Wrapping Up Fiscal Year-Ends to Prepare for the Upcoming Year
As the fiscal year comes to a close, it's crucial for nonprofits to wrap up their financial activities and prepare for the upcoming year. Properly closing out the fiscal year ensures your organization starts the new year on a strong footing. Here’s a comprehensive guide to help your nonprofit wrap up the fiscal year-end effectively and set the stage for a successful new year.
1. Conduct a Financial Review
Thorough Examination:
Review Financial Statements: Examine your balance sheet, income statement, and cash flow statement to ensure all transactions have been accurately recorded.
Reconcile Accounts: Reconcile all bank accounts, credit card statements, and investment accounts to ensure your records match the financial institutions' statements.
Analyze Budget vs. Actual: Compare your actual financial performance against the budget. Identify any variances and understand the reasons behind them.
2. Close Out Accounts
Ensuring Accuracy:
Adjust Journal Entries: Make any necessary adjusting journal entries to correct errors or account for accrued expenses and revenues.
Write Off Bad Debts: Identify any uncollectible receivables and write them off your books.
Depreciation and Amortization: Ensure depreciation and amortization expenses are recorded properly.
3. Conduct an Internal Audit
Ensuring Compliance:
Internal Controls: Review your internal controls to ensure they are effective and adhered to. This helps prevent fraud and errors.
Compliance Check: Ensure compliance with relevant laws, regulations, and grant requirements. This includes tax filings, labor laws, and donor restrictions.
Documentation: Ensure all financial documents are organized and stored properly for easy access during audits.
4. Prepare for External Audit
Readiness:
Engage Auditors: If your organization requires an external audit, engage your auditors early and schedule the audit dates.
Audit Preparation: Gather all necessary documents and financial records that auditors will need. This includes bank statements, receipts, contracts, and board meeting minutes.
Audit Committee: If you have an audit committee, schedule a meeting to discuss the audit process and any areas of concern.
5. Review Fundraising Performance
Evaluating Success:
Campaign Analysis: Evaluate the success of your fundraising campaigns over the past year. Identify which strategies worked well and which need improvement.
Donor Retention: Analyze donor retention rates and trends. Determine how many new donors you acquired and how many you retained.
Donor Feedback: Gather feedback from major donors and supporters to understand their perspectives and improve future engagement.
6. Strategic Planning for the New Year
Forward-Thinking:
Set Goals: Based on your financial review and fundraising performance, set realistic and achievable goals for the upcoming year.
Develop Budget: Create a detailed budget that aligns with your strategic goals and includes projected revenues and expenses.
Program Planning: Review your programs and initiatives. Plan any new programs or adjustments to existing ones based on performance and feedback.
7. Communicate with Stakeholders
Transparency:
Board Meeting: Schedule a year-end board meeting to review financial performance, discuss audit results, and approve the budget for the new year.
Donor Communication: Send a year-end update to donors, highlighting your achievements, financial health, and plans for the upcoming year.
Staff Meeting: Hold a staff meeting to discuss the year-end review, celebrate successes, and outline goals and expectations for the new year.
8. Update Policies and Procedures
Continuous Improvement:
Review Policies: Review and update your financial policies and procedures to ensure they are current and effective.
Training: Provide training to staff on any new policies or procedures, especially those related to financial management and compliance.
Technology: Evaluate your financial management systems and software. Consider upgrades or new tools to improve efficiency and accuracy.
9. Celebrate Achievements
Acknowledgment:
Recognize Successes: Take the time to recognize and celebrate the successes of the past year. This includes staff, volunteers, and donors who contributed to your achievements.
Team Building: Plan a year-end celebration or team-building activity to boost morale and foster a positive organizational culture.
10. Prepare for the New Fiscal Year
Starting Fresh:
Clean Slate: Close out the books for the current year and open new accounts for the upcoming fiscal year.
Set Milestones: Establish key milestones and deadlines for the new fiscal year to keep your team on track.
Continuous Monitoring: Implement a system for continuous financial monitoring and reporting to ensure you stay on track with your goals.
Conclusion
Wrapping up the fiscal year-end is a critical process for nonprofits to ensure financial accuracy, compliance, and strategic readiness for the new year. By conducting thorough reviews, engaging in strategic planning, and communicating transparently with stakeholders, your organization can start the new year with confidence and clarity. At Spark Group, we specialize in helping nonprofits manage their financial processes and strategic planning. Contact us today to learn how we can support your year-end activities and set you up for success in the upcoming year.
