Financial planning for non-profits is one of the most common employment sectors for experts in accounting and finance. Contrary to the popular belief, these organizations still require a plethora of money-based services. Thus, the fact that they are non-profits has very little to do with the way that they handle finances. Consider, for example, how simple donations and expenses must be accounted for. Just like for-profit companies, these entities are required to do everything from withholding taxes from their employees to reporting “income” through informational returns.
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Even though non-profit organizations do not strive to maximize their bottom-line profits nor care about income, they must perpetuate healthy spending practices. This is important to ensure that the company survives in the long-run and reduces unnecessary expenditures. For instance, non-profits are often companies that utilize their own offices, assets, and other materials. This means that they must cover the expenses of things like rent, marketing, and other campaigns to promote their purpose. Thus, having a financial planner who understands the exact principle of how costs are handled would be incredibly beneficial.
Although non-profit entities are generally also exempt from things like federal taxes, financial planners can aid them with budgeting. This is a process where all cash inflows and outflows are carefully considered in order to come up with the best course of financial action. In translation, financial planners could aid with any of the following:
- Properly classifying income;
- Recording expenses and maintain the proper paper trail;
- Handling planning related to the time value of money.
Also, budgeting is needed to handle large projects that may pertain to expansions. Great examples are public institutions like universities where donor’s contributions often make it possible to build new structures.
Another aspect of how financial planning for non-profits would be useful deals with the administrative side of things. This includes everything from the low-end tasks like bank reconciliations all the way to simulations of cash flow statements and balance sheets. So, having a person who knows the right way to operate financial software and create accurate reports will make it easier to be transparent with the donors, workers, and the public in general. Additionally, financial planners also have training that pertains to international wires or domestic transfers. Although these type of dealings may seem simple, they require a lot of back-end knowledge.
Interacting with the Donors
Non-profit organizations receive a considerable portion of their operating money from charitable contributions. Meaning, individuals or other companies help them fulfill their goals by sending donations. In order for this to happen, however, they must convince people to donate. Well, financial planners can play an important role in this area as well. In fact, trying to convince donors to support the non-profit organization in question will be almost impossible absent a person who understands finances. This is because their expertise will help answer common questions and, as mentioned, ensure that a high level of transparency is achieved.
Of course, there are many other finance-based roles in the non-profit sector. Hence why a great number of professionals transitions to this sector at some point in their career. Thus, learning the ways that financial planners can promote growth within non-profit agencies helps takes advantage of their unique skills.