Herd immunity will help protect you from the flu (friendly PSA: go get your flu shot), but there’s no immunity for neglected financials. Unlike that annual physical you’ve been putting off (along with that flu shot), your association’s financials require a fitness regimen that is consistent, evaluative, and compliant.
No, your organization does not likely require the stress tests that banks now complete as a result of Dodd-Frank, but your association financials should not be categorized as “set it and forget it.”
Having a fiduciary responsibility means that you cannot:
- Outsource your financials and abdicate knowledge and responsibility
- Have someone else in the organization worry about it and never report out
- Believe your budget is so small it doesn’t merit closer management
- Just not understand the numbers
- Wait until your annual report is due to think about it
Associations are most valuable as a result of the intellectual and professional contributions of their members and partners. However, with few exceptions, all require an operating budget that juggles membership dues, accounts receivable, accounts payable, etc.
How do you create an efficient financial management process that does not overburden your organization, but creates the proper safeguards to protect your cash flow?
And while you consider that. Is your organization on track with the 2016 FASB updated accounting standards that went into effect for not-for-profits, depending on their fiscal years, beginning on December 17, 2017? ASAE’s guidance on these changes from 2016 remains relevant for organizations still in process today.
In addition to those standards, the Financial Accounting Standards Board (FASB) has also begun issuing guidance that is relevant to non-profits and associations claiming similar tax status on the pending changes to the federal tax code in 2018.
If the thought of financial compliance has your head spinning, start with the basics for your association?
- How do you track income and expenses?
- Who has access to those records?
- How many people have to sign checks?
- Do you have credit or debit cards linked to your organization bank accounts?
- If yes, who has them? How are those transactions reviewed?
- Do you handle physical cash at events? How is it tracked?
- How often are your books reconciled? Who verifies their accuracy?
- How do you maintain your financial records and receipts?
- How often do you evaluate the fees you may be paying a bank, account, or others for services related to your finances?
This can seem overwhelming, but attention to detail upfront and on an ongoing basis is imperative to maintaining an organization’s financial health. When it comes to your association’s finances you need to “trust but verify.”
ASAE has recognized that there are many association leaders and staff that identify as being “not numbers people” and have developed both half day and full day training to help individuals gain a basic working knowledge.
When an association finds that they suddenly have “poor financial health” it is rarely a result of careful and diligent management. Developing best practices now, even for the smallest organizations, will ensure that you are knowledgeable and prepared boom or bust. There’s no need to fear an audit when you already know what’s in your books. And the best way to do that is to be certain your financial practices are in good health.
Todd VonDeak is the Founder and President of TVD Associates, dedicated to providing strategy and management for associations and nonprofits. He has over 20 years experience in nonprofits across industries. He volunteers with the American Society of Association Executives and regional Mid-Atlantic Society of Association Executives and regularly presents at industry conferences.