All nonprofits can experience troubling times, especially since they are more likely to have inconsistent funding and smaller staffs; however, if they are able to quickly and efficiently diagnose the problem, they may be able to work back toward prosperity. While there are a number of factors that can cause problems within a nonprofit, there are certain accounting and finance errors that can set a nonprofit back several months.

Financing your nonprofit

Nonprofits often rely on funding from donors and investors who are looking to make a positive impact on the world, but these lenders are often inconsistent. The uncertainty of available capital may force nonprofits to seek out other investors, or turn to banks, credit unions and credit cards to ensure they can continue to meet their financial obligations. This can be one of the greatest challenges for a nonprofit manager. In order to best manage this challenge, non-profits must have a better pulse on their future financial requirements. This requires forward looking financial planning. For this exercise, non-profits should consider investing in budgeting software or engaging an accountant that provides financial forecasting services.

Practicing strong accounting

Too many non-profits fail to recognize the benefits of accrual over cash-based accounting.  As mentioned above nonprofits need to have a better pulse on their financial requirements, accrual accounting helps them do this. Cash accounting often results in an inaccurate financial picture because the timing of obligations incurred and cash in/out often varies. By having a knowledgeable accountant on-board, nonprofits will be able to keep track of accounts payables/receivables, accruals/deferrals as well as tax liabilities to make sure they’re recognizing the obligations incurred, instead of just cash out the door. An accountant can also work with the nonprofit manager on a budget to provide insights on where the organization can save money and where it can afford to increase its spending.

Know who you’re serving

Many nonprofits have a dedicated staff that will go above and beyond the call of duty to make sure the company is a success; however, like all businesses, lethargy and the occasional “bad apple” can spoil morale and productivity. Nonprofit managers need to have employees who are worth every dollar, and these leaders shouldn't be afraid to make the necessary changes if someone isn't working out.  As a leader of a nonprofit, your obligation is to your mission statement, and, consequently, your charity should be directed toward the end goal, not under-performing employees.

Developing and sticking to a sound strategic plan requires making hard calls, and nonprofit heads need to make sure they make decisions that keep the health and success of their organization the top priority.

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