6 Tips for Managing Financial Systems for a Nonprofit
Even in a small nonprofit organization, you want to establish careful practices about how you handle money and financial documents. If you have a one-person office, creating all the following controls may be impossible, but you should try to implement as many of them as possible:
- Store checkbooks, savings passbooks, blank checks, financial records, and cash in a locked, secure place. If you’re banking online, use secure passwords — multiword or nonconsecutive letters with numbers and symbols. Don’t write your passwords down and don’t allow your computer to remember them.
- Regularly back up financial records that you keep on computers, and store a copy off-site in a safe location.
- Assign to different people the functions of writing checks, signing checks, and reconciling bank statements. If you can arrange for three different people to perform these tasks, that’s great. If not, maybe a board member can double-check the bank statements. Look for accuracy and for anything that looks fishy, such as payments to vendors you don’t recognize . Embezzlement is rare but possible, and taking these steps is a way to detect it. Trust us, we’ve discovered such a case!
- Require two signatures on checks or bank transfers over a certain amount. There isn’t a standard amount for this practice: It depends on what qualifies as an unusually high transaction for your nonprofit. You can adopt this requirement as an internal policy and enforce it as a way of ensuring board oversight of large transactions. Although your bank probably monitors large or unusual transactions and may contact your organization if it notices unusual activity on your account, these days few banks accept responsibility for enforcing a two-signature policy on customers’ checks.
- Retain in organized files, subject to a document retention/destruction policy, all paperwork that backs up your banking documents. These documents may include personnel time sheets, box office or other records for tickets sold, receipts, and invoices. You may scan and retain them as electronic documents, if you wish. If you do so, back up the files and carefully protect all passwords.
- Keep an itemized list of any furniture or equipment you purchase or receive as donations (including computers), noting the date they were purchased or received and their value.
Blue Avocado published a helpful article, “Treasurers of All-Volunteer Organizations: Eight Key Responsibilities.”