Nonprofit Good Practice Guide

Johnson Center at Grand Valley State University

Financial Management  Last updated 2/12/2009

Financial management is one of the most important practices that an organization can be skilled in. With the challenges of accountability and regulations facing today’s nonprofits, an understanding of the basics can help to ensure that your organization is fiscally responsible. This topic will help you understand basic practices in financial management, and build the basic systems and practices essential for a healthy organization.

Accounting

Accounting is a system which provides information about finances of an organization. In financial management, accounting includes bookkeeping, standards, in-kind contributions and managing other financial transactions.

Financial Reporting

Financial Reporting is the collection, analysis, summarization and presentation of financial data which can be in the form of balance sheets, income statements and cash flow, or any supporting statement that is intended to communicate an entity's financial performance.

Human Resources

Human Resources ensures the personnel policies and practices are applied fairly and consistently to protect and provide staff and volunteers with a safe work environment conducive to productivity. Financial management deals with wages, compensation and benefits in relation to employees, board members and volunteers.

Legal Considerations

Legal Considerations are factors governing sound judgment and lawful decision-making. An organization must be aware of the legal responsibilities and obligations entrusted in them to minimize legal ramifications and lawsuits. Financial management supports the legalities of lobbying, advocacy, contracts, risk management and public support test, in addition to other rules and regulations.

Sustainability

Sustainability is the ability of an organization to develop strategies of growth and development that enable indefinite functioning. Sustainability of an organization can be achieved through endowment and social enterprises.

Taxation

Taxation is the act of taxing an organization. Financial management in nonprofits requires diligent record keeping and a good understanding of the 990 document.