When it comes to getting an objective view of your organization's operations, most nonprofit executives and board members are too close to judge. One of the hardest parts is determining where the gaps are and what to do about them.
VAL IDATE AND IMPROVE
Nonprofits need more funding. Funders need more confidence. More confidence comes from demonstrated operational competence. Funders with more confidence give more. Operational competence can be measured and improved quickly.
Assessing competence against Best Practice or pre-determined industry standards takes all the guesswork out.
Check Out Essential Best Practices #1 - #3
ESSENTIAL BEST PRACTICE #1
Our organization has procedures to handle pledges or income from the sale of products or services, which include billing, follow-up and collection of amounts due, along with written documentation that substantiates both the product or services provided, pledges made, and amounts to be collected.
Why It’s Important
It's important to have procedures in place for the timely billing of customers or donors to collect amounts owed as soon as possible.
Consequences for Non-Performance
Without clear procedures that require timely billing and collection of service fees, an organization can easily fail to bill for services provided, have excessive accounts receivables, or uncollectable accounts resulting in lost revenue or a shortage of operating cash.
Our Recommendation If You Are Not Compliant Now
Develop reasonable procedures for accounting for and managing Sales and Accounts Receivables. Formally assign this task to an accountant or bookkeeper who regularly does this as a core part of their job on at least a monthly basis.
Key Element:
Business Process & Reporting Systems
Competence Level:
Level 1
ESSENTIAL BEST PRACTICE #2
Our capital needs (for equipment, property, etc.) are reviewed at least once a year where priorities are established and funds are pre-identified for capital acquisitions.
Why It’s Important
Capital purchases often require a significant outlay of cash, which may find some organizations in debt. These types of purchases should be planned well before they are made so the operating plan for the larger organization is not adversely affected.
Consequences for Non-Performance
Without an annual plan for capital purchases, necessary equipment or property might not be acquired or other program needs may suffer if their funding needs to be redirected to the capital purchases.
Our Recommendation If You Are Not Compliant Now
As part of the annual budget process, create a worksheet identifying which capital assets need to be purchased during the year and identify the timing and source of funding for each.
Key Element:
Business Process & Reporting Systems
Competence Level:
Level 2
ESSENTIAL BEST PRACTICE #3
Our CFO works closely with the leader of Fundraising, Marketing & Communication to ensure synergy between overall budgeted revenue and the timing and amounts of funds being raised, and periodically reviews the wording of donor appeals to determine whether money spent on certain marketing pieces could be classified as Program costs.
Why It’s Important
It's critical for the CFO to understand and have input into many aspects for Fundraising, Marketing & Communications to ensure these areas are appropriately reflecting the financial status of the organization. It's also important for the CFO to understand the content and nature of external communications in order to accurately allocate their costs between Program, Fundraising, and Administration.
Consequences for Non-Performance
Without a clear and current understanding of Fundraising, Marketing and Communications content and materials, stakeholders could be misled about the financial status of the organizations, resulting in loss of donors or legal claims. Further, inaccurate allocations of costs to Fundraising, Marketing and Communications could also mislead the public and regulators, thereby creating liability to the organization.
Our Recommendation If You Are Not Compliant Now
Conduct periodic meetings with the leaders of Fundraising, Marketing & Communications to ensure everyone has a clear and current understanding of, and agreement with, information being communicated to all stakeholders, including the Board, donors, the public ,and regulators.
Key Element: Business
Process & Reporting Systems
Competence Level:
Level 3
Download all 18 Essential Best Practices for Nonprofit Compliance HERE
About the Authors
BOB LIPPS, ATTORNEY AND CPA
Bob Lipps is Co-Founder and Principal Advisor at The Global Center for Nonprofit Excellence® and Co-Inventor of OpX360®. Bob serves on the boards of CCM and SIM. His previous roles include Managing Partner of Ten Talents Partners, Executive Director and Practice Leader of Lockton Insurance Brokers, Chairman of Stewardship Insurance Ltd., and General Counsel, CFO and Board Member for Wycliffe Bible Translators. Bob holds degrees from Arizona State University and Texas A&M University School of Law and is a member of the TX and FL Bars and the TX State Board of Public Accountancy.
MARC STEIN, MBA
Marc Stein is Co-Founder and Principal Advisor at The Global Center for Nonprofit Excellence® and Co-Inventor of OpX360®. His previous roles include Vice President and Executive Team Member of Joni and Friends International Disability Ministry, President of Gospel Light Worldwide, and National Director of the International Bible League and various other roles within the professional services arena. Marc holds degrees from California Coast University and is the author of Referral Rainmaking, How to Build Your Business Through Professional and Client Referrals. He currently serves on two boards.
About THE GLOBAL CENTER FOR NONPROFIT EXCELLENCE
The Global Center for Nonprofit Excellence® is an orchestrated network helping nonprofits, funders and industry experts work better together for greater impact through increased operational effectiveness and strategic introductions where:
- We Make Nonprofits Better.
- Nonprofits can know their operational levels and the three most important things to do next; Funders can gain greater confidence in nonprofits and the confidence to give more;
- and Industry Experts can have a dynamic, focused connection to better serve both nonprofits and funders.
About OPX360®
By combining nonprofit best practices and the simple use of artificial intelligence, you can now measure 60 operational practices in all six areas of nonprofit operations and know the three most important things that you can do to improve your operational competency fast in each of those areas.
Any of the OpX360® assessments can be taken individually or together, depending on the needs of your organization.
HOW I T 'S BUIL T
Statements are grouped into sets of related Best Practice statements called Key Elements and each individual statement is categorized into one of three Competency Levels.
Those levels of competency are:
- Level 1: Core operational practices necessary to perform effectively.
- Level 2: Sophisticated practices that enhance overall performance.
- Level 3: Leading edge practices that enable an organization to deliver the highest level of operational performance.
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