Once the holiday frenzy has subsided, and the year winds down, it's time to shift our focus to an important season: preparing for year-end financials. This critical period demands that businesses and nonprofits alike review their financial performance, make strategic decisions for the upcoming year, and get ready for tax time and audits. In this blog post, we’ll provide 7 tips to help you finish the year strong and set the stage for a powerful start in the new one.
1. Get your data in order
Have you ever put together a puzzle, only to discover a missing piece? Preparing for your nonprofit's year-end financial tasks begins with a crucial step: ensuring you have all the data before assembling the big picture. Collect all your financial records and ensure transactions throughout the year have been accurately logged. Verify that all accounts are current and reconciled for the year. It's not just about catching errors; it's about building a good habit of financial vigilance as well.
Accurate and up-to-date financial records are crucial for various reasons. They provide transparency in how contributions are utilized, maintain compliance with legal requirements, and enable confident and informed decisions for budgeting and planning. By taking these initial steps to establish accurate financial records before diving into the rest of the year-end processes, you will set yourself up for a smoother transition into the new fiscal year.
Key Takeaway: Before diving into year-end financials, take the time to ensure the data is in place. This sets the stage for a seamless year-end process and clear financial reports with actionable insights.
2. Show donors some love
As the year wraps up, it's crucial to check all donor contributions and send out year-end giving statements or tax receipts. These statements help donors with their taxes by providing accurate information about their charitable giving. Sending them in a timely manner will help ensure they can complete their own year-end tax filings smoothly.
When sending out these statements, consider adding a personal touch to strengthen the connection between you and your supporters. It's not just about checking off year-end paperwork; it's an opportunity to tell a story and show appreciation for those who believe in your mission!
You can use this communication to share examples of how their support has helped and all the amazing things their contributions helped you achieve this year. By highlighting upcoming projects or initiatives that may resonate with them, you can keep them engaged and enthusiastic about supporting your organization in the future.
Key Takeaway: Transform your year-end giving statements from simple tax receipts into opportunities to express gratitude, share achievements, and outline future plans to keep donors engaged.
3. Review your fund balances
Reviewing your year-end fund balances and project reports will help you understand how specific initiatives performed and plan for the upcoming year. This allows you to gauge the success of your projects, identify areas for improvement, and make informed decisions moving forward. It’s particularly important if you have any ongoing projects or fund balances that may span multiple years.
Look beyond the numbers! Review the outcomes of the projects, feedback, and evaluate the effectiveness of each project. Identify any factors that may have contributed to success or challenges faced. Then review the resources used this year and the available resources planned for next year.
If you're not familiar with fund accounting and want a handy resource, check out this blog on nonprofit fund accounting.
Key Takeaway: Take a look at your year-end fund balances and project reports to see how they did, find areas to improve, and know where they stand for the next year.
4. Review Your Cash Flow
When reviewing unpaid bills, don’t forget to also review your records for any uncashed checks older than one month, which could have been lost, stolen, or misplaced. Reaching out to vendors or recipients allows you to reissue payments if necessary and stop payments on old checks so that you don’t have too many outstanding liabilities.
During the bustling holiday season, mailed checks often have a higher risk of delays, losses, or tampering. Opting for electronic methods over traditional checks could also be a way to help you ease one potential worry in the midst of the holidays.
Equally important is following up on money owed to your organization; whether from donors, clients, grants, or other sources. Check if promised pledges haven't arrived as expected and establish a plan for reminders, fostering open communication. This proactive approach ensures a healthy cash flow and builds positive relationships with financial stakeholders.
Key Takeaway: Tackle outstanding bills and follow up on outstanding pledges to keep your cash flow healthy.
5. Share your financial story
If you have a bookkeeper or accountant, plan a strategy session to talk through your financials and address any unclear numbers. When sharing your nonprofit's finances with its board and other supporters, simplicity and clarity are key. Financial statements tell your story using numbers, providing insights into your organization's performance and accomplishments over the year. These reports are not merely about financial transactions; they paint a holistic picture of your organization's well-being.
Developing robust and transparent financial reports fosters trust among your supporters and ensures that your narrative remains comprehensible. It will allow you to connect with your audience by highlighting the positive impact your organization has made throughout the year. Additionally, it serves as a means to show the true costs it may take to sustain your nonprofit's impact so that you have a strong case when applying for funding.
Key Takeaway: Prepare financial statements that offer a straightforward view of your organization's progress and overall health.
6. Prepare for the coming year with a budget!
Creating a budget and gearing up for the new year doesn't promise a flawless journey, but it’ll help you start with a sturdy foundation. This proactive approach offers a roadmap for your organization, enhancing your adaptability and decision-making abilities as the year unfolds.
Start by assessing your nonprofit's financial health, identifying strengths, and pinpointing potential challenges that could come up in the new year. Define realistic financial goals aligned with your mission and strategic priorities and break down your budget into the core areas of focus you want to track for the new year.
And, as mentioned, while a budget provides some structure, recognize the dynamic nature of the nonprofit landscape. Embrace flexibility, allowing for adjustments in response to unforeseen challenges or opportunities. Also make sure, when possible, to keep a buffer or emergency savings as well. This proactive approach equips your organization with the financial tools needed to thrive and adapt to anything that may come up.
Key Takeaway: In the wise words of Dwight D. Eisenhower, "Plans are of little importance, but planning is essential."
7. Wrap-Up The Financials: End the Year Strong and Don’t Forget to Breathe!
As you wrap up the financials and conclude the year on a strong note, it's essential to acknowledge the hard work and dedication that went into these year-end tasks! Take a moment to breathe, give yourself a well-deserved pat on the back, and take a break. Celebrate the milestones achieved, both big and small, and recognize the hard work you and your team have done throughout the year.
A moment of reflection and self-appreciation not only recharges your energy but also sets a positive tone for the upcoming year. Remember, your efforts contribute to the success of your organization, and taking care of yourself is an integral part of ensuring sustained success!
Key Takeaway: Finish paperwork, finish the books, and don’t forget to take a moment for you and your team to celebrate and breathe as you close out the year.
As you go to wrap up your year-end financial tasks, we hope these tips were helpful to you! Remember that these steps are not just about closing the books; they are about laying the groundwork for a successful new year. From organizing your data to expressing gratitude to donors, reviewing fund balances, and preparing for the future, each step contributes to the overall health and resilience of your organization.