It’s the end of the year (I know, we can’t believe it, either!) and along with holiday parties, gift buying, and goal setting, lots of our clients are thinking about their finances, especially in terms of whether or not they are in good shape to end the year.
At Lumix we work with many organizations in the nonprofit sector. Lots of leaders in that space see finances as a puzzle that is tricky to solve. Add to that the busy schedules of the holiday season and you’ve got a recipe for stress.
Like every holiday baker knows, winging it is not going to result in a batch of tasty treats for all to enjoy. Some things are best left to a more precise process. We can’t promise your kitchen counters won’t be covered in flour this season, but we can say that following our 5-step recipe for sweet success will help you get your organizational finances tidy, clean, and ready to ring in the new year.
1.Start with the Right Ingredients: Accurate and Up-to-Date Financial Records
You can’t bake chocolate chip cookies without chocolate chips and you can’t build a gingerbread house without sticky icing. Accurate, up-to-date financial records are essential starting ingredients for year end.
You can tell your financial records are in good shape when all your income, expenses, and transactions are recorded correctly and, ideally, done so in real-time.
If your organization is practicing a retroactive reporting style, resolve to change that in 2024. This will help you make informed decisions throughout the year and ensure that your financial statements are reliable when it’s time to report to donors, board members, and government agencies, which is incredibly important.
- Match Up Your Measurements: Complete Reconciliation Procedures
When it comes to recipes, it’s important to make sure the amount you throw into the mixing bowl is what the recipe called for…matching the numbers on the recipe to the numbers on your measuring cup. The same is true when you are going through your reconciliation procedures.
Reconciliation is where you match the numbers to ensure everything adds up. Your bank statements, accounts payable, and accounts receivable should all be in sync with your records. When going through your nonprofit accounting carefully, you will catch any discrepancies or errors and ensure your financial statements reflect the true financial health.
- Follow the Steps: Compliance with Accounting & Governmental Standards
Staying on the right side of accounting standards and compliance regulations is like following the steps of any recipe. If you don’t check every box along the way, the consequences could be disastrous and leave a bad taste in the mouth of your donors and ruling bodies.
Your nonprofit accounting must adhere to not only the standards but also any specific regulations that govern your industry or funding sources. Being in compliance not only keeps you out of trouble but also builds trust with donors and supporters. It’s a way of saying, “We’re using your contributions wisely and responsibly.”
- Organize and Arrange Carefully: Preparation of Year-End Reports
If your cookie recipe calls for spacing out the cookie dough with two inches of space between, it’s best to follow that direction so you don’t end up with a giant blob that isn’t recognizable. Year-end reports are like that. You have to organize and arrange the data carefully for everything to look “right.”
A well-prepared year-end report shows your nonprofit’s financial picture with clarity and transparency. It should include financial statements like the balance sheet and income statement. When handled correctly, everyone who needs to review them will instantly understand what they are looking at and dive right in with confidence.
- Taste Test: Budget vs. Actual Analysis
Once your confections come out of the oven, naturally you are going to want to take a taste to see if they turned out the way you planned. This is what performing a budget vs. actual analysis does.
Conducting a budget vs. actual analysis allows you to see how well your nonprofit accounting actually performed in relation to your financial goals and budget. Analyzing it helps you identify areas where you’ve exceeded expectations, fell short, and ultimately, where you need to make adjustments moving forward. It’s an invaluable tool for making financial decisions in the coming year.
Wrapping up the year doesn’t have to be a stressful mess. If you follow Lumix’s sweet recipe for year-end success, you’ll get all of the information you and all of your stakeholders need, served up in just the right way.
If this all sounds like something you strive for, but you recognize your strengths lie outside of the metaphorical accounting kitchen, Lumix can help. We work with nonprofit organizations and leaders like you and would love to talk. Contact us today and let’s get cooking.