Keep track of Cash - Top 5 Mistakes Nonprofits Make

Managing money is a problem for many new nonprofit organizations, with the culprits ranging from establishing an accounting system at all discount the importance of staying up-to-date. There are some errors that are common but easily avoidable with just a little 'time and attention. The top five, and how to avoid them, are as follows:

1. The lack of knowledge of non-profit

Nonprofits have a heavy responsibility for the maintenance of accurate accounting and meet some "best practice" standards. Every key player in the nonprofit should have at least a basic understanding of what the regulations are and why, and how they apply to the particular situation of your organization. Problems with the books are a great way to get your nonprofit status at risk and probably reflect the organization's reputation within the philanthropic community.

2. No accounting system

An accounting system is more than installing software. Rather, any activity that relates to money and the money should have formal, written procedures to ensure the accuracy and consistency. Everything from accepting a donation of $ 2 to oversee major fundraising events, the purchase of pizza with petty cash to pay salaries of employees must follow a logical, comprehensive SOPs. To that end, anyone and everyone bookkeeping tasks should be to make them the same way each time, to ensure consistency and transparency. Moreover, the correct categories must be established and used to keep track of all income and expenses (such as donations for the separation, separating the costs of each program, and the like).

3. Inaccurate data entry

Related to the development of accounting procedures is solid including measures to verify the accuracy of data entry. Small typos can turn into big problems and discrepancies should be addressed as soon as identified. Also, select an accounting software that allows you to skip the double entry method (one for each debit, credit vice-versa). In this way, the accounting software will help to ensure that the numbers balance and sense.

4. Failure budget

Setting up a well-documented, realistic budget is essential to control the money in a non-profit organizations. In addition to increasing the confidence of your constituents in your management skills, a strong balance sheet will keep the organization on track to achieve planned targets. A good budget includes projections based on past performance numbers, research costs, and justifiable assumptions about where the money will come from and where it goes. Do not overload a vague, undefined categories such as "miscellaneous expenses" ... are only an indication that the organization suffers from poor planning and research.

5. The failure to review

Although an annual financial audit is standard for most non-profit organizations, not everyone uses this information effectively. Also, any legitimate accounting software should provide easy to create financial statements that should be reviewed frequently by experienced staff and board members. Review and analyze reports will help to identify ongoing problems (mis-classification of income or expense) and one-off problems (data entry errors, embezzlement).

Establish and maintain an effective accounting system should be a priority for any startup nonprofit. More than any other type of business, manage the finances of a nonprofit organization can be the difference between longevity and never take off.