For charity organisations, protecting your finances is crucial for smooth and sustainable long-term growth. While this is true for any business, charities, as fundraising entities,  inherently face certain financial obstacles that can lead some organisations into dangerous territory.

That’s why knowing the ins and outs of your charity or not-for-profit is the first step to safeguarding your organisation’s finances.

Analyse what you have

Analyse what you have

Charity organisations primarily rely on donations from groups and individuals to fund their work. But the specifics of this factor can give you great insight into the knowledge that will help you safeguard your charity’s earnings. To begin, make a list of where your donations are coming from year to year. Here are some common sources of income:

  • Grants (government, private and community grants, program-related investments, etc.)
  • Donations (from individuals, foundations or private groups)
  • Fund-raising events

Once you’ve put together information on where your charity’s funding has been coming from, use trends and details about each income source to project your future income.

Are you receiving annual grants?

Do you rely on a handful of large donations from private parties?

Are your fund-raising events gradually growing and bringing in more money every year?

Now that you have a detailed understanding of your charity’s income, create a similar analysis of your spendings. What are you spending money on? Some expenses to look at include:

  • Overhead costs of running your charity (Remember, the work you do is charitable, but it doesn’t mean you’re all working for free. And it costs money to do good! What are you spending on a monthly basis to keep things going?)
  • Big event expenses (Fundraising almost always requires putting money out before getting money in. What have you been spending on each of your fundraising events?)
  • The little things (It’s a cliché, but it’s true. The little things add up. Take note of the random expenses and try to find a pattern. While you’re at it, take note of any that might have been a little unnecessary).

When you’re through, critique your expenditures by making direct connections between costs and rewards. This will put some perspective on your spendings, perhaps giving you a little push to cut costs or shift focus. Not only is this a good practice for maximising your charity’s budget, it also shines some light on the successes and weaknesses in other parts of your organisation. After all, it’s all connected in the end, so managing each division of your charity with efficiency and effectiveness will only help other aspects of your organisation improve.

Think about who’s watching

Bookkeeping is, of course, necessary for any successful business. A notable particularity for charity organisations, however, is that your expenditures are held to a higher standard. That is, if higher-ups are making millions, or your organisation is sitting on large sums of money while asking the public for more, you might receive some unwanted attention from patrons and potential donors.

Another overseer to keep your eye on is the government. Charity organisations often receive certain benefits and tax exemptions, so it’s not surprising that they’re also held highly accountable for their actions, and watched more closely than tax-paying groups.

A surefire way to suddenly lose a sum of money is to misstep and not adhere to the rules that apply to you. You don’t want to run into problems that end up bankrupting your organisation so stay on top of your legal responsibilities to avoid unnecessary hassle.

This can be as simple as making a 3-year calendar marking important due dates, compiling a checklist of bills and due dates that you can refer to at the start of each month, or filling your office with coloured post-it notes (which perhaps isn’t the most fool-proof system).

Whatever your method, always have a backup reference in case something goes awry, and stick to it consistently so that you’re always one step ahead.

Look where you’re going

With your bookkeeping and due dates under control, looking toward the future is key to safeguarding your charity’s finances. You should bear the following questions in mind:

  • Are we prepared for an unexpected budget cut?
  • A sudden pull-out from one of the main donors?
  • Do we have a backup plan for our backup plan?

Now that you have your fiscal ducks in a row, it’s time to look forward. Plan ahead. Think of possible roadblocks to come, and imagine all that is possible in the future.

Secure your charity’s longevity by keeping enough savings on-hand to catch you in a fall.

You can’t predict the future, but you don’t necessarily have to. By keeping an attentive eye on your present financial circumstances, and looking just a few steps ahead all the time, you can adjust to the small obstacles as they come and safeguard your charity’s finances with confidence and grace.