Nonprofit Accounting Basics

Nonprofit Accounting: Serving the Mission

Note: Articles published before January 1, 2017 may be out of date. We are in the process of updating this content.

Updated: 
Aug 17, 2020
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Though not usually involved in customer service to donors or members, the accounting and finance department of a nonprofit often provides customer service to the rest of its organization. It is responsible for providing timely information to its board and executives, program managers, and fundraising team, all of which will have different needs. Developing good relationships with budget holders and managers enables the finance team to better respond to those needs, and builds others’ confidence in the accounting department. A small accounting team will always be pulled in many directions by different priorities, but we shouldn’t forget the importance in building and maintaining respected partnerships with colleagues across the organization. This ultimately makes our work easier and much more satisfying.

Useful and timely financial information of course requires colleagues to keep up with their administrative tasks, such as compiling those pesky expense reports. In a small to mid-size nonprofits, there may be few if any staff dedicated entirely to administrative tasks, and these tasks naturally remain on the back-burner for most employees. It helps to demonstrate to budget holders and managers that they benefit from keeping those tasks up to date, in the form of more complete information. Program managers know that their funders require timely and accurate financial reporting, and they are motivated by raising and tracking funds for their programs: try to show them that you can be a valuable partner in this. Learn about your program managers and their work, discuss their reporting needs and find out what information is important to them. Show them that you can do more than collect information and spit it back out: make sure that information has context and meaning for your audiences.

The development or fundraising team in your organization should also be a close partner in preparing funding proposals, reporting revenue, and moderating expenses. Good communication among program, development, and finance staff will result in stronger and more successful funding proposals. Cultivate a relationship with development in which accounting is a valuable resource and partner in selling the “product” of your organization’s mission. This relationship will also help you keep abreast of revenue pipelines and cash flow forecasting. Sometimes it may seem like finance and development speak a different language, especially when it comes to the revenue recognition rules that accountants must follow, but that is just another reason why communication is key. And your fundraising team isn’t only worried about revenue. They can be a strong partner in monitoring your functional expense ratio, as they understand the importance of this ratio to donors.

Keeping up with daily tasks and transactions and basic reporting requirements is certainly enough to keep us all busy. Requests and inquiries from our colleagues can be unwelcome at times, when we feel that our plate is full enough already. But we should do our best to refresh our perspective, reminding ourselves that much of what we do with our colleagues is what elevates our work to a more fulfilling level. Our goal should be that the accounting department isn’t seen as just the ones who pay the bills and ask for receipts. We know that our work is far more valuable than that, and we should take the time to show our colleagues how our work serves them and the mission.