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Nonprofit Finances 101: Your First 3 Steps · Nonprofit Launch Plan Podcast for Startup, Small, and Growing Nonprofits

• 0:00
  Matt Stockman: You don't have to be an accountant to be a great financial leader for your organization. You've gotta be willing though to take some simple, proactive steps because financial management isn't just about keeping the lights on. It's about making smart decisions that will help your nonprofit's mission get stronger and have more impact. Welcome to the nonprofit launch plan podcast for startups, small, and growing nonprofits. This podcast is here to help you build your nonprofit from the ground up on a strong foundation.
• 0:34
  Every episode, we give you frameworks and tools and guidance, all that you need to create lasting impact. My name is Matt Stockman. I'm your host, Stoked to have you here at nonprofit launch plan. We believe every nonprofit's got to be operating at peak performance in six key areas to be successful. Those areas are leadership, fundraising, marketing, programs and services, operations, and finances.
• 1:02
  So on every episode of the podcast, we talk about a topic that is core to at least one of these six areas. And on this episode, we're diving into the area of finances, which I get it is not a particularly sexy topic for a podcast, but it is important that we talk about it. None of us got into nonprofit work in order to stare at spreadsheets all day. And if you're a small staff and you and your team are all wearing a lot of different hats, that boring spreadsheet stuff quickly can become kind of an afterthought or something you say, I'll get to later. And I use air quotes around that.
• 1:40
  Because before you know it, it's tax time and you're scrambling trying to figure out expenses and revenue from months ago. It's a mess. So on this episode, we're going to demystify the numbers and give you three simple, non intimidating steps to start to build a strong financial foundation. We'll show you how to move past just a shoebox of receipts in the corner and gain confidence by tracking every dollar all the time, building trust and accountability with your donors and your board as well. Listen, you don't have to be an accountant to be a great financial leader.
• 2:18
  You just got to have a clear plan. And we're going to give you the beginning steps of that in this episode. Now before we jump into it, one of the biggest struggles with any nonprofit, especially in the early days, is around fundraising. Without a clear message and a clear plan, fundraising can be awkward uncomfortable, but building a foundation of funding is critical. And everything about that, if you don't have a plan, if you don't know what you're doing, can feel really scary.
• 2:47
  That's why I've built the five step fearless fundraising framework to take the fear out of asking other people to partner with you financially and to get you some more yeses early on in your fundraising journey. The fearless fundraising mini course is an easy to use workbook and five short videos that go along with it, that walk you through all five steps of the framework and will build your confidence in knowing how to invite somebody else to partner with your nonprofit financially. And when you're finished with a mini course, you'll end up with a game plan and clear fundraising messaging, which in a lot of situations that I get invited into as a coach is a huge problem. I've worked with a ton of organizations that have a good story to tell, and they're doing good work. But if people can't figure out pretty quickly what you do and how their gift can make a clear difference, they just won't give.
• 3:41
  And this mini course is going to solve all that for your nonprofit. It is free and you can get it on my website right now at nonprofitlaunchplan.com. Again, nonprofitlaunchplan.com. All right. So we're jumping into finances today.
• 3:56
  Be honest, When you hear that word, finances for your nonprofit, do you get a bit of a nod in your stomach? You got into nonprofit work because you're probably driven by the word impact, not finances. And you might be great at programming. You might be supervisionary when it comes to marketing. You could be fearless when it comes to fundraising.
• 4:18
  But when it comes to the numbers and the budgets and the bank statements and all that stuff, you just feel lost. If you're a couple of years in and your finances are still being managed by that shoebox in the corner I was talking about before, it's okay. You're not alone. And we're going to take some steps in this podcast to change all that. The truth I mentioned before is that you don't have to be an accountant to be a great financial leader for your organization.
• 4:45
  You've got to be willing though to take some simple proactive steps because financial management isn't just about keeping the lights on. It's about making smart decisions that will help your nonprofit's mission get stronger and have more impact. So today I'm going to give you three easy, non intimidating steps you can start to take right now to build a solid financial foundation for your small or your growing nonprofit. And step number one is simple, but critical, separating your money. And I mean completely separating.
• 5:20
  Here's what I mean. If you're like a lot of startup nonprofit leaders, you've probably at some point been mixing personal and organizational funds. Maybe you pay for some program supplies on your personal card and then you reimburse yourself later, or a small donation comes in and you know you made a payment on behalf of the organization on your personal card a while back, so you just deposit that donation into your personal checking account, which I get it. It seems easy, but this is a massive problem waiting to happen. From a practical and a legal standpoint, your nonprofit is a separate entity from you.
• 5:59
  So your finances have gotta be completely separate as well. The easiest way to fix this is obviously go to your local bank or credit union and open a dedicated business checking account for your nonprofit organization. Doesn't have to be fancy. Just a basic account with a debit card is a good first step. This simple act is step number one towards true financial clarity.
• 6:25
  It's gonna make it easy to track every single dollar that comes in and out of your organization because every single dollar is gonna go into this account rather than your account. And it also shows your donors, your board members, and the IRS that you're serious about managing your nonprofit professionally. And as your nonprofit grows, your banking accounts and how the finances should be separated into individual accounts, that should grow as well. And an accountant that specializes in nonprofits is gonna be able to help you with that. We'll talk more about that in just a moment.
• 6:59
  So step one, separate your money. Step two then is to track every dollar. If you're still relying on that shoebox full of receipts and invoices and check stubs, etcetera, this is where you can make a huge change. The goal is not to become a CPA overnight. The goal is to set up a simple system and stick with it consistently.
• 7:26
  You can start with something as easy as a spreadsheet with columns for the date and the vendor and the amount and a short description, or you can try a user friendly sort of accounting software. There's a lot of free options like Wave or QuickBooks for nonprofits, something that's gonna get you on the right track. And while you're doing this, you shouldn't have to do this alone. In fact, your board treasurer should be intimately involved in this. This is a perfect time to bring them on board.
• 7:56
  It's a great role for them to take on as a partner to you. And you also, from as close to day one as you can absolutely manage, hear me when I say this, contract with a solid certified public accountant with a background in nonprofit work. Accounting practices for nonprofits is not a joke. And even if you don't think you can afford it, you should pause other things in order to get an accountant on your team now rather than later. I've got enough experience to be dangerous, and most other non accountant types are the same way.
• 8:29
  So I cannot overemphasize the importance of having a pro in this area with you from the very beginning. And I know what you're thinking. Hey. We're struggling with donations. It's sort of hand to mouth around here.
• 8:42
  We're stretched too thin to be able to hire an accountant. So we'll do it when we have some more money. Do it now. Because if you don't, you probably won't have more money in the future. Even if you have to go to a board member and ask them to call in a favor or raise the money specifically from a couple of donors to cover the retainer fee, Do not go it alone.
• 9:03
  Getting a second set of eyes on your books is not a sign of weakness. It is a sign of a smart, accountable leader. Honestly, this is one of the best decisions you can make in your leadership career to have an accountant. Frankly, if I'd have been thinking about this, I could have started the episode. We're gonna talk about finances.
• 9:23
  Here's my advice. Hire an accountant from day one, the end of the episode. But but you get my point. An accountant who works with nonprofits and understands nonprofits is worth his or her weight in gold. So don't compromise on that.
• 9:40
  The overall key here for you as the leader is to put aside sixty minutes a week or at least a few hours a month to make sure your income and your expenses are logged properly. And it's not just about compliance. It's a GPS for your finances. Tracking your money shows you and everybody else if you're on budget, where your money is actually going, and if you've got enough cash to pay the bills next month. But most importantly, it's really the foundation of accountability and transparency that is so important in nonprofit work.
• 10:15
  Donors trust you to be a good steward of their money, and tracking every dollar proves you're doing just that. And you need the help of accountant to be able to do that well. So you've separated your money. That's number one. You're tracking your dollars.
• 10:29
  Number two. Now what? Step three is you've got to understand your financial story. And I'm talking about the story that your numbers are telling. Most small nonprofit leaders glaze over when they hear about financial reports.
• 10:43
  I'm raising my hand. I'm one of them. But they're not as intimidating as they seem, and I think you really only need to focus on two basic reports. One, I call the statement of activities, and two is the statement of financial position. The statement of activities is a picture of a period of time, like a month or a year.
• 11:03
  It will show you your revenue, your expenses, and whether you had a profit or a loss, which in nonprofit speak would be a surplus or a deficit. This report tells you how you've performed as a nonprofit over time. Then the other report you really should be looking at is the statement of financial position. It's different. Think of this like a snapshot in time.
• 11:26
  It shows you what you have in that moment, cash and assets and what you owe in that moment, like a credit card or a loan. The difference between those two numbers is your organization's net worth or net assets. And this report shows you the health of your organization at a specific moment in time. So statement of activities, statement of financial position, both super important reports to have as the leader of the nonprofit organization to have your eyes on. Your job isn't to be the person who creates these reports necessarily, although it's probably handy for you to learn how to create these reports.
• 12:06
  And there are a lot of tools that can help with that. And, of course, an accountant can help with that as well. But as the leader of the organization, it is your job to be the person who understands what the reports are saying. So if you need help, take them to your board treasurer and say, why are the expenses as high as they are this month? Did we bring in as much as we budgeted?
• 12:29
  Etcetera. Ask the questions, figure the reports out. These reports turn a jumble of numbers into a narrative about what's happening in your organization. They help you make smart decisions, not just guesses. So three simple steps to financial sanity for you and for your nonprofit.
• 12:46
  First, separate your money to build clarity and professionalism. Second, track every dollar to be sure that you are a good steward and build trust with your donors and your financial partners. And third, understand your story by asking questions about your basic financial reports and overall get the help of an accountant. If you don't have one, hire one today. Financial management is a skill, it's not a talent, and it's a skill that you can learn.
• 13:15
  If you want to dive deeper, there's a couple of books that I highly recommend that are written specifically for nonprofit leaders, not just for accountants. One is called Nonprofit Bookkeeping and Accounting for Dummies. You've seen these books on shelves, all the different dummy series books everywhere. For this one, nonprofit bookkeeping and accounting for dummies, don't let the title fool you. It's great.
• 13:38
  It's jargon free. It's a great guide to the basics. It really will be a good help for you. The other one I love is called Street Smart Financial Basics for Nonprofit Managers by Tom McLaughlin. This book is all about giving you the practical tools and knowledge to make smart, strategic financial decisions.
• 13:58
  So by taking these simple steps, using the resources like these, you're going to be well on your way to building a financially stable organization that can truly serve your beneficiaries and accomplish your mission for years to come. So before we wrap up the episode, if you or somebody you know is still in the dreaming phase of launching a nonprofit, I've got a free resource for you. It's a PDF I've built called From Dream to Action, Your Nonprofit Pre Launch Checklist, 10 Essential Steps for Moving from Nonprofit Idea to Impact. It's 10 things to think about as you start to crystallize your dream for a nonprofit. This tool is going to take you through 10 easy kind of first steps to move your dream for a nonprofit toward a launch plan that gets that dream off the ground.
• 14:50
  This checklist will walk you through your why, considering your first teammates, honing in on exactly who your beneficiary is, choosing your nonprofit name, your IRS application, and more. There's an easy to do action step for each one of the 10 things to consider that will bring your dream for a nonprofit into a whole lot clearer focus when you've completed it. If you want this free resource PDF from dream to action, your nonprofit prelaunch checklist, 10 essential steps for moving from nonprofit idea to impact, here's what you do. Just email me at mattnonprofitlaunchplan dot com. Say, I want the nonprofit dream PDF.
• 15:34
  Again, my email is mattnonprofitlaunchplan dot com. Just tell me, I want that nonprofit prelaunch checklist PDF. Don't forget about the other free resource too, the fearless fundraising mini course. It's a workbook and five short videos that go along with it to take the fear out of asking other people to partner with you financially. Go get the mini course.
• 15:54
  And then once you go through it, you come out with a game plan and a fundraising messaging script that's super clear. It's free on the website for you right now at nonprofitlaunchplan.com. Again, nonprofitlaunchplan.com. That is it for today's episode of the nonprofit launch plan podcast for startup small and growing nonprofits. Thank you for listening.
• 16:17
  Don't forget to hit the subscribe button so you don't miss out on future episodes. And if in some way or another, you found this helpful, a like, a share, share it with another nonprofit leader who might benefit. Leave a review on your favorite podcast website. Anything that you can do to help spread the word about this is much appreciated. Until next time.
• 16:39
  Keep making a difference.