Nonprofit organizations strive to make the world a better place. Some nonprofit organizations, however, suffer from a lack of financial due diligence that could result in budget concerns at the close of the calendar year. Here the Maryland CPAs at Fitzpatrick, Leary & Szarko discuss year-end financial considerations for nonprofits.
Nonprofits Should Continuously Monitor Budget and Future Financial Outlook
Nonprofit organizations strive to tackle an important, meaningful challenge: to substantially improve the world around them. Budgetary concerns are often overshadowed by these grand missions—after all, when working to actively improve the community is your organization’s goal, financial discussions may seem irrelevant in comparison. But, meeting financial goals is extremely important to both an organization’s board and its executive for year-end reporting purposes. As such, at the end of the year it is important that nonprofits take stock of their financial outlook, as well as their current budget, to ensure that the organization begins the new year on solid financial footing.
Nonprofits Should Seek Counsel From Experienced Accounting & Consulting Firms
First, nonprofit organizations should seek counsel from a competent and experienced financial executive. A seasoned financial manager will remain transparent about the state of the organization’s budget and help to determine the organization’s potential for future improvements. Although ridding the organization of the burden of paying an executive salary may be tempting, a substantial investment in a financial officer who can steer your nonprofit in a positive budgetary direction will help to ensure its future success.
It is also vital that nonprofits inform the IRS of any alterations they make to their mission and vision statements. As nonprofit organizations grow and develop, they may determine that their efforts would benefit the community in a previously unexplored area of service. Organizations that choose to alter their goals must ensure that this new message is communicated to all interested parties, including the Federal Government, to avoid paying unnecessary taxes or losing their tax-exempt status in the coming year.
Nonprofits Should Organize Financial Forms & Build Annual Budgets
Structure a calendar detailing the most important dates throughout your organization’s financial year, including the filing of your Form 990, grant application deadlines and audit requests. Be sure to keep track of any intermediate deadlines that may fall between grant applications, as they can be more difficult to remember, and occur more frequently throughout the year.
Finally, nonprofits should prepare for a financially responsible new year by creating an annual budget. While it may seem like a standard practice, many nonprofit organizations do not take the time at the end of each year to create one. Building an annual budget based on the year’s expenses can give organizations an idea of what additional goals they may be able to achieve, as well as what projects should be tabled until the following year.
Seek Help From Maryland Accounting & Consulting Firm Fitzpatrick, Leary & Szarko
Although the end of the calendar year can be a festive occasion filled with enjoyable donor events and holiday cheer, it is important to keep in mind best practices for ensuring your nonprofit’s longevity. Prudent financial decisions such as those described above will help to extend the life of the organization, allowing it to focus on achieving its mission with financial peace of mind. For more information on how to ensure the financial stability of your nonprofit organization, contact the CPAs at Fitzpatrick, Leary & Szarko today.