Occasionally, board members and managers of nonprofit organisations are constantly reminded of the need for good financial stewardship. This ensures that the organisations’ resources are well protected and used efficiently to accomplish their missions.
- Financial stewardship serves as a means to checkmate the use of resources in a nonprofit
- It also ensures the organisation’s long-term viability.
Ensuring the Success of Financial Stewardship for Nonprofits
To achieve financial success, an organisation needs to set up an integrated management system that will do the following:
- Ensure that they take into account, all transactions that are made within the organisation.
- Ensure that they provide reports of transactions carried out, whether favourable or unfavourable. Also, there is a need to ask questions where necessary, for a better understanding of the reports.
- Ensure analyses are carried out on various data types and draw reasonable conclusions that will inform the planning process.
- Ensure budgets are carefully drafted based on their analyses. In addition, prioritise long-term plans based on the current resources and future predictions.
Basic Considerations for Nonprofit Financial Stewardship
When considering financial stewardship for nonprofits, there are some key areas to focus on. They include but are not limited to:
1. Establishing Goals and Objectives: The first thing to be considered when establishing financial stewardship for your nonprofit organsation is to have a mission. The next step in carrying out the mission is to develop goals and objectives. Goals are what one hopes to achieve, while objectives define the actions that must be taken to achieve those goals. Aside from clarifying goals and objectives, measurement techniques must be in place to track progress.
2. The Ability to Understand Financial Statements: For a manager to carry out the task of a Financial Steward for nonprofits, he/she has to have knowledge of accounting and how financial statements work. Also, it is important because it becomes easy to analyse and link financial statements to challenges and seek solutions to address them.
3. Using relevant tools, frameworks, and concepts to analyse financial transactions: The process of sourcing, managing, and allocating funds is essential to rigid financial planning. Hence, financial ratio analysis, accounting metrics, and other related tools are important concepts that help in the organisation and control of a nonprofit’s financial activities.
4. Budgeting and Resource Allocation: In times of economic distress, nonprofit organisations are usually the most hit as they depend on donations to operate. This is why the issue of budgeting is important to them and must be handled diligently to prevent unnecessary shortages or misappropriation. In seeking financial stewardship for nonprofits, the ability of the potential financial steward must be thoroughly considered.
The Importance of Financial Stewardship to Nonprofits
Financial stewardship for nonprofits is crucial for the following reasons:
- The application of the right financial tools and concepts by the board or management is essential. This is because it determines the success of the organisation and its stakeholders in the long run.
- Secondly, several people who offer financial stewardship for nonprofits have the opportunity to learn on the job. This increases room for innovation. It also consequently, improves the operations of the nonprofit organisation.
- An effective finance committee shows that there is a great commitment toward financial stewardship for nonprofits. This will likely lead to a healthy build-up, allocation, and preservation of the resources necessary to ensure smooth operations by the organisation.
- Financial stewardship for nonprofits also ensures that there is a go-to man in terms of financial issues. It shows the management has a steward who should have answers to their questions and solutions to their problems in the aspect of finance.
- The presence of a financial steward also helps to ensure that the donor restrictions on donations are duly followed.
Conclusion
Whether a nonprofit organisation is just starting or is already in existence, the importance of financial stewardship cannot be overruled. This is because it sets the tone for financial growth and makes record-keeping easier for the organisation at an early formation stage.
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