The Key to Sound Financial Management
Tuesday, 1st April 2014 at 8:58 am
To survive, Not for Profits need to maximise funding while maintaining financial integrity, says bookkeeping practice Successful Alliances.
Not for Profit organisations play a vital role in every community in Australia. And financial training plays an important role in every Not for Profit.
The Australian Government’s Productivity Commission has reported how the highly diverse Not for Profit sector is driven mostly by mission or community purpose. Yet to survive, Not for Profits need to maximise funding — every cent counts — while maintaining financial integrity.
This supports them to remain sustainable, properly funded and assured they have the cash flow needed to operate efficiently and achieve their strategic goals.
So why are these principles not always easy to translate into action?
“It’s natural and most comfortable for Not for Profits to focus on what they do best, which is to dedicate time and energy on helping others in line with their mission statement,” says Karen Groves, Director of Successful Alliances, a bookkeeping practice specialising in helping Not for Profits get strength in numbers.
“This often means that Not for Profits do not concentrate as much as they perhaps should on matters outside their comfort zone, including financial matters, even though collectively they deal annually with billions of dollars of income nationally.”
Successful Alliances, having worked with Not for Profits for more than a decade, warns that not having sound financial management policies, processes and procedures in place can create a small ripple that ends up being a massive wave. Sound financial training of staff is key.
“It helps staff understand their financial obligations, helps them read financial reports and be more professional when applying for grants and acquitting grants,” Groves says.
“It also enables staff to interpret financial data accurately and be more alert to what doesn’t look ‘quite right’. This positions Not for Profits to effectively manage real or potential risks.”
An added bonus is that financial training is a legitimate and important form of professional development, no matter what size the Not for Profit is. It also motivates staff to take an interest in this aspect of the organisation’s operations.
Sound financial management for Not for Profit is also critical for demonstrating that money collected—whether through government grants, donations, fundraising and sponsorships—is being used wisely.
“Not for Profits understand financial matters can be hard work and how the going can get tough given they’re not experts in financial recording and reporting,” Groves says.
“It’s often best to save time and money by partnering with a company that is expert in this area. This helps get the most out of funding and ramps up efficiency.”
Groves says the menu of services Not for Profits can choose to outsource is extensive.
“Services that Not for Profits can outsource, to ensure their funding is working as hard as they are include, financial reporting, cash flow, bookkeeping services, audit preparation, budgeting, as well as BAS preparation and electronic lodgement,” Groves says.
Groves also recommends that Not for Profits engage an external expert to conduct an overall financial health check, streamline procedures and pinpoint areas for improvement. Other important tasks can include acquitting grants.
“This builds the confidence of funding bodies and Boards that the financial data they receive is accurate, sound and reliable,” Groves says.
“And it motivates funding bodies to provide further grants.”
The benefits of using a specialist company for financial services are many:
Quality, error-free reports, which are easy to understand and improve transparency.
Efficient operations between the Not for Profit, their Board and their auditor.
Instant and up-to-date knowledge on financial matters.
Reduced financial risk and ability to deal with risks efficiently and smoothly.
Freedom to concentrate on implementing strategic goals.
Save time, money, effort from wasting precious time struggling with financial matters.
Not for Profits should take stock and ensure they budget properly for outsourced financial expertise.
“It’s the best way to move forward,” Groves says.