In my last post I shared some New Year’s Resolutions, and TechSoup had a similar idea with a series of technology resolutions, including #3: This Year, We Will Manage Our Finances Better. This is a great resource that rounds up available nonprofit financial management and accounting options. It explains the different products (with links to their TechSoup pages) and even has some resources to help you find the best software to meet your needs. For anyone unfamiliar with TechSoup and their nonprofit discounts, add that to your 2010 to-do list.
Here are a few other things for that to-do list.
Assess Your Hyperlocal Conditions
We can all agree that local conditions vary. I just returned from a brief vacation to sunny Florida, and these words have never felt more true. Nonprofit Quarterly took used idea as the theme for their Winter 2010 issue.
Local Conditions
There are many factors that impact your nonprofit, such as your funding sources, field of service, and the needs of your constituents. Let’s think of these as the local conditions. The Minnesota Council of Nonprofits and Minnesota Council on Foundations have updated information on how the economy is affecting funders and Minnesota nonprofits in general. National Organizations such as The Foundation Center, NFF (view information from 2009 or take the 2010 survey), and the National Council of Nonprofits all have good resources that can help you take action. However, these reports can only take you so far.
Go Hyperlocal
The most useful information is the “hyperlocal” conditions – what is happening on the ground at your nonprofit. As our ED, Kate Barr, says in her article for Nonprofit Quarterly:
“In all forecasts, ‘local conditions vary,’ and the most relevant information is the situation at an individual nonprofit organization. Only by clearly understanding its own financial position, strengths, and risks can a nonprofit develop strategies to respond to the economy and plan for the future.”
How can you get a handle on the conditions at your nonprofit? Our Assessment of Recession Risk and Preparedness for Nonprofit Organizations is a tool designed to help you quickly assess your organization. By answering these 20 questions, you will identify potential risk factors, immediate priorities, and proactive steps to take right away. Keep in mind; this is a first step, not an in-depth organizational assessment.
Whatever is happening on the ground at your organization, the Recession Preparedness Assessment provides useful information to help you better understand what’s happening and develop strategic responses. You can read the full article in Nonprofit Quarterly or download the Assessment from our website.
Re-Set Your Internal Controls
Internal controls are another factor that can impact a nonprofit’s stability. Smaller organizations in particular are often cited for lacking adequate segregation of duties in management letters. Blue Avocado’s recent article, Five Internal Controls for the Very Small Nonprofit, is a great starting point to help you strengthen your internal controls. CPA Carl Ho outlines five main categories that are crucial, and do-able, for even the smallest organizations:
- Set the control environment
- Assign responsibilities
- Physical controls – lock it up
- Cash, always have two people count it together
- Reconcile the bank statement
Read the whole article for additional suggestions and examples. For more on this topic, you can participate in our webinar on February 22nd, Financial Policies for Internal Control. You’ll receive sample board and management policies and learn how to customize them for your organization.
Know Your True Program Costs
More on everyone’s favorite topic – overhead! (If you missed our past blogs about overhead, and why we think it’s an overrated metric, start here.) Last week the Chronicle of Philanthropy hosted a discussion on Making Smart Decisions About Overhead Costs. What cannot be said enough is the importance of knowing (and then budgeting for) the true, full costs of your programs and operations. As Daniel Stid of The BridgeSpan Group stated:
It goes without saying (but perhaps we should say it!) that having a clear view of the full direct and indirect costs of delivering a program is essential. We often encounter situations in which clients have failed to budget even for their full direct costs let alone so called overhead.
It has to be said, explicitly, because too many organizations do not know the actual costs of delivering their services. We have a workshop dedicated to this topic, and I encourage any Minnesotans with questions to attend our April training Calculating True Program Costs. If you don’t live here, or don’t want to wait until April, check out Nonprofit Cost Analysis: Introduction from the BridgeSpan Group. It’s a thorough introduction and very helpful, although it may not be the most accessible to those without a strong financial foundation.
Update Your Bookmarks!
Intrepid nonprofit accounting guru and friend of the blog Alan Strand has has moved. Not-For-Profit Accounting remains a helpful resource, but for new content from Alan visit Nonprofit Accounting, a resource from the Nonprofit Center in Washington State.
