An income statement summarizes your revenue resources and expenses over time, highlighting program efficiency and financial health. The ultimate guide to selecting the best accounting and financial management software for your nonprofit. A well-structured financial plan will guide your daily operations and lay the foundation for future expansion, allowing your organization to align its mission with the financial KPIs. Unlike for-profit businesses, you must balance financial needs with your mission, often relying accounting services for nonprofit organizations on donations, grants, and fundraising to sustain operations. Creating a nonprofit financial plan from scratch can be a daunting task, right? But not to worry; we’re here to help you with a realistic financial plan example prepared using Upmetrics.
Implement expense tracking systems
Nonprofit financial management also includes the structures and workflows that enable your finance team to operate efficiently and effectively. Generally speaking, there are two ways to organize expenses in your nonprofit’s operating budget. The natural expense method categorizes costs according to the nature of payments made, while the functional expense method categorizes expenditures based on how they further your organization’s mission. Although considering natural expenses is helpful during the planning process, your final budget should use functional expense categorization to match your financial reports. People generally work in nonprofit organizations because they want to contribute to change.
- Transparent reporting fosters trust and supports informed decision-making.
- In a time of recession, the cost of living rises, and your nonprofit’s supporters may not have the same capability to donate to your nonprofit.
- Transparency in financial matters fosters trust among donors, stakeholders, and beneficiaries.
- For example, Sage Intacct’s scenario modeling tools help organizations prepare for emergencies and strategically deploy resources.
- If you notice your cash flow beginning to trend in the wrong direction, this is another key indicator that there may be some changes that need to be made.
- Overhead is frequently discussed and disagreed upon as a topic in the nonprofit sector.
Template 6: Nonprofit Sustainability Plan for Ensuring Long-Term Viability
For your nonprofit venture, you may consider budgeting for both fixed and variable costs that will help you ensure your nonprofit’s financial stability and effective resource allocation. Also, tailor your financial plan that ensures alignment with the nonprofit’s mission, vision, values, and specific goals it seeks to achieve. A Conflict-of-Interest policy is the first policy every nonprofit organization must develop.
Understand your nonprofit’s funding model
And with enough time and effort, it’s a process that can be richly rewarding. Large nonprofits often hire a bookkeeper, accountant, and CFO in-house since their financial needs are complex enough that they need full-time professionals managing them. However, many small to mid-sized organizations don’t have the budget to fill all of these roles internally. Instead, outsourced financial management services provide access to all of the expertise these nonprofits need at a fraction of the cost. Across all areas of your nonprofit’s operations, it’s important to maintain consistency in data entry and practice good data hygiene.
Simply put, such a plan is a tool used to help the organization or initiative – and more importantly, its goals – thrive. In this section, we’ll look at the basics of planning for the financial sustainability of your organization. Finally, we’ll close the section with some tips https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ from the field from folks who have been doing this work for a long time. The best laid plans of any organization will come to nothing if you don’t have the right people on board. This section of your financial plan should briefly describe the key people in the organization and the skills and expertise they bring with them. The cover page and table of contents are the same as any multi-page document.
The 30 points in The Charity CFO Financial Blueprint are grouped into six essential categories—each representing a core component of sustainable nonprofit finance. These aren’t just accounting tactics—they’re cultural and strategic best practices that define high-performing organizations. We created The Charity CFO Financial Blueprint to give leaders a practical, actionable tool based on real-life experience with organizations just like yours. This guide is the foundation of our fractional CFO services and reflects the systems, processes, and mindsets we implement for clients every day. In years of financial stresses, nonprofits can create best- and worst-case scenarios. For example, in the best-case scenario, revenues decrease at or close to the same level as the decrease in expenses.
- If one donor withdraws support, the organization may struggle to fill the gap.
- When filling in your nonprofit business plan template, include the type of nonprofit business you intend to be.
- Incorporating flexible frameworks, such as 501(c)(3) status combined with affiliated social enterprises or fiscal sponsorships, facilitates diversified revenue streams.
- The potential vitality of a nonprofit organization is often dependent upon the commitment of employees and volunteers to the organization’s mission and vision.
- It helps maintain financial stability, optimize resources, and support the growth of your nonprofit’s mission.
To get you started, this guide offers a handy step-by-step outline of what to consider when building a comprehensive and effective financial plan for your nonprofit. And that’s a wrap—we’ve discussed all the fundamental aspects of financial planning. By performing test assumptions and risk analysis, you can develop contingency plans to mitigate potential risks, diversify revenue sources, and make well-informed decisions.
best practices for sustainable nonprofit financial management
- The plan can be modified or adjusted for any future changes to the client’s facts or financial situation.
- Community resource mapping is a process that creates a map of community assets and resources within a defined area.
- If you’re ready to turn these best practices into action, our team of fractional CFOs for nonprofits can help.
- Effectively manage your nonprofit’s finances with Jitasa’s affordable, scalable bookkeeping and accounting services.
- Gone are the days when nonprofit organizations could create something akin to a business plan and hope for the best.
The example nonprofit updates donors regularly, breaking down revenue and expenses into a clear annual report. Keeping your strategy up-to-date will also better enable your nonprofit to respond to changes, optimize resources, and continuously align financial goals with your mission. It enables accurate tracking of funds from various sources, categorizing expenses by program, and managing restricted versus unrestricted funds effectively.