Sample Best Financial Management Practices for Non-Profit Organizations

Non-profit organizations play significant roles in a country’s economy. The success of non-profit organizations is determined by the financial management systems and practices in place. To achieve this perspective, an accountant must understand healthy non-profiting accounting practices, adopt the use of non-profit accounting software, and oblige to the latest accounting rules and regulations. Employing healthy financial practices can help build the stability and flexibility of non-profit organizations. Various studies and literature explore accounting practices that non-profit organizations can adopt to achieve short and long-term goals; practices that include establishing internal policies and controls, having realistic budget plans, understanding non-profit tax and accounting regulations, adopting the use of accounting software designed for non-profits, hiring independent professional for audit reviews, and ensuring transparency of the financial management system.

“10 Good Accounting Practices for Nonprofits”

Accounting principles that are outlined by the article that would be useful in my management practice are adopting effective internal policies and controls and assigning different financial practices to different people. Fraud is a major problem within our non-profit organization. Some of the managers are involved in misappropriation of funds for personal use and take part in the theft of assets and cash. I have realized that adopting effective internal policies and controls would help to solve the issue of fraud. Thus, I would have to come up with effective internal policies and controls that would remind departmental managers and employees the need to uphold the organization’s values and morals while undertaking their responsibilities. The policies would include outlining charges an employee or manager would face in case of involvement in fraudulent activities. I would also address the issue of fraud by assigning different financial roles. This approach would help protect the integrity of the organization’s accounting data and ensure that the honesty of the firm’s employees is maintained. This approach would also enable me to identify financial discrepancies that may arise and take immediate legal action against an employee involved in fraud.

The best accounting practice that this article outline, which I will utilize in future management is the use of accounting software. The article posits that non-profit organizations face unique accounting challenges as accounting mistakes and unforeseen expenses (“10 Good Accounting Practices for Nonprofits,” 2019). The article further argues that the best way to address such challenges is to integrate accounting software. Through integration of accounting software, I will manage to improve on various management-related practices such as budget management. I will also be in a position to provide internal control over a firm’s financial data and secure and protect the organization’s crucial information.

“12 Golden Rules of Nonprofit Finance”

The best practices outlined by the article that would be useful in my management practice include effective budgeting and understanding the costs of programs. The article argues that effective budgeting is an essential aspect of planning and control of a firm’s finances (“12 Golden Rules of Nonprofit Finance,” 2019). Adopting this practice would enable me to understand the priorities of the non-profit organization, ensure that finances are appropriately allocated to the aspects that support strategic objectives of the organization, and limit any spending that is not part of the budget plan. For the past few years, our non-profit organization has been operating without a proper financial budget. This has resulted in the firm’s inability to realize some of its objectives. Thus, effective financial budgeting practices would help the company to achieve its short- and long-term goals. Another practice that I would consider implementing is assessing and evaluating program costs before allocating finances to various resources. The article argues that effective financial management is an essential aspect for every organization (“12 Golden Rules of Nonprofit Finance,” 2019). The article, therefore, asserts that accountants must rely on accurate information when making financial decisions (“12 Golden Rules of Nonprofit Finance,” 2019). This practice would enable me to determine accurate costs of various resources before allocating the organization’s finances to each resource. This approach would ensure that finances are only allocated to resources that can help the organization to meet its short- and long-term goals.

The best approach critiqued in the article that I will adopt in my future management practice is diversifying sources of funding. The article posits that although this may be an effective approach, finding diverse sources of funding is difficult at times. Diversifying sources of funding will require putting in place different systems, structure, and communications as well as establishing strong relationships with relevant stakeholders such as the government (“12 Golden Rules of Nonprofit Finance,” 2019). This approach will also ensure that the non-profit organization has a strong cash flow to realize its objectives.

Financial Management Resources”

The approaches that this article outlines, which I would consider adopting  in my management practice include establishing policies, procedures, and internal control as well as monitoring of financial practices and performance. Since fraud is a major concern in our non-profit organization, establishing effective policies, procedures, and internal controls will help to promote ethical conduct among departmental managers and employees. The article contends that establishing effective policies, procedures and internal controls ensure that every employee engages in ethical practices that can help in achievement of organizational objectives (“Financial Management Resources,” 2020). I would also engage in frequent monitoring of financial practices and performance. This approach would enable me to to ensure that people assigned financial duties engage in ethical practices sustainable for the organization.

The approach outlined by the article that I will adopt in future is hiring of independent professionals to help in auditing of the organizational reports. The article posits that hiring of independent audit professionals helps to ensure that an audit opinion is not influenced by the relationship between an auditor and other employees at the workplace (“Financial Management Resources,” 2020). Adoption of this practice in the future would be based on what I experienced a few years ago while auditing my organization’s financial reports. I found out that my colleague and a close friend of mine had embezzled funds. Due to our close relationship, I did not disclose the issue to the management. I believe that hiring an independent auditor will ensure honesty and transparency in audit reports.

“Best Practices in Financial Management”

The approaches outlined in the article that I would adopt in my management practice include making the budget realistic and filing the organization’s account in time. The article asserts that a proper financial budget is an essential component that guides operations of non-profit organizations (“Best Practices in Financial Management,” n.d.). By making a realistic budget, I would be able to make informed financial decisions in areas such as marketing, sales, and expansion plans. Another accounting practice I would adopt in my management is filing the corporate accounts on time. Late filing of corporate accounts may lead to huge fines that may adversely impact the firm’s budget plan. To ensure that the organization does not face legal tax charges, I would file the accounts on time.

The approaches outlined by the article that I will adopt in my future management practice is ensuring transparency of the financial management system and understanding of financial reports. Transparency is important when it comes to ensuring that the area of financial management is efficient and effective. Adopting this approach will require that all organizational stakeholders are involved in the financial decision-making processes (“Best Practices in Financial Management,” n.d.). Therefore, will have to put in place the best management structures and system, which will support collaboration amongst all organizational stakeholders. Besides, financial reports provide information related to various stakeholders of a non-profit organization. Therefore, understanding the financial reports will allow me to understand various features that define given stakeholders such as government, donors, foundations and how as an accountant I can relate with them during fundraising activities.

Effective financial management is an important aspect of every business including non-profit organizations. The aspect can enable a non-profit organization to realize objectives. According to the above critiqued articles, adopting healthy accounting practices can help non-profit organizations to build stability and flexibility. I believe that lack of the knowledge about financial management has contributed to the failure of many non-profit organizations. I opine that some of the financial management practices that non-profit organizations should adopt include establishing internal policies and controls, ensuring transparency of the financial management system, and monitoring financial practices and performance. Employing these practices can help them to address various challenges they make encounter such as fraud issues. Furthermore, non-profit organizations ought to diversify their sources of income and generate revenues above their expenses from grants, contracts, and donations and adopt effective management practices to ensure that they spend or invest in business-related areas that can help them to achieve their goals.

 

 

References

10 Good Accounting Practices for Nonprofits. (2019, September 09). Retrieved from https://www.capitalbusiness.net/resources/10-good-accounting-practices-for-nonprofits/#:~:text=10%20Nonprofit%20Accounting%20Best%20Practices%201%20Have%20Internal,to%20use%20nonprofit%20accounting%20software.%20More%20items…%20

12 Golden Rules of Nonprofit Finance. (2019, August 07). Retrieved from https://www.propelnonprofits.org/resources/12-golden-rules-nonprofit-finance/

Best Practices in Financial Management. (n.d.). Retrieved from https://talentedge.com/articles/best-practices-financial-management/

Financial Management Resources. (2020, June 10). Retrieved from https://www.501commons.org/resources/tools-and-best-practices/financial-management