Non profit finance - just like putting pennies in buckets!First off, you are not an accountant, although sometimes you feel as if you are expected to be one. Having a good basic knowledge and some vocabulary of finance will go a long way towards more confidence. Remember that financial recording is more a matter of detail, careful categorization and some good common sense more than any mysterious set of processes. As the accountant to some of the Hearst money told me, ‘it is just a whole bunch of buckets- put the pennies in the right one.’

Good general ledger codes:

First, let’s decode some of the basics:

A general ledger is an accounting summary or worksheet divided in two sections–debit and credit. A ledger is the primary financial reporting record because all financial statement data comes from general and subsidiary ledger information also known as entries. General ledger coding is important because it helps staff accountants and bookkeepers report accurate journal entries.

General ledger codes relate to five account types:

  • Asset: what you have
  • Liability: what you owe
  • Revenue: what you have brought in
  • Expense: what you have spent
  • Equity: the difference, and what you have in “value”

A general ledger accountant reports asset, liability and equity items in the balance sheet and records revenue and expense items in the income statement, aka the Profit and Loss Statement.

When in doubt: do two things: first check with your accountant, and two, if you don’t have one, create a clearly titled account name and general ledger code, for any new program or initiative.

Constant data input and verification

Keep an eye on the money

This is day-to-day life of your staff. Each and every dime that comes in or goes out must be listed and categorized. Detail is important here and if there is any one single piece of advice I can offer: keep on top of this stuff regularly. Don’t let it pile up and then become the most hated pile of paper in the office. Keep notes on every transaction, even if brief, with some notation of when the posting has been done.

Set aside the time daily, weekly and monthly to look at this without any other distractions. It will help you not only see what is there, catch wild and out- of -place numbers, but will give you greater confidence about what is going on. I suspect you will find few that will care or know as much as you do, and this discipline will provide handsome dividends in your grasp of your financial place in space.

Clear titles for accounts

Cute is fine for your hamster, and naming legacies for planned giving and the honor board, not in the books. Give your accounts clear titles, then subtitle if you wish. I once inherited a set of books in which all major gifts were listed as a separate income accounts under the name of the donor. Sorting that out was not one of my most fun jobs. If a fund is a scholarship, say so; if the income is from a solicitation, list is as such.

This of all things is not brain surgery, but sometimes needs to be said. Make life easier on everyone: be clear and direct. Think of every account as a clearly labeled bucket, and make sure the right stuff goes into, or comes out of, the correct bucket.

Ask for help if you need it

As any kind of director and manager, your hands are full. There are expectations all around, mostly screaming “Me, first!”. The expectations for nonprofit accounting and financial reporting are increasing daily and the consequences of a mistake or misstep can be dire. While it may not seem fair, and it isn’t really, there is no avoiding it.

There is help to be had in many shades, levels and abilities. First off, know yours. Do some homework with the local nonprofit management center; most large cities have them, with online nonprofit groups who may provide references and resources. This is no time to try to figure it out, muddle through or fake it.

Believe me, spending hard earned funds on managing finances seems a bit paradoxical, how you manage and report your organization’s financial stewardship is crucial. Don’t let your hard work and important mission get bogged down in financial stuff.
Learn it, know it, do it. You will be glad you did.

Having learned this the hard way, I will be happy to offer guidance and resources that I found helpful and life-saving; call me on 310 828 6979.

Read Fear & Loathing: Non Profit Finances (Part 1)

Cindy Lauren - Lauren Associates - non profit consultingCindy Lauren is the Principal of Lauren Associates – non profit consulting

As well as advising Executives and Boards on all aspects of nonprofit management, the firm specializes in developing fundraising solutions for all sizes of organizations.

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Image Credits:
Magnify Glass and Money by Images_of_Money on Flickr