Effective Financial Reporting Solutions Improve Nonprofit Transparency

Is your organization doing all it can to keep your donors’ and supporters’ trust? Are you using a financial reporting solution to produce transparent and accurate reports? If you plan to continue carrying out your mission for years to come, you need to do all you can to keep the trust of your supporters and an effective financial reporting solution can help you do just that.

Nonprofit organizations are facing increasing government regulations each passing year. Restrictions around the use of government grants are continuing to increase and private funders are now asking for specific measurable outcomes resulting from grant awards. With the recent proposed rule changes to A-133 and Form 990, nonprofits will be required provided extensive reports on all federal and private funding.

Being accountable in all aspects of your organization’s financial and program management has always been important; however, with the recent regulations, it is more crucial than ever to develop effective financial reports.

An organization’s accountability does not fall solely on the CFO or Executive Director; it is also the responsibility of all staff and board members who are involved in the financial management, fundraising and program planning aspects of the organization. Keep the following tips will help you maintain accountability among your supporters and funders:

  1. Make sure that you are using raised funds only for the purposes you outlined in your solicitations. Keep your donors updated on how you are using their donated funds and send out communication on a regular basis. This can be as simple as sharing a success story in your organization’s newsletter or making your annual report available on your organization’s website, or as complex as reporting on fulfilling grant restrictions, program outcomes and the impact donated funds have had on your organization. However, at the end of the day, funders need tangible proof, such as clear tracking of donor restrictions and funds spent, in order to keep their trust in your organization.
  2. Keep the lines of communication open. Ensuring accountability means allowing your supporters to communicate with you through the good times and the bad. Grant-makers and donors desire open communication, especially when things do not go as planned. Funders are not looking for justification to take the grant away; they just want to know what the roadblocks are and how they can help organizations overcome them.
  3. Don’t let your actions come back to haunt you. Remember that donors and members of the grant-making community network and talk. While your actions and communications can reinforce their decisions to fund you and gather support from other funders, they can also be a deterrent. When your organization becomes tainted in the mind of your donors, you can expect to never receive funding from that donor again. So let your actions speak for the good you do.
  4. Maintain an effective financial reporting solution to meet your financial needs. Part of being accountable means having the right infrastructure in place to assist with the necessary reporting, tracking and communications. Audits come yearly, and your organization must be prepared to provide key stakeholders, grantors and auditors with a clear trail to verify the financial accuracy of your reports. Make sure that your financial reporting solution not only tracks and reports outcome measures on financial statements, but that it can also be used to budget outcome measurements for more accurate forecasting. Information on outcome measures can be factored into the financial data and presented to the necessary constituents. An effective financial reporting solution will give your donors and grantors a clear picture of your organization, outline your intentions and ensure that your supporters see the accountability of your financial data.

A financial reporting solution can also helps organizations manage donor information. An effective system helps nonprofits acknowledge donations in a timely manner, keep record of all communication histories, maintain profiles on all donors, create follow-up reminders and personalize communications with your organization’s programs and projects.

While effective financial reporting software can help keep your organization accountable and transparent, at the end of the day, it is the people in your organization that use these tools to demonstrate transparency, accountability and financial accuracy. Contact us for more information about maintaining financial transparency.