3 Must-Have Accounting SOPs for Nonprofits

Standard operating procedures are commonplace in nonprofit organizations and businesses alike, and while their “official” title may differ, most organizations have the same SOPs in place for the various processes required to function. Still, there is one department that thrives – and requires – SOPs to function.

We’re taking a look at the must-have accounting SOPs for nonprofits.

What Are Accounting SOPs? How Are They Specific to Nonprofits?

SOPs or systems of procedures/processes are guidelines for how a task should be performed. Depending on the SOP, you’ll have various moving parts that need to be done promptly and accurately, while others can be automated through various tools. 

SOPs come into play in multiple aspects of your nonprofit or business, not just accounting. There are marketing SOPs, hiring SOPs, and even SOPs that you should set up before you go on vacation or step away from your nonprofit for an out-of-office event.

Nonprofit organizations tend to have more specific accounting SOPs than other businesses or organizations simply because they have a different set of financial requirements and reports. Nonprofit organizations are also more likely to be victims of fraud and deceit, which can be prevented to some extent with very clear and thorough accounting and operating SOPs. An accounting SOP for a nonprofit may also be considered a financial procedure. 

Accounting SOPs Every Nonprofit Needs to Have in Place

From years of serving nonprofit organizations and helping set up, organize, and maintain their fiance department and systems, we’ve established three main SOPs that every nonprofit needs to have in place.

Here are our recommendations:

#1. Audits

Your nonprofit should have an SOP that identifies how a financial audit is conducted, when it should be conducted, who is responsible for it, and who should review the information at the end of the audit. 

We recommend that you do a quarterly audit to keep your information up to date and ensure that there are no “leaks” in your accounts. An audit should also include reviewing how your accounts are organized and managed.

#2. Financial Statements

Nonprofit organizations are responsible for more than your average financial statement for reporting purposes. Some of these financial statements include a Statement of Activites and a Statement of Functional Expenses.

Your SOP for your financial statements should follow a similar pattern and identify who is responsible for gathering and reporting the data, along with who the data is reported to and when.

#3. Accounts Payable and Accounts Receivable 

Although this seems like an obvious recommendation, it’s important to identify and write out the SOP for your accounts payable and receivable. Even if you’re utilizing a tool that manages most of your nonprofit’s cash flow and financial organization, you should still have systems in place for check-ups and reporting.

A clear system of processes/procedures can clarify where to look in a situation where funds are mismanaged or periods when cash flow is slow but shouldn’t be. If you’re curious about how you can set up SOPs and establish procedures for your nonprofit organization’s financial reporting, reach out to our team today for a free consultation call.