Should Your Nonprofit Use Quarterly or Monthly Financial Statements?

The complex accounting demands of running a nonprofit organization can quickly outgrow the resources available to manage them.

While many nonprofits have a need for two or three full-time employees to manage financial and accounting needs, few can afford to do so. That is one of the many balancing acts that define success in the nonprofit sector.

As a result, some nonprofits forgo monthly financials in favor of quarterly statements to save time and money. It’s a practice, however, we do not recommend to our nonprofit clients. Here’s why.

Maintaining accurate and timely financial records is essential to support the mission. When monthly records go unanalyzed until the end of the quarter, small errors can escalate, budgets may be exceeded and necessary actions are delayed. To satisfy the expectations of multiple layers of oversight that include a board, funders, the public, the IRS, and other regulatory agencies requires a consistent approach to ensure that reliable and up-to-date financial information is accessible when you need it.

Quarterly financials may save you some effort and expense, but they are not a good substitute for monthly financial statements, which enable ongoing tracking of financial performance, early identification of issues, and informed decision-making.

Key Benefits of Monthly Financial Statements

Peace of mind: A nonprofit can’t afford inaccurate recordkeeping. Nonprofits answer to their funders and the public, among others, and there is a direct line between financial clarity and credibility.

Protection against turnover:  In an industry where turnover of volunteers and staff is often high, quarterly financials can leave you vulnerable to numbers that are significantly out of date or errors that go uncorrected for months.

Better decision making: Solid monthly financials provide you with an up-to-date view of your financial condition that you can use to quickly resolve discrepancies, fine-tune your processes, and answer questions like:

• Can I afford to offer new programs?
• Does it make sense to hire additional staff?
• What does my cash flow planning look like?
• Can I make a major purchase or investment?

Monthly financial statements provide a window you can use to track progress across short and long-term goals and move confidently toward meeting them.

Ability to provide timely information when requested: When every source of funding can come with different reporting requirements, solid monthly financials provide the foundation you need for reliable up-to-date reporting by project, by donor, or however you need to slice it.

Holistic Accounting Support for Nonprofit Success

When your nonprofit organization begins to outgrow your financial processes, it’s time to look for expert support. With Kirsch CPA Group as your partner, you can grow your reach without adding staff. Our holistic approach is designed to ensure up-to-date transparency into your financial health and internal processes, including monthly cash flow.

We can help you enhance your processes, improve internal controls, prepare compilations, reviews, and audits, navigate tax compliance, and provide accurate and timely reporting for internal and external sources.

Reach out to a member of our team to learn more about our services for helping nonprofits strengthen their financial processes and grow their missions with confidence.

Contact Us to Learn More About Nonprofit Accounting Support

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