Non-profits work hard to raise funds. They invest in workshops and guidance to learn fundraising techniques and increase funds raised. In contrast, workshops and guidance about how to control the receipt of those donated funds are limited, if they exist at all. That’s pretty amazing!
Making sure that all donated funds are controlled and accounted for is vital to an organization’s financial health, as well as the health of its reputation. Having checks and balances for donated funds can prevent fund “leaks” that create budget shortages. Protecting donations as they are received means not having to raise even more funds to replace what was lost.
By addressing the following four areas, non-profits can find and plug their donation “leaks”:
Capture all donation receipts
Identify all the ways that funds come into your organization – online, in the mail, events, and walk-ins. Make sure that donation receipts are verified for every way that donations come to you. How to do that and how often it should be done may be different for each type of donation, depending on the volume, level of automation and other factors.
Verify all bank deposits
Bank deposits may come into your account from different sources, depending on how funds are received. Third parties, such as credit card processors, are also involved in some deposit transactions. Even with all of today’s automation, errors can occur. Checking on the receipt of all deposits allows for timely follow-up and assists with the reconciliation process.
Identify and record all donor restrictions
Honoring the donor’s intended use of his or her gift only happens when the restriction is identified and recorded. Processes to capture and record the donor restriction upon receipt saves time having to research and allocate donations appropriately later. Failing to honor donor intent is a breach of trust that impacts donor’s likelihood to give again.
Reconcile bank and ledger accounts
All bank statements and donation records should be reconciled with accounting records at least monthly. Accounts with a high volume of transactions, such as merchant accounts used for on-line credit card donations, might require a more frequent reconciliation using on-line bank transaction information.
Detecting and preventing donation loss requires non-profits to control the receipt, tracking, and recording of funds as they are received. Paying attention to some basic donation checks and balances goes a long way to safeguard the funds that non-profits work so hard to raise.