Leaders of nonprofits that are just getting started, or are relatively small, are generally focused on getting their organization up and running, raising money, and delivering on their mission. That’s to be expected.
Properly tracking the financial activity of the nonprofit, and installing best practices, does not tend to receive the attention it deserves early on. There are accounting rules that nonprofits must follow, and best practices that should be implemented right from the start.
Here is why it is a smart choice to invest time, and even some money, to make sure your accounting gets off to a good start.
To make informed decisions, a nonprofit leader needs accurately recorded data and meaningful reports that provide useful information. Without these you are flying blind and may make incorrect and costly assumptions. Additionally, having an accounting file that is set up correctly and structured strategically is critical.
Whether you rely on memberships, donations, grants, or sponsorships (or some combination of these) to provide revenue to fund your organization, stakeholders are more inclined to support nonprofits that share well-organized and accurate financial statements. Financial statements that are professionally prepared are usually required by foundations and government agencies that provide grant funding.
Save Money in the Long Run
It is always more costly to go back in time to fix accounting errors than it is to do it right the first time. If you have been relying on data that has not been entered correctly, or does not follow GAAP and FASB guidelines, then you are at risk of making ill-informed decisions.
A Clean First Audit
If you are approaching your organization’s first audit, you will want to ensure the accounting file being audited will not be subject to adjustments by the auditors. You will also want to have all your financial schedules in order and have compliant procedures in place for auditor review.
Keep Pace with Organizational Growth
When you are recording transactions correctly and have best practices and compliant procedures in place from the start, your organization’s accounting function will be positioned well to accommodate growth. Adjusting historical transactions and implementing best practices and compliant procedures after you have experienced growth can be time consuming and costly.
How Can You Get Started?
Most nonprofit leaders are not equipped to address the demands of nonprofit accounting. Consulting a nonprofit accounting expert can be invaluable. Chazin & Company will soon be offering an affordable option – NFP SmartStart – designed specifically for start-up and small nonprofits. NFP SmartStart consultants provide just the right amount of guidance to ensure your start-up or small nonprofit has a sound accounting function in place, to include a proper accounting file setup, accurate data, best practices and compliant procedures, and informative reports.
NFP SmartStart will be available on January 10th but you can learn more about this new service today.