By Jayme F. Moore, CPA,
Vice President & Director
For many nonprofits, strong communication between the accounting and development teams is essential for success based on their critical roles within the organization.
Development is typically responsible for bringing in revenue while the accounting team must track the funding and where the funds are spent. If the teams do not coordinate and communicate effectively, this can lead to mismatched records, compliance risks, and frustrated staff.
Why is collaboration between development and accounting essential?
Donor intent must match how funds are reported by the organization and how the funds are spent, and the records for both accounting and development should align. Grant reporting must also be accurate, as development typically writes proposals and promises deliverables while accounting ensures spending matches the approved budget and reporting requirements.
When the records and the financial reporting don’t align, this can lead to:
• Inaccurate financial reporting for the governing body of the organization making financial decisions;
• Less clarity and visibility on cash flows, and
• Certain compliance risks depending on the grant or audit requirements that may exist for the organization.
When these teams operate in sync, the organization can raise money more effectively, spend it more responsibly, and report it more accurately.
How the two teams can work closely together
Regular meetings along with joint planning help to prevent unrealistic revenue projections and program budgets. These meetings will also allow the accounting and development teams to ensure they are aligned on the terms and any conditions for pledges and gifts, including donor intentions that impact the treatment and accounting of the revenue. The collaboration should also include discussions on any proposal or grant reporting and compliance deadlines to ensure compliance requirements are being met.
How collaboration can improve financial reporting
Regular and timely reconcilement between the accounting software and the development software also avoids any surprises at the end of the year and significant changes to the financial reports. Having two departments reviewing the donation activity and information from different software and performing regular reconciliation promotes accurate financial statements. Accurate financial reporting is essential for the decision making of the organization as well as managing the budget and program activities.
When development and accounting teams work together, the nonprofit can improve financial stability, become more transparent, and gain trust from donors and funders. Talk to the nonprofit accounting services team at GT Reilly & Company with more ideas for collaboration and accurate reporting.
