Making Mindful Choices in the World of Nonprofit Accounting

Each day, your nonprofit organization faces many choices. One area where choices are of supreme importance is in the area of nonprofit accounting. Choosing how you classify donations, whether to give a trusted employee a raise, or how to comply with the new FASB 958 regulations are all choices that must be weighed and prioritized based on urgency.

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When faced with myriad choices, it is easy to feel overwhelmed. As Washington DC nonprofit advisers, we have worked with many nonprofit clients to help them identify and prioritize key elements of their accounting activities for maximum business impact. Here are several tips to help you make mindful choices about your financial and accounting needs.

Three Tips for Nonprofit Accounting to Help You Set Priorities

  1. Focus on strategic clarity: Clarity of purpose, mission and vision is essential for all good business management, but especially for nonprofit accounting. When you clearly identify your organization’s mission and vision, you will find it easier to prioritize the essentials. Activities in direct support of your mission are funded first, with secondary activities funded next, and so on. Developing strategic clarity can be difficult if you are not used to this type of work; a nonprofit business adviser can help.
  2. Diversify income sources: In other words, don’t put all your eggs in one basket. Relying upon one source of funding for the majority of your organization’s support can be catastrophic if something happens to the funding source. Grants may end; donations can dry up if the economy sours. Diversification of your income stream is equally as important as diversifying your investments. Diversification spreads out the potential risk if one stream dries up.
  3. Measure outcomes: Measuring outcomes isn’t just for the for-profit world. Nonprofits should also measure the outcomes of their efforts. Measuring donor campaign results, educational activities, and other projects just makes sense. It is only measuring how well you achieved your objectives that you can prioritize funding in future years. Knowing that one activity achieved its objective while another fell short can help you decide whether additional funding, staffing, or publicity can change the dynamic or not.

Asking the Tough Questions

Asking the tough questions about initiatives can also help you set your goals. It may be difficult to learn that a favorite activity doesn’t meet your revised mission statement, but it is better to learn this now than to continue spending resources unwisely.

Ask yourself:

  • Are we continuing any activities just because we’ve always done them? Some companies continue with charitable events, marketing campaigns or other activities in the same manner year after year simply because “it’s what we always do.” Always ask if the activity serves the organization’s best interests now.
  • Are we holding onto “pet” projects? Larger organizations with a strict hierarchy sometimes fall prey to the ‘pet project’ syndrome. It may be the director’s favorite activity, or a cherished idea. It’s done simply because so-and-so asked that it be done. You must have the courage to question even pet projects to prioritize the vital ones from the rest.
  • Does this serve our constituents? No matter what activity you are considering, asking if it serves your constituents’ best interests helps keep your focus on what you do best. This helps you prioritize your budget and accounting activities around what matters most.

As Washington DC nonprofit advisers, we know how hard it is to ask these questions and to change the status quo. It may be helpful to bring in business advisers to help you sort through these issues dispassionately.

At Beck & Company, we offer CPA services, nonprofit accounting, and business advisory functions for nonprofit organizations. Contact us today if you would like more information about our services or help with your nonprofit business needs.