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Managing the money in a small non-profit organization

When you’re running a small non-profit organization there’s always a lot to keep up with, and it can be difficult to devote as much time as you’d like towards managing your money.

While you can get away with doing just the basics most of the time, doing more will put you in a better position if things go wrong and will give you a much better chance of growing your non-profit over time, and keeping it in robust financial health. These tips will help.

Take the time to budget

Keep close track of money before it’s spent by drawing up regular budgets and integrating project budgets with your main one. Always allow 10% to 20% for overspend, depending on the level of risk in each area. Be realistic, do your research before projecting costs and make sure there’s clear accountability for what gets spent in each area.

Keep communicating about cost

Just as you’ll need advice from others within your organization to make initial cost projections, you’ll need to make sure that you get feedback from them about what’s happening with costs in reality. This means that people need to feel able to tell you if costs have got out of control or if they need you to find extra money so that work can be completed.

Focus on cashflow

More important than how much you have in your savings or what’s being spent on individual projects is how well you can balance money going in and out of your organization. This should be your first point of focus. It’s better to be a small but agile organization than a big one with spiraling debts, and a healthy cashflow will make everything else less stressful.

Keep something in reserve

Every organization needs to be able to reach deeper into its pockets sometimes due to unforeseen events, so make sure that you always keep some money in reserve. You should aim to be able to cover basic running costs and pay costs associated with your premises for a minimum of two months even if you have no income.

Find diverse sources of funding

In order to reduce the risk of finding your organization low on income, it’s best to ensure that you have funding coming in from multiple sources. Don’t rely on just one or two donors or grants, no matter how generous they are. Always keep an eye out for additional sources of income even if you’re disinclined to pursue them immediately.

Know when to say no

Most non-profits find that the funding they’re offered frequently comes with strings attached and that they need to bring projects in under budget in order to have anything left for basic running costs. Offers of funding like this can put other parts of your organization under strain if they require a lot of work to be done. Be realistic about what can work for you.

Promote financial awareness

Even if you’re the main person responsible for managing money in your organization, you won’t be the only one interacting with it, so it’s important that you keep everybody else informed about the financial situation and to make sure they understand it. Your job will be much easier if they have a sensible attitude to spending and know what is and isn’t possible.

Take advice on opportunities

If you have somebody advising your organization on financial matters, along the lines of what Alex Friedman of Jackson Hole Economics does, don’t just ask about day to day things – take advantage of the opportunity to get advice on how you can expand your non-profit in practical, sustainable ways so that it can do more of what it’s good at.

Address financial problems straight away

Facing up to financial difficulties in a small non-profit can be daunting. Many people simply try to ignore them and hope they’ll go away, but of course, they usually don’t, and neglected problems often get worse. It’s important to have the courage to grasp the nettle and take whatever action is needed to deal with problems as they arise.

Understand your responsibilities

Even as a non-profit, you have a responsibility to maintain accurate accounts and keep the government informed about the financial activities of your organization. This means that you have to stay abreast of what needs to be submitted and when, and you also need to make sure that you’re informed about any changes in those requirements.

Although this might seem like a lot to keep track of, you’ll soon get the hang of it and your non-profit will be stronger as a result. You’ll find it easier to make cost-saving measures without jeopardizing core activities, you’ll develop a better credit profile in case of future borrowing needs, and you’ll be able to direct money more efficiently towards the activities that matter most.