Having people volunteering for your NFP entails volunteer expenses that you must reimburse. Here are some tips to effectively manage these expenses.
Maximise Your NFP's Community Impact With Accurate Expense Reporting
NFPs can maximise community impact by transforming operations to simplify grant management, get more funding and streamline other financial processes.
You may think that expense reporting for your not-for-profit (NFP) organisation has an internal effect only, but did you know that it can also help you maximise your community impact? Let’s dive into that in this blog.
What Are the Different Expense Reports for an NFP?
A report is just an umbrella term for the many documents that an NFP usually prepares. Here are examples of various expense reports for an NFP.
1. Financial report
Even though it’s not an NFP’s primary goal to generate funds, they need those to carry out their operations. NFPs create not-for-profit financial statements either monthly or quarterly to present an evaluation of how the organisation is doing financially. They may also do the reporting to secure grants and show how the organisation’s funds will be used.
2. Donor report
NFPs commonly rely on their generous donors for financial assistance. In a donor report, you highlight the impact of a donation given to your NFP. Donor reports promote transparency as the reports keep donors in the loop about where their support went.
3. Cash flow forecast
A cash flow forecast or projection forecasts the NFP’s financial position in the long run. This report is meant to anticipate what’s coming in the future, ideally over the next six to eight months, sometimes longer.
This report will help your NFP use anticipated expenses and anticipated income in operations, investments and financing activities so you can see how well your NFP is prepared to respond to what’s coming next.
4. Annual report
A not-for-profit annual report presents the NFP’s accomplishments from the year that has passed. It’s usually sent a few months after the end of the financial year and shows an overview of how the NFP accomplished its plans and goals.
5. Report for managing grants
Grant reports are usually used by grant managers to foresee and plan initiatives and manage grants. Making program funding easier, grant reports display actual grant amounts paid out versus budget.
A grant report can help users find significant deviations from planned payments and zoom in on the relative size of different metrics.
6. Volunteer spend report
Think of a volunteer report as a volunteer diary. It’s a summary of what your volunteers have accomplished within the year, as well as an overview of the spending they incurred during their volunteer journey.
The volunteer report can also be a platform where you can share stats, impact data and volunteer stories.
7. Petty cash report
A petty cash report gives an overview of the petty cash repository. It shows the activities for a certain business date, as well as the petty cash that will be used.
NFP Spend Management: Best Practices for Reporting
While there are many different kinds of reports, the best practices for reporting apply to all of them.
1. Tailor the report to its intended audience
There are two categories of NFP reports: internal reports and external reports. Internal reports are used for your staff, volunteers, board of directors and other key personnel within the organisation. These reports bring everyone on the same page by providing insights and statistics on the financial information of the NFP. External reports, on the other hand, are meant for public viewing. It’s intended for funders, state services, supporters, donors—pretty much anyone.
Be sure to tailor the report to its intended audience so that whoever reads the report gets the information that they need.
2. Acknowledge both wins and losses
As much as we want to move on from the financial losses that our NFP may have incurred, we must acknowledge both wins and losses. This helps build transparency, make better financial decisions, have stronger spending projections and make proactive decisions.
3. Keep the report easily digestible
Not everyone has the time to read long reports with irrelevant information. Keep the report easily digestible so you can communicate the essential information quickly and efficiently. Use visual aids to represent complex data, wherever possible. Using graphs, tables and other effective tools to represent data makes it easier for people to consume and understand reports.
4. Build public trust and transparency
People value accountability and transparency, and NFPs must do their part to enhance the public’s trust in their organisation. For instance, in May 2021, the Australian Government announced reforms to the administration of NFPs that self-assess as income tax exempt. This ensures that only eligible NFPs can access income tax exemptions and that they operate on a level playing field.
According to the ATO, starting July 2023, non-charitable NFPs with an active Australian business number must lodge an annual self-review return so they can access an income tax exemption. Such actions ensure transparency and enhance the public’s confidence in NFPs.
5. Digitally transform finance and reporting processes
It’s not easy to do reporting for an NFP—especially when you do it on your own without the help of software and tools. Digitally transform your finance and reporting processes by switching to automated platforms and software. This digital transformation can help your NFP be more proactive, compliant and get better with grant management.
Expense management software also has digital processes such as virtual cards that help you manage petty cash and volunteer reimbursement.
How Does Accurate Financial Reporting Improve My Community Impact?
1. It builds credibility for your organisation
Accurately reporting your organisation’s funds creates a chain reaction: an accurate report builds credibility, which gives your NFP recognition, which then invites more supporters for your cause. After all, it’s best to support an organisation when you know it advocates honesty, transparency and integrity.
2. It attracts more donors
Donors want to know that their support is really making a difference—especially if their donation is prompted by their passion and belief in your cause. When a documented donor report shows them where their support goes, they know that their contributions are being used responsibly and may even encourage others to support your organisation.
3. It brings everyone on the same page
No one wants to be part of an organisation that makes them feel lost and clueless. When your internal reports are accurate and transparent, your employees get a better understanding of the organisation’s goals and, in turn, get to achieve those goals better. In the same way, proper reporting helps volunteers, supporters, funders—everyone—be on the same page.
4. It helps build reliability through compliance
We can’t stress enough how accurate reporting builds reliability. In this case, it’s built through compliance. Compliance is key to securing more grants and funding because potential donors see how the NFP adheres to the necessary rules.
Plus, accurate reporting encourages both internal readers (e.g., employees) and external readers (e.g., donors) to comply with the NFP’s policies, which therefore leads to positive community impact.
Don’t make the mistake of thinking that your NFP’s reports won’t do anything for the community. When you maximise the organisation’s efficiency, maximise compliance and work on your NFP’s vision and mission, you maximise your community impact too!