounting system. While many nonprofits start with cash-basis accounting due to its simplicity, this method often falls short of providing a comprehensive view of a nonprofit’s financial health.
Transitioning to accrual-basis accounting can offer a more accurate representation of finances and enhance long-term planning. Let’s look at the differences between cash-basis and accrual accounting and why you might want to switch.
Understanding Cash-Basis vs. Accrual-Basis Accounting
Before we can know why to switch accounting systems, it’s important to understand how each system works. The main difference between cash-basis and accrual-basis accounting is when revenue and expenses are recorded.
In cash-basis accounting, revenue gets reported only when the cash is physically (or digitally) received. Likewise, expenses are recorded when money leaves the organization’s account. Cash-basis accounting is most common for smaller nonprofits, where financials tend to be less complicated.
Accrual-basis accounting, on the other hand, records revenue and expenses when they are incurred. The accrual-basis method records transactions with the assumption that the money will physically change hands in the future.
For example, a nonprofit provides a paid service to a community member and issues an invoice. The revenue from the service is recorded now, even though the invoice hasn’t yet been paid.
Limitations of Cash-Basis Accounting for Nonprofits
Cash-basis accounting is a simple method that’s great for new or small nonprofits. However, there are two major limitations to using the cash-basis method:
- It inaccurately represents financial health.
- It can cause challenges in long-term financial planning.
The timing of an organization’s income and expenses in cash-basis accounting can misrepresent the actual financial state of the nonprofit. Additionally, the cash-basis method can make accurate forecasting and budgeting difficult.
Say a nonprofit hosts a large fundraising event in the second quarter. The costs for the event are all paid in the first quarter, but donation funds and other revenue won’t come through until the second quarter.
By using the cash-basis method, this organization would look like it’s struggling financially in the first quarter but has a major surplus in the second. The reality is somewhere in the middle, but the organization may be tempted to under budget for the first quarter and over budget for the second.
Benefits of Accrual-Basis Accounting for Nonprofits
Switching to accrual-based accounting can have a lot of benefits for nonprofit organizations. Most importantly, making the switch can help your organization:
- Enhance the accuracy of financial data
- Increase transparency
- Improve financial decision-making
Enhanced Financial Accuracy
By recording revenue and expenses when they happen, instead of when cash is exchanged, helps provide a more accurate picture of the organization’s financial health at any given time. You’ll get a better view of long-term financial transactions, rather than just seeing what cash is currently in an account.
Accrual accounting also helps keep related revenues and expenses together. Matching revenues with the expenses incurred to generate them reflects the true cost of running programs and services.
Improved Financial Transparency
Accrual accounting provides stakeholders with a detailed view of your organization’s financial activities, improving trust and confidence. Transparent financial reporting can also improve donor relations. With increased transparency through accrual accounting, donors can see how their contributions are being used and the impact they’re making.
Better transparency also helps you stay compliant with regulations or grant requirements. Many regulatory bodies and grantors require accrual-basis financial statements. Adopting the accrual method ensures compliance with Generally Accepted Accounting Principles (GAAP) and other relevant standards. By making the switch, you could open your organization up to more grants and funding opportunities.
Facilitates Better Decision-Making
A more accurate understanding of your organization’s financial health means nonprofit leaders can make better strategic, data-driven decisions. Accrual accounting provides the data needed to forecast cash flow, budget more effectively, and allocate resources where needed most.
An accrual-based accounting system also gives you insights into the efficiency and effectiveness of programs and services. Detailed financial reports generated using the accrual method can highlight inefficiencies and areas for improvement within your organization. By analyzing the financial performance of programs, you can determine which initiatives are delivering the most value–and which may need adjustments or more support.
Get Support for Your Cash-Basis to Accrual-Basis Transition
The cash-basis accounting method is simple, but simplicity could be holding your organization back. Moving from cash-basis to accrual-basis accounting can help your nonprofit better manage its financial health and improve transparency.
While switching to accrual-basis accounting can be daunting, the easiest way to make the switch is to work with a trusted nonprofit accounting firm, such as The Charity CFO.
Our dedicated team of accounting professionals specializes in nonprofit accounting–ensuring your organization gets advice from accountants who understand the unique needs of nonprofits. Get in touch today to see how we can help you transition accounting systems!
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What to Look for in Nonprofit Accounting Services
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Choosing the right accounting services is crucial for the financial health of your nonprofit. The right nonprofit accountant helps your organization properly manage its finances, which improves trust and transparency with stakeholders and donors.
Let’s explore the key factors to consider when researching nonprofit accounting services–from the firm’s expertise to its technology recommendations–so you can be sure you’re getting the nonprofit accounting your organization needs.
1. Nonprofit Accounting Expertise and Experience
Nonprofit accounting isn’t the same as for-profit business accounting. Your organization needs a nonprofit accountant who understands the differences and has experience in nonprofit accounting. Look for accounting firms that specialize in nonprofit accounting when researching accounting services.
Specialized nonprofit accountants know the ins and outs of nonprofit accounting, so they can easily jump into managing your organization’s finances. Unlike a generalized accountant, nonprofit accountants already understand the unique challenges and regulations nonprofit organizations face. This can be especially important when it comes to reporting and filing requirements.
2. Services Offered
When selecting nonprofit accounting services, looking for a firm that offers a comprehensive suite of services tailored to your needs is important. There’s a wide range of accounting services your organization might need, including:
- Bookkeeping
- Financial reporting
- Tax preparation
- Audit support
These key services are vital to maintaining the financial health of your organization. Proper tax preparation, for example, can help your nonprofit stay compliant with financial regulations and maintain tax-exempt status. Likewise, an accountant who offers financial reporting services can help you choose and prepare the right financial reports for your board of directors, donors, or the general public.
Additionally, most nonprofit accounting services include specialized services for nonprofits, such as:
- Grant management
- Providing recommendations for best practices as your organization scales
- Financial goal setting
Specialized accounting services like grant management help your organization efficiently manage funds to help meet donor expectations and plan for growth and sustainability.
3. Technology and Tools
The modern world is built on technology, and nonprofits are no different. Technology is one of the most important tools in modern nonprofit accounting. When researching nonprofit accounting services, aim to work with a firm that embraces and encourages technology like accounting software or donor management systems.
A good nonprofit accounting firm will work with you to find the right technology tools to help you simplify your bookkeeping. For example, they might recommend tools that make it easier for employees to track expenses using a mobile app. This eliminates the need to collect paper receipts from employees and streamlines your accounting systems.
You should also choose nonprofit accounting services that prioritize nonprofit data privacy. Data breaches can plummet public trust in your organization, so it’s important to use secure technology and software.
4. Customization and Scalability
You may not need the full range of your accountant’s nonprofit accounting services right now. But what happens as your organization grows? You’ll likely need expanded accounting services.
Your nonprofit accounting services should be customized to fit your current needs. However, you also want to work with an accountant who can scale your services to fit your future needs. Consider the future of your organization as you look for nonprofit accounting services.
5. Transparency and Communication
Accountants often work with sensitive financial data. It’s no surprise that should look for nonprofit accounting services from a trustworthy firm.
However, you also want to take the firm’s transparency and communication skills into consideration. Does the firm respond quickly to messages? Are they open and honest about the state of your organization’s financials? These factors can help you narrow down the right accounting services for your nonprofit.
6. Cost and Affordability
The final thing to look for in nonprofit accounting services is the price. Unfortunately, financial sustainability is one of the biggest challenges facing many nonprofits. You need to be sure you can afford the nonprofit accounting services your organization needs.
On the other hand, it usually doesn’t make sense to choose nonprofit accounting services based solely on cost. The key is to find accounting services that balance the cost with the quality of services provided.
Luckily, many nonprofit accounting services can be tailored to fit your needs–including your budget. As you look for accounting services, be sure to let potential accountants know your budget so they can build an accounting plan that meets your financial constraints.
Find the Right Nonprofit Accounting Services
Your nonprofit accountant is an important decision for your organization. Focus on these six factors when researching accounting services to ensure you find the right fit for your organization. The right accounting services will help your organization streamline financial processes, build trust with donors and stakeholders, and ultimately contribute to expanding your mission.
At The Charity CFO, we understand the unique financial and accounting needs of nonprofits. Our team specializes in nonprofit accounting and we take pride in being able to accurately and efficiently help nonprofits streamline their accounting processes. We’re here to help you better understand the financial health of your organization–and discover ways to improve.
Get in touch today for a free consultation on our nonprofit accounting services!
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What to Look for in a Nonprofit Accounting Partner
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The Ideal Nonprofit Accounting Tech Stack
Known as a tech stack, building a comprehensive system from multiple tools is essential to successful technology use.
How to Fix Your Nonprofit Accounting
An effective nonprofit accounting system helps your organization stay transparent, manage funds wisely, and build trust.
Nonprofit Audit Requirements: Do You Need An Audit?
Are you clear on the nonprofit audit requirements for your organization?
Contrary to what many people envision, a nonprofit audit doesn’t usually start with a letter from the IRS. Instead, an independent nonprofit audit is something you choose to build trust in your nonprofit organization.
In fact, the IRS doesn’t issue requirements for nonprofits to be audited, but other federal and state agencies do in some circumstances.
Plus, many grantmakers, foundations, lenders, and donors will require an independent audit before giving money to your nonprofit organization.
An audit can be a critical step for a growing nonprofit that needs to raise increasing amounts of funds. But it’s expensive. And time-consuming. So it’s not always a wise investment for some smaller nonprofits.
In this article, we’ll take a look at what an independent financial audit is and when your nonprofit might need one. And we’ll also look at your less-expensive alternatives for establishing financial credibility with your stakeholders.
What is a nonprofit financial audit?
A nonprofit financial audit is an independent examination of the accuracy of your accounting records, financial statements, and internal controls.
It confirms your compliance with federal grant management standards. And many federal and state agencies require audits, depending your organization’s fundraising, size, and spending.
(For example, 26 states require an audit before a nonprofit can earn charitable registration — necessary for in-state fundraising. And, the Office of Management and Budget requires an audit when a nonprofit spends more than $750,000 in federal funds in a year through the end of 2024. Starting in 2025, the new threshold will increase to $1,000,000.)
When you pass the audit, you’ll receive a clean bill of health from your auditor and a professional opinion stating the accuracy and validity of your accounting records. It assures outside observers that “the organization’s financial records meet generally accepted accounting principles.”
Bottom line? An audit shows your organization is trustworthy, compliant, and well-managed.
And that inspires trust and confidence among potential funders, banks, and other potential partners.
What a nonprofit financial audit is NOT:
First, this isn’t the same as an IRS audit–it’s not an “I’m being audited!” situation.
Instead, it is a decision to take proactive ownership of your organization’s financial health, transparency, and validity by hiring a professional to examine your books.
It’s also not a compilation of your financial statements, your financial strategy, or a report of financial viability. Those are up to you and your in-house or outsourced accounting team.
What are the nonprofit audit requirements? And is your organization required to have one?
There are no hard-and-fast rules for when you need to conduct an audit. But here are some of the common external triggers that may require you to conduct an independent audit:
✔️ When you spend over $500,000 per year.
Nonprofits that spend $500,000 a year are typically required to do an annual audit (but this varies by state, so check your state’s requirements)
✔️ When it is in your bylaws.
Check your company’s founding documents. The founders may have stated the organization would complete annual audits.
✔️ When you receive federal funding.
Organizations that receive more than $750,000 in federal funding may be required to complete an audit.
✔️ When you want to get serious about grant funding.
Many grants require an audit (not a review or compilation) because it provides an opinion of assurance.
✔️ When you want to apply for a loan.
Many banks will ask for audited financials as a prerequisite for lending you money.
Some internal changes may also trigger an audit:
- Changes in services, programs, or leadership
- Acquiring, merging with, or losing a partner organization
- Shifting debt, leases, or contracts
The benefits of an independent financial audit for nonprofits:
No other report, review, or statement inspires more confidence than an audit. Which makes it easier for you to attract larger donations, apply for grant funds, and access lending facilities.
Because it’s a universal indicator that your organization takes fiscal responsibility seriously, it’s impact goes beyond fundraising. An audit is also a symbol to the media, volunteers, watchdog groups, and the community you serve.
Internally, it provides valuable oversight for your bookkeeper or accounting team. And it gives the board and leadership the peace of mind that your books are accurate and reliable.
All in all, a financial audit helps you hold your organization accountable to your mission, build trust with the outside world, and access money to pursue your goals.
Less expensive alternatives to a nonprofit audit:
Because a nonprofit audit can easily cost $10,000+, not every nonprofit can afford one.
If you need to build confidence but aren’t ready to invest in an audit, you have two main alternatives: a financial review and a financial compilation.
We’ll look at the differences between your three options here. But the primary difference between a financial review, a financial compilation, and an audit is the level of “assurance” they provide.
What is assurance?
Assurance is an opinion given by a CPA on the accuracy of an organization’s financial statements. It shows whether or not your accounting records are accurate per generally accepted accounting principles (GAAP), in the auditor’s professional judgment.
An audit provides reasonable assurance, a review offers limited assurance (but not a professional opinion), and a compilation offers zero assurance.
Nonprofit Audit Alternative #1: Financial Review
In a Financial Review, an independent auditor reviews your financial statements to determine if they’re consistent with generally accepted accounting principles (GAAP).
It offers limited assurance that no significant modifications need to be made. While it does evaluate the accuracy of financial records, no professional opinion is given on that accuracy. A financial review typically costs 40-60% less than an audit.
Despite the lower level of assurance, a financial review may be enough for some grantmakers to approve your organization. Even if a grant asks for audited financials, sometimes that isn’t a deal-breaker if you have a financial review and meet their other criteria.
But without at least a financial review, you’re probably out of luck when it comes to most grants.
Nonprofit Audit Alternative #2: Financial Compilation
A compilation simply organizes your financial records for a specific period in a GAAP-acceptable format without evaluating the accuracy of those records.
It’s a cost-effective option for organizations that need a GAAP report. But it offers zero assurance as to the accuracy of your books.
A compilation can help your nonprofit identify obvious errors by getting their books into an organized format. It adds primary value and serves owners, board members, creditors, and financial institutions. A compilation is your least expensive and time-consuming option.
Not sure if you meet the requirements for a nonprofit audit? We can help you figure that out.
The Charity CFO doesn’t conduct nonprofit audits. But we have 5 former nonprofit auditors on our team, so we know exactly how to prepare your organization to pass your audit the first time.
Even better, with our nonprofit bookkeeping and accounting services, we’ll ensure your books are always audit-ready. Plus, give you timely financial reports and expert advice that help you carry out your mission.
We’ll help clean up your books and implement state-of-the-art systems to save you time and bring your accounting department into the 21st century.
We’re honored that over 120 nonprofits trust us with their bookkeeping and accounting. And we’d be excited to show you how we can help your organization meet your goals.
Nonprofit Fundraising Strategies: Tips for Running an Effective Campaign
Are you looking to raise more money for your nonprofit and bolster your fundraising strategies?
When you run a nonprofit, knowing how to get money from your supporters should consist of one of your chief goals. Many nonprofits become born out of care for certain needs in the world, yet they can’t exist without a solid marketing plan. You need effective fundraising strategies to get the money you need to continue your initiatives and keep your talent.
So, how do you go about getting the proper funding? We’ll go into nonprofit fundraising strategies below. Keep reading to bring in more money for your cause today!
1. Use a Professional Mass Email Service
You may have a great mission, but you won’t attract many donations if your emails don’t look professional. Even if you run a small nonprofit, professionalism inspires confidence in you and your organization.
In turn, this prompts less hesitation about giving. When people believe you operate in a professional manner, they may trust you with more of their funds.
But how do you ensure your emails maintain a professional appearance? Get a mass email service. These platforms allow you to store your contacts’ information and even provide templates you can edit with your own text. This gives your emails a professional look.
2. Use More Than One Platform
If you just advertise your cause via email, you likely aren’t getting the most money you can. Instead, you should seek to get funds from other platforms as well.
You should start out by having a donation page on your website. Make sure people can navigate to this page from any other page on your site. Your donors should have the ability to find it without much effort.
You can also put donation buttons on each of your blog posts or news updates. This encourages people to give to causes after reading about them.
Some people even advertise their causes on social media. To do this, create posts targeted to raising money for specific causes and include links to donate.
3. Create Nonprofit Fundraising Strategies
You shouldn’t create random fundraising opportunities. Instead, fundraising works best when it gets planned out in detail. As such, you should dedicate much of your marketing endeavors toward creating nonprofit fundraising strategies that work for you.
How do you customize your own strategies? A lot of it involves doing research on how well different types of strategies work with your donor base. Any time you try something new, make sure you look at how well people received your new endeavor by viewing your analytics. The best working attempts will result in more donations, shares, or donor interactions.
Then, once you have an idea of what works well, incorporate it into your fundraising strategy.
4. Plan Out Fundraising Campaigns
Fundraising campaigns should comprise a lot of your fundraising strategy.
But what is a fundraising campaign? Think of them as a multi-component attempt to raise money for a specific cause. Fundraising campaigns harness the power of sending email messages to highlight your mission and the initiatives you want your donor base to give to.
For these, you shouldn’t send out one message. Rather, plan out several that build upon each other and encourage your donors to give.
To get the best results, you should start out with a soft launch of your campaign. These launches target only your committed donors. Ask them for feedback on the campaign and pay attention to the issues they raise. Then, you should implement these changes to your campaign before you send it to the rest of your email list.
You should also create thank you notes to send out to people who donate!
5. Know About Prime Fundraising Seasons
Did you know you can maximize your profits by launching campaigns at certain times of the year?
In particular, people like to give before the end of the year because they can claim their donations on their tax forms. Giving Tuesday kicks off this season. It lands on the Tuesday after Thanksgiving, when people follow Black Friday and Cyber Monday with an opportunity to give. You should always start your end-of-the-year campaign on Giving Tuesday.
Then, send messages throughout the month of December. Finish the campaign with a last chance message toward the end of the month, and then follow up with a thank you statement in January.
You can also run fundraising campaigns around holidays.
6. Use Specific Stories
People connect to stories. A well-told story pulls on the heartstrings of your audience and convinces them that they should spend their money giving to your cause.
The more specific the story, the better. Telling the story of one specific beneficiary of your services shows people the impact a donation to your organization can have. These stories also encourage people to put themselves in someone else’s shoes, encouraging empathy and furthering their dedication to your cause.
7. Get Reviewed by a Nonprofit Financial Organization
People want to make sure their money goes to the cause to which they intended to give. Most nonprofits manage their money well, but some don’t, and so it becomes important to have documentation to show how you spend your donations.
To do this, get reviewed by a nonprofit financial organization. These companies focus on reviewing the finances of nonprofit organizations and making this information public for any potential donors. Then, when potential donors contact you asking how you spend your donations, you can send them to the organization’s website so they can view the information for themselves.
This gives your donors confidence in your ability to handle money well and not use it for purposes other than your cause.
Need Nonprofit Financial Services?
Nonprofit fundraising strategies become the crux of many nonprofit organizations. They enable them to raise money for the different initiatives they run and help them keep their lights on.
But you shouldn’t just fundraise and not manage your money. If you need financial assistance for your nonprofit, we offer a full team of accountants who can help you manage the funds you receive. Request a meeting today!
A Guide to Nonprofit Risk Management and Cybersecurity
A Guide to Nonprofit Risk Management and Cybersecurity
We are living in an age that is characterized by risk. Every decision a company makes needs to take various risk factors into account. If you fail to properly consider risks through a risk assessment and risk management, it could be disastrous for your company.
One area in which non-profit organizations frequently miscalculate risk is cybersecurity. This article explains how you can secure your organization against various cyber threats.
What Is Risk Management?
Essentially, risk management involves trying to foresee what could go wrong for your organization. You then take measures to mitigate the risk. Of course, organizations don’t take measures against every conceivable risk. Instead, they evaluate each risk based on perceived likelihood and expected damage.
For example, consider an event such as a meteor hitting your office. The damage from this kind of event would be catastrophic, but it’s very unlikely that it would ever happen. Therefore, a risk management analysis would conclude that there’s no need to take measures against a meteor strike.
On the other hand, events like a fire happening on the premises are much more likely, and the damage from such an event could be just as severe. Therefore any reasonable risk management strategy would take fire into account.
Risk management looks at both intentional harms caused by malicious actors and accidental harms.
Cyber Risk Management
Some of the biggest risks you’ll face in nonprofit security are cyber threats. These kinds of threats involve harms caused by computers and computer network systems. Most organizations have robust and sensible risk management approaches when it comes to “real life” threats such as fires and earthquakes, but their approach to cyber risks is often lacking.
This is because digital technology has progressed so quickly in the last few decades. Risk management approaches have not had time to catch up. It doesn’t help that many people in management positions are not very knowledgeable about computers and the internet.
Unfortunately, this means that many nonprofit organizations take a reactive rather than a proactive approach to cybersecurity. You can’t afford to take this kind of approach to cybersecurity as threats like data breaches could have a devastating impact on your organization.
Data Security
As a nonprofit organization, one of the biggest cybersecurity threats you face is a breach of your data. Quite often, if data is stolen from your organization, it will mean you’re in violation of data privacy regulation. This could result in fines or other legal action against your organization. It could also have a negative impact on your reputation.
Your risk management strategy should involve reviewing your cybersecurity. This should be on the hardware and software level. For example, all employee workstations should have antivirus and firewall software installed. If you don’t have dedicated IT support staff at your company, you might consider working with a managed IT company.
Two-Factor Authentication
One of the best and most efficient ways to protect yourself against a data breach is to use some form of 2-factor authentication. Basically, this involves using a second device to verify your identity.
The most common form of 2-factor authentication is using a cell phone to verify who someone is who is attempting to log in. This is an effective security measure because it means a hacker who has the password of an employee still won’t be able to log in.
Consider setting up such a system to protect yourself against a data breach.
Consider Social Engineering
One mistake that organizations often make is that they focus all of their risk management on software protection. This is certainly important, but many cyber-attacks involve using social engineering to breach a system.
Social engineering involves using trickery and manipulation in order to breach a system. A firewall or antivirus software won’t be able to protect you against this kind of attack.
An example of a social engineering attack might be an attacker calling up someone at your company. They might then and convince them to give out their password. It might sound implausible, but it’s a lot easier than you might think.
Security Culture
Sadly, there is no straightforward solution for dealing with social engineering attacks. If you want to protect yourself against this kind of risk, you need to create a strong security culture in your organization.
This means that everyone in your organization takes security seriously and knows how to recognize cyber threats. A common way to achieve this is through seminars, presentations, and other activities.
With that said, you can’t just host a seminar on cybersecurity risks and call it a day. Cybersecurity is a constant process. To achieve a true security culture, employees need to have security on their minds at all times.
It helps to have a dedicated member of staff responsible for investigating potential cyber threats. Staff should report and all suspicious activity to this individual. This should be encouraged, even if the majority of reports are false positives.
Consider Shadow Security
Security culture is important, but pushing security too much can actually make your company less rather than more secure. When you implement excessive security policies, this results in what is known as shadow security.
Shadow security is when workers find the official security policy too restrictive. In response to this, they may adopt their own unofficial security methods.
This is problematic because most of your workers are probably not security experts. This means that they may inadvertently do things that could cause a data breach or some other threat.
To avoid this kind of behavior, you need to have an open dialogue with your employees. People may feel like the official policy is interfering with their ability to get work done. you may need to modify the policy to avoid workers taking matters into their own hands.
Risk Management Is Crucial
As you can see, risk management is crucial for running a nonprofit company. You need hardware and software solutions to keep your digital environment safe. You also need to develop a strong security culture in your organization.
If you want to learn more about running a nonprofit organization, check out our FAQs page.
Strategic Planning vs Scenario Planning
Recognizing potential situations and environments your nonprofit may encounter in the future, and determining how your organization should react, are important towards its long-term success. To build a successful nonprofit, one must learn the importance of nonprofit strategic and scenario planning.
While these two terms sound similar, they are fundamentally different. Quickly, strategic planning typically focuses on identifying and/or describing likely futures, then developing a plan that allows an organization to succeed. Similarly, scenario planning process tends to explore the uncertainty involved in analyzing a long- term future.
But, you shouldn’t just rely on the short paragraph above as your information, or all that you need to know for your nonprofit.
You should rely (and listen) to the latest episode of A Modern Nonprofit Podcast if you want to learn everything you need to know about strategic and scenario planning.
LISTEN TO EMILIE AND TOSHA DISCUSS NONPROFIT STRATEGIC AND SCENARIO PLANNING ON A MODERN NONPROFIT PODCAST HERE!
On this episode, Dr. Emilie Socash, CEO of Nonprofit Help Center, to talk with Tosha Anderson, founder and CEO of The Charity CFO, to review this important topic. Some questions covered during the episode include:
- What’s the difference between scenario planning and strategic planning
- What’s unique about the scenario planning process for nonprofits (vs. for-profits)?
- What does the scenario planning process look like? Is there just one way to do it? Does it require a specific skill set?
- Can you give an example of how a nonprofit has effectively used scenario planning?
- And more!
Make sure to subscribe to A Modern Nonprofit Podcast and share our episode to your nonprofit, professional network to get the word out about the helpful tips and tricks shared during this nonprofit-oriented series!
Dr. Emilie Socash is the CEO of Nonprofit Help Center, and also joins Tosha Anderson on A Modern Nonprofit Podcast!
So, you’ve listened to A Modern Nonprofit Podcast. Now what?
Nonprofit organizations—and the people who lead them—bring unique value to our communities, particularly during times of challenging change. The Nonprofit Help Center delivers a leader-focused suite of services that are grounded in organizational and leadership psychology, delivering transformational and long-lasting change where it’s needed most. Is your organization looking to build itself into an organization that can truly succeed? Become a NHC member today, which includes full access to all live and pre recorded webinars, special member resources, and a discount on coaching!
Visit the Nonprofit Help Center Website to learn more.
And if you want to build your organization, you need to focus on the work that matters. That means you shouldn’t have to spend your nights and weekends completing financial paperwork, performing bookkeeping tasks or learning nonprofit accounting jargon. You need to outsource your accounting, and ensure you have a team of certified public accountants who actually know nonprofits.
If this sounds like your nonprofit and your own needs, then you should consider us, The Charity CFO. Discover what bookkeeping and accounting services we can provide your organization, then schedule a free consultation with us to start your journey.
