When we spoke about co-funding (and about avoiding double funding) I said that systems are key. You need to have systems in place to make sure you record and report all income and expenses properly and with integrity. Having such systems in place, will help you build trust with donors that their money will be spent for what it was meant to contribute to. So let’s look at what systems can help build trust with donors?
Systems
Systems help you be more consistent in your work. Working with systems can also create greater predictability. That way you can be more reliable to people inside and outside of your team. There are many areas of your work in that can benefit from systems. But let’s now look at how systems can help you build trust with donors.
What is important to your donors? Impact!
So what might (potential) donors find important? Obviously, donors want to know that their money is well-spent. They want to know that you implemented the activities with the desired result and impact. Remember, donors have dreams that you are fulfilling for them. To see that happen is key to them. That means you need to have systems in place to ensure good quality of your implementation. Systems that also help you measure and show results and impact created. Or that help you understand when you need to adjust your approach to ensure that the desired impact is achieved in another way.
Make sure the donor knows about the impact! Outreach.
In addition, you need to have good systems in place to communicate to your donors about the impact you have created. If (potential) donors cannot see, feel or touch the impact, it is not going to be real to them. So you need to make sure they are updated regularly with relevant stories and data. And you need to present these in a way that suits your donors. So that they can see you are doing what you promised to do and that you are achieving the shared dream.
What is important to your donors? Value for money!
In addition to getting the promised impact (and seeing that!!!), donors want to be sure that their money is used effectively, efficiently and properly. They also want to know that the money they gave (or will give) was used for the purpose, and not for anything else. So you need to have systems in place that help you manage and monitor finance in your organization. And you need to be able to produce reports that will provide your donors with the financial information they seek to see about how their contribution was used.
Finance systems
Most donors will leave the implementation to you, aside from asking about your monitoring plan maybe. They may also not express any demands in regard of communication, other than having a format that you may need to follow. But donors do tend to ask for information about your finance systems. And they may even ask to see your finance policies. This is a way of gaining more certainty that the money will be well-managed and as a result well-spent.
OK, so what do I need to have in place then?
The basics you need include a policy for financial processes, that makes clear who can authorize payments and who can make the payments – and how this is monitored. The policy needs to make clear how costs are assigned to projects. Also, this policy needs to clarify how you do procurement.
You also need to have a basic outlay of your bookkeeping procedures, highlighting how you can distinguish between expenses covered by different donors for instance.
Donors may also ask you how you calculate the costs of your team’s work. These are all items they may ask to see as a policy or internal instruction or guide.
Is that all?
In addition to what donors may ask to see, they may also implicitly expect you to have certain things in place. For instance, when it comes to documenting proof of expenses incurred. They may not ask you for your internal instructions on documentation and filing. But they may ask for certain proof and then expect you to be able to provide specific documents. For instance, time sheets of your team.
Don’t forget – your systems work for you
You may feel you need to develop systems for project management and monitoring, for communication and for finance management & administration for your donors. And perhaps a donor’s question will be an incentive to set these up. But keep in mind that all your systems will work for you in the end. Systems can help you be more efficient and effective. They can help you manage better. And ultimately, all this will help you achieve more for your mission.
My key tips
- Set up simple finance management and admin systems (policies, procedures, formats, checklists) right from the start. So that you know you will meet any donor’s standards without problem or stress.
- Develop a cash flow projection and update it monthly so you can see when you need money coming in and can plan accordingly.
- Invest in understanding why certain things are needed and in making sure your team ‘gets this’, too. If someone is aware of the reason of a stupid-looking rule that seems like a lot of unnecessary work, it usually helps them comply instead of trying to circumvent.
How I can help
Here is how I can help you set up your nonprofit finance and admin professionally so you can stop worrying about this:
- If you would like to know what admin steps you need to design and implement for proper donation management, my workshop Donation Received – Now What? Can help you. You can get that here: https://www.changingtides.eu/donationnowwhat
- If you have your donation policy and SOPs for managing donations, and you’d like my professional opinion, I create a personal video review for you: https://www.changingtides.eu/reviewdonationssops
- If you would like simple steps to set up and organise your finance & admin foundations guidance by me, you can get a bundle of six simple and short workshops here: https://www.changingtides.eu/financeandadminbundle
If the bundle is too much for you at this moment, feel free to pick one or more of the workshops individually:
- Set up your financial processes: https://www.changingtides.eu/financialprocesses
- Understand important basics of bookkeeping for nonprofits: https://www.changingtides.eu/bookkeepingfoundations
- Be sure you are keeping all the documents you need for project donors, auditors, or officials: https://www.changingtides.eu/documentationfornonprofits
- Plan your cash flow for a year: https://www.changingtides.eu/cashflowfornonprofits
- Get a feel for how time sheets can be helpful to everyone in your nonprofit and set them up straightaway: https://www.changingtides.eu/timesheetsfornonprofits
- Learn how to calculate the price of time spent of your team members, including allocations for general costs that are used in different projects: https://www.changingtides.eu/feesfornonprofits
Please note, the bundle is cheaper than buying all six workshops separately: https://www.changingtides.eu/financeandadminbundle
Want to know more and ask questions?
If you want to discuss this more – jump into my nonprofit support community and get input from a wide range of peers and from myself!
Here is how you can join my free nonprofit support community
You can join my free nonprofit support community on the Heartbeat platform here. This group is a safe space for open exchange and discussion on potentially sensitive topics like boards, nonprofit management, fundraising, etc.
You can visit the community via a browser or via an app. Here is the link to download the Heartbeat chat app in the Google Play store.
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