Reviewing Your Financial Picture
Watch your finances as you proceed through operations, and especially through fundraising activities and special events preparation.
It is important to examine how much you can dip into your funding and still have enough to continue operations. Plan ahead and never expect the next fundraiser to solve your financial woes, even if the last three years have proven a particular event to be a major success. Ultimately, look for a balance in maintaining enough funding to keep your organization running smoothly to meet your goals and further your mission for years to come. Depending on the needs of the organization, nonprofits report they spend 20 to 50 percent of their money on fundraising.
Organizations do not want to build up excessive amounts of money. If you find that you are operating with significantly more money in reserve than your anticipated needs, you should sit down with your board or key members of your group and decide how to put the money into programs that better serve the community and further your goals as an organization.
A nonprofit can show money in reserve above and beyond its operating expenses, but this money cannot be used to benefit any individual in the organization or to back a political candidate or a commercial venture. It must be used for the designated mission of the organization.
To get a good feeling of where your organization stands financially, you need to review your financial statements. Ask yourself:
Are you sticking to your budget?
Are there extra expenses beyond those for which you had planned?
Are you keeping administrative costs down?
Are contributions being used for their intended purposes?
These are among the questions you will need to ponder to get an adequate assessment of where you stand financially. If, for example, you find the percentage of money going toward administrative costs is too high, you will know where to make adjustments. Naturally, the nature of the organization and the size and scope of the fundraising activities will factor into your analysis.
Also, consider the age of your organization. In the first year, the setup of the office and establishing of the presence of the organization will likely require more money than after you are up and running. It's important to monitor and analyze the finances of any nonprofit organization or grassroots fundraising activity on a frequent basis. Organizations with monthly or bimonthly board meetings often require a financial report at each meeting.