Finance

Common Accounting Terms for Not-for-profit Organisations

Having a good level of financial understanding can enable an organisation’s board members to make better decisions about the financial future of the organisation they serve. Understanding common accounting terms can help boards to better understand and systematically record financial transactions, track spending and revenue, and interpret financial statements. While they may not have the expertise to conduct reviews or audits, boards are in a unique position to provide oversight of accounting activities.

Director Financial Literacy

As a board director understanding financial statements is not just about fulfilling a role; it’s about proactive stewardship and ensuring your organisation’s success. If the complexity of financial duties seems overwhelming, know that you are not alone. Research from QUT indicates that even seasoned directors regularly engaging with financial statements can feel this pressure (Bettington, 2023). Director financial literacy is widely defined as ’the ability to read and understand the fundamental financial statements - balance sheet, income statement and statement of cash flows’.

The Challenge of being the Treasurer

Glenn Poole: Well, good afternoon. Thank you for coming back so promptly for this final session this afternoon. My name’s Glenn Poole and I’m an Executive in Residence at the Australian Centre of Philanthropy and Nonprofit Studies at QUT’s Business School. With a long career in the state treasury and seven years as a state auditor general, I’ve little difficulty in acknowledging the power and influence of money within society.

The Funding Conundrum

The board of a not-for-profit organisation is ultimately responsible for the organisation, its impact and its activities. But what does this really mean? Many directors find it difficult to understand their responsibilities and often seek clarification, especially with respect to their role in ensuring financial sustainability and the part they play in fundraising and building organisational profile. Board directors are responsible for governing in line with their legal and fiduciary duties.

Financial Metrics: A Guide for NFP Boards

It’s easy to count how much money you’ve made. It’s not so easy to demonstrate that you really are helping children to reach their full potential, or how effectively you’ve raised awareness of a rare disease. Yet not-for-profit (NFP) organisations are increasingly expected to quantify their achievements – and the directors must ensure they’re measuring the right things. “The board sets the strategic direction and will want to track the organisation’s progress and achievement of these objectives,” says Andrea Petersen, Managing Director, Not for Profit Accounting Specialists.

Asset Protection in a Commercial Environment

Recent activity in the not-for-profit sector has made it clear that many organisations are beginning to operate in a more commercial manner. With such changes occurring, not-for-profit organisations may wish to consider how to best protect their assets. Commercial ventures can, in some instances, create environments in which it is possible that customers or other third parties will sue, increasing the importance of asset-protection. Equally, the commercial activities run by not-for-profits can generate significant income, which is important to protect.

All Your Eggs in the One Basket? The Importance of Diversifying Income for NFPs

Boards no doubt want to see their organisations deliver impact long into the future. And grow this impact, too. Unpredictable government funding and increasingly competitive philanthropy makes it hard to plan out future growth without the safety net of financial sustainability. Sustainability is not a year-to-year proposition, but by its very nature a long-term pursuit with short-term actions. It allows the capacity to plan ahead with predictability, and decrease dependencies on revenue streams that are out of your control.

Distressed Balance Sheets – The Board’s Role

“Things are pretty tough in the market these days”. How often do we hear that? I’ve rarely heard anyone say over the years that “conditions are ideal right now”. Whether you are a commercial business or NFP organisation, staying in business is tough. Cash is hard to come by from government, donations or trading activity, so it’s inevitable that financial challenges arise from time to time in many organisations. In some cases, this can be an isolated hiccup, but in other, it is the sign of a more serious structural failing of the organisation’s finances.

The Art of Financial Management

Mr. Micawber’s famous, and oft-quoted recipe for happiness highlights the importance of strong financial management: Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery — Charles Dickens, David Copperfield It is important for boards of non-profit and community sector organisations to focus on strong financial management. These organisations typically have external stakeholders on whom they rely for funding.

Property Portfolio Dilemmas Faced by CEOs

Of the many challenges faced by a CEO, including resourcing, staff, clients, regulations, technology and finance, the property portfolio of a non-profit organisation is typically viewed as something that is static and therefore seldom proactively managed until a major issue develops. CEOs from the non-profit sector find that most issues arise from having a disparate property base accumulated through circumstance or allocation, rather than planned development. Hence, many problems stem from legacy or historic reasons that have simply not been adequately addressed in the past.