Before starting the graduate program at Full Sail University, I was pretty clueless about how a business ran financially (besides basic financial management and economics). I was even more oblivious to how non profit organizations kept afloat being that they are a not for profit business. Soon into the program, a spark ignited in me and I realized I wanted to create a non profit. I quickly learned that in order to operate a successful NPO, I would have to be fiscally responsible (even more so than a for profit business). So, I am going to share what I have grasped about financial management in NPO’s.
To begin, I would find a fiscal sponsor. A fiscal sponsor would be beneficial to me because I am unsure how long the non profit will exist. A sponsor would also benefit my NPO because it is a small organization, which means that I would not have to undertake the bookkeeping, administrative, and evaluation requirements. I like this idea especially because the sponsor maintains fiscal control while I maintain most of the program control.
Second, I would hire a board treasurer. The accounting expertise I would get from a treasurer is pivotal since I do not have strong skills in this area myself. I would have the treasurer manage the finances of the non profit, set up a bookkeeping system, provide a budget, generate financial statements, and develop financial policies and procedures.
Third, I would ask for advice and get references from other non profits (of similar size and nature) about which bank to conduct business with. At the start of my non profit, I will not have that much money to deal with, but it is important to start a checking account and establish a credit card account. Choosing a good banker is of utmost importance because it will help me get financing and provide me with business operation advice. Another way to choose a banker is by contacting the Small Business Administration. This will tell me which banks in my area have the best small business lending records.
Of course I will have to know more than the former three items listed, but my graduate study has given me perspective on the basic processes involved in financial management. From here, learning about accounting systems, financial forecasting, and financial statements will be easier.
McNamara, Carter. Free Management Library. Authenticity Consulting, LLC. 2010.
Interesting reflection about a non profit organization. Understanding the successes and the failures of other similar organizations will put your organization far ahead of the pack when it comes time to make important decisions. The key to success is accountability and responsibility. Assigning specific responsibilities to members of the staff (especially the financial staff) will ensure that the organization's precious resources are being used the best way possible.
ReplyDeleteAn interesting tidbit about nonprofits: One of the ways nonprofits generate cash is from the leftover cash they have saved up. Investing this additional cash properly is absolutely crucial. If the organization can hold enough extra cash on hand from donations, it can eventually generate enough cash from interest and return on investments that it can operate without relying so heavily on donations.
Non-profit hospitals are a great example of this.