Finishing the year strong allows not-for-profits to be less stressed as they head into the new year and audit season. Ensuring that everything is caught up at year-end and handled correctly gives your organization a sense of peace. Here are some tips to help you stay ahead of potential chaos and start your new year calmly.
Financial Completeness
It’s important to work with your accountants to ensure all accounts are reconciled. Begin by encouraging the development team to notify the accountants of any contributions or multi-year pledge agreements received during the last quarter of the year, particularly those for which cash hasn’t been received. GAAP may require revenue to be recognized in the current year. Also, reach out to any organizations that you receive in-kind contributions of products or services from and request a letter of support as supporting documentation. For example, pro bono legal services are common, so your organization would need a letter from its lawyers detailing the donated hours and hourly rates, or simply the total amount of fees donated to your organization. This will need to be recorded on the year-end financial statements.
Prepare for the annual financial audit by reviewing subsequent cash receipts and disbursements, and checking to ensure everything is included in the proper period. Review your current year’s activities to ensure you have the proper support, particularly regarding revenue recognition issues.
Compare your budget to actuals to help ensure transactions are recorded correctly. If something looks off, investigate to ensure proper treatment. Make sure you have explanations for all material variances. This helps plan for next year, but also puts you ahead of the questions the auditors will ask.
Contact Donors
Ensure any last-minute year-end giving campaigns are set up and ready to launch. Make sure you have a tracking system in place to help with proper revenue recognition. This will also help with confirming that the amounts on the year end acknowledgement letters that evidence their tax-deductible donations are correct.
Prepare Required Filings
Having a checklist of requirements for federal, state, and local filings will help you keep on track. Some of the crucial filings to include are the 990, 1099s, W-2s, and charitable solicitation registrations. They aren’t all due at the year’s end, but making sure you are aware of what needs to be completed and their deadlines will help keep things running smoothly.
Budget and Goals
Now is a good time to finalize your budget, review your programmatic goals for the current year, and set new ones for the coming year. Gather feedback from your clients, staff, board members, and others who have a stake in your organization. This will ensure you meet the organization’s constituents’ needs and establish financial accountability and transparency for the coming year.
Engage Your Board
Including your organization’s board of directors in the budget process and having them help with programmatic goal setting can be beneficial. Schedule a year-end board meeting to assist management in reviewing the organization’s performance, discussing strategic direction, and confirming their commitment to hold the organization accountable for next year’s goals. This can encourage your board to be active in the organization and help them fulfill their fiduciary responsibilities. Active boards can help an organization grow its mission.
Acknowledge Your Staff
Expressing appreciation to your staff, volunteers, and other partners makes them feel good and builds morale and loyalty towards the organization. However, it’s critical to ensure that any gifts provided are documented in accordance with IRS reporting requirements.
Year-end can be a busy time, but by prioritizing financial organization, timely communication, compliance, and expressing gratitude, you can end the year on a high note. Thoughtful year-end planning not only helps your organization fulfill its mission but also lays out the groundwork for even greater success in the year ahead.
If you need expert guidance to ensure a smooth year-end process, contact a CBIZ not-for-profit professional today.
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