3 Simple Steps to Financial Sanity for Your Nonprofit
I get it. Most of us didn't get into nonprofit work to stare at spreadsheets all day. We're driven by the word impact, not finances.
If you're running a small nonprofit, you and your team are probably wearing a lot of hats, and the "boring spreadsheet stuff" can quickly become an afterthought. But here's the truth: you don't have to be an accountant to be a great financial leader for your organization. Financial management isn't just about keeping the lights on. It's about making smart decisions that will help your nonprofit's mission get stronger and have more impact.
So, let's create a basic plan to begin to understand the numbers. Here are three simple, non-intimidating steps you can take right now to build a solid financial foundation.
Step 1: Separate Your Money. Completely.
If you're like many startup nonprofit leaders, you've probably mixed personal and organizational funds at some point. Maybe you paid for program supplies on your personal card, or you deposited a small donation into your personal account. While it might seem easy, this is a huge problem waiting to happen. Your nonprofit is a separate legal entity from you, so its finances must be completely separate as well.
The easiest fix is to open a dedicated business checking account for your nonprofit. This simple act is a critical first step toward true financial clarity and professionalism. It makes it easy to track every dollar that comes in and out, and it shows donors and the IRS that you are serious about managing your organization professionally.
Step 2: Track Every Dollar.
If you're still relying on a "shoebox full of receipts" to manage your finances, it's time for a change. The goal isn't to become a CPA overnight; it's to set up a simple system and stick with it consistently. You can start with a simple spreadsheet or use a free accounting software like Wave or QuickBooks for Nonprofits.
This is also a perfect time to bring in your board treasurer to partner with you. And here's some advice I can't overemphasize: hire a solid Certified Public Accountant with a background in nonprofit work. An accountant who understands nonprofits is worth their weight in gold. Having a professional second set of eyes on your books isn't a sign of weakness; it's a sign of a smart, accountable leader.
Tracking your money isn't just about compliance; it's a GPS for your finances. It shows you and your donors that you are a good steward of their money, which builds trust and accountability.
Step 3: Understand Your Financial Story.
Financial reports can seem intimidating, but you only need to focus on two basic ones to start: the Statement of Activities and the Statement of Financial Position.
The Statement of Activities shows your revenue, expenses, and whether you had a surplus or a deficit over a period of time. It tells you how you've performed.
The Statement of Financial Position is like a snapshot in time. It shows what you have (cash and assets) versus what you owe (like loans) at that moment. It tells you the health of your organization right now.
Your job as the leader is to understand what these reports are saying. They turn a jumble of numbers into a narrative about your organization, helping you make smart decisions instead of just guessing.
By taking these simple steps, you can begin to build a financially stable organization that can truly serve your beneficiaries and accomplish your mission for years to come.
I have a podcast episode that dives into this topic more… access it right here:👇🏻