Running a charity or not-for-profit organisation requires more than just the best of intentions. Without responsible financial management, things can go awry in no time. It is also important to have a clear understanding of compliance obligations eg. with the Australian Taxation Office and the Australian Charities and Not-for-Profits Commission.
Here are 3 top financial management tips to note:
It is important to ensure that your organisation is keeping a set of accounting records that tracks income, expenditure, assets, liabilities, etc. Without an accurate and up-to-date set of books, it will be difficult to check on the financial health of your organisation, including knowing whether it is able to pay its debts as and when they fall due. It is also easy to over-spend without being aware of it.
A good cloud accounting software packages can greatly simplify the process. Glint Accountants highly recommend Xero as it is easy to navigate and use. A non-for-profit organisation get 25% discount off Xero subscription fees.
- Internal Controls
Strong internal controls help protect your not-for-profit against fraud. Some ways to reduce the risk of fraud/theft include at least 2 authorisations/signatories for all payments, and good cash handling procedures such as segregation of duties and prompt banking of all cash.
- Budgets & Forecasts
Think of budgeting and forecasting as a financial goal setting and decision-making process for your organisation.
Budgets are set targets for income and expenditure which then guides the organisation’s decisions as the year progresses. Budgets can be set by analysing historical financial patterns while making adjustments for specific plans and commitments for the coming financial year.
Actual figures should be regularly compared to budgets to identify major discrepancies and for corrective action to be taken where necessary.
Regular forecasts allow you to closely monitor your finances and develop strategies to fix problems before they become major issues. Forecasting is not easy but is one of the most important financial activities to undertake as it helps your organisation to ensure that it will always have sufficient cash to operate.
Disclaimer: This blog post has been simplified to cover some key points about good financial management for a non-for-profit organisation. This should not be construed as advice from Glint Accountants.
Geraldine Lee is Fellow of CPA Australia and has been a mentor for the Mentor The Treasurer Program with Pro Bono Australia since 2015. Contact us at Glint Accountants for advice on how to improve your organisation’s financial management procedures.