If you want to fully fund your budget and change as many lives as possible, your nonprofit must run like a well-oiled machine.
Whether you’re trying to feed the hungry, house the homeless, or do something else equally important, nothing happens without organization – and that means infrastructure.
When you work in a small office, it’s tough to get everything done.
And easy to get overwhelmed.
Every big nonprofit you can think of was once a small shop, with someone doing most everything themselves. So, how did they grow from a little nonprofit to a much bigger one?
Think for a minute about Starbucks.
If you go to any Starbucks in the world and order a tall vanilla latte, you’re going to get the same drink no matter what city you’re in.
You know why?
It’s because they have systems in place.
How they source their coffee, the way they take your order, how they make a drink – all of this helps them to deliver the same drink, every time.
You see, systems help you grow and multiply your efforts.
When you have a system for getting something done, you don’t have to think too hard about what you’re doing. You follow the formula and get the result you’re looking for.
Just like that tall vanilla latte.
Want to know why you should embrace systems? And which systems are critical to your growth and success, especially as a nonprofit startup?
Systems create efficiency
Before we dive into this, I’m sure you’re wondering something – what is a system exactly?
A system is simply an organized, consistent method used for accomplishing a task so that you get the same result every time – no matter who is using the system.
Actually, the system can run without you because someone else can easily follow it.
Systems can help you be more efficient, ensure quality, and speed up the training process for new folks.
The biggest reason why you need systems in your nonprofit startup (well, any size nonprofit!) is that they help you get more done.Face it, you’re just one person and you can’t do EVERYTHING (even if you try). Systems will streamline your work and save you time, simultaneously helping you get more done. Click To Tweet
We meet people all the time who have no systems or their systems are broken. They’re overwhelmed, they spend a lot of time ‘winging it’, they’re disorganized, and they seem to always be fighting fires.
Who wants to deal with that stress all the time?? Not me! And I’m sure you don’t either.
In practical terms, when you don’t have systems,
- You won’t be able to keep good volunteers – they’ll get frustrated at the disorganization and leave.
- Your database will be useless crap because you’re inconsistent about entering data and there’s no protocol for keeping it clean.
- Donors will be frustrated at the errors in your materials or the sporadic nature of your communications.
But how do you know if you need a system?
Anything you do more than once needs a system.
Theoretically, every time you use the system, you get faster or you refine it. You become more efficient.
So, let’s take a look at some systems a nonprofit startup needs so you can begin to see what systems you need.
7 systems that help a nonprofit startup to streamline and grow
Systems help you get more done, involve other people, and get consistent results.
As your new, young, or small nonprofit grows, systems are critical because they help the growth happen smoothly and steadily.
Without systems, your nonprofit startup grows like a house of cards that can come tumbling down when the least little thing goes wrong.
And while you’re in growth mode, you can’t afford that kind of disaster.
Here are 7 key areas where you need systems. Avoiding this or thinking “I don’t have time to deal with that” is only setting yourself up for big problems later.
As you start to create these systems, answer the questions that are listed for each one to help get you started down the right path.
This list is by no means exhaustive, but it will help you tackle some of the most critical aspects of your nonprofit, getting the important ones done first.
1. Donation and Cash Handling
- How long does it take between when the donation arrives and when it’s deposited in the bank? You don’t want checks piling up so be sure someone is checking the mail on a regular basis. Doing so helps you keep money in the bank and ensures donors are being thanked in a timely fashion.
- Who all touches the donation? Minimize the number of hands that touch a donation because it speeds up the amount of time between arrival and depositing. Plus, it reduces opportunities for it to get lost or worse, stolen (yes, that can happen).
- How does your bookkeeper need to record it? Be sure your chart of accounts makes sense and every donation is captured consistently. For every database, garbage in, garbage out.
- How exactly should it be recorded in your donor database? Having fundraising systems and written procedures for entering donation details is highly recommended for every nonprofit. This ensures accurate data is captured accurately and minimizes redundancy, which leads to a quality database.
2. Paying Bills & Reimbursements
- Who’s responsible for writing checks? Identifying a point person to write checks keeps things consistent (and helps keep bill paying from falling through the cracks).
- Have you identified a back-up person to write the checks in case the point person is out of the office (vacation, sick, etc.)? A good practice is to designate at least a primary and a secondary person to write checks. Maybe your Executive Director is the primary and your Board Treasurer is the secondary. Don’t give check writing authority to the bookkeeper. It’s too great a risk and best practice requires you to involve at least 2 people in handling finances to minimize risk.
- What does your expense reimbursement process look like? Have a written set of procedures outlining this process so you’ll know what expenses are reimbursable, who is eligible for reimbursement, how often reimbursement is done, what documentation is required to be reimbursed, etc. If random receipts show up on the bookkeeper’s desk, that person will waste a lot of time trying to track down who spent the money, if they need to be reimbursed, and do on. A process and a reimbursement form will streamline things, getting staff or volunteers reimbursed on time and for the right things.
3. Financial Accountability
- Who will reconcile bank accounts and credit cards? This is a task usually completed by the Bookkeeper or Treasurer that should be done monthly to ensure that receipts are accounted for and that there are no unauthorized expenditures. Nonprofits that get into trouble fast aren’t keeping an eye on their credit card or checking account statements, making it easy for problems to happen and pile up.
- What monthly reports will you review? At a minimum, the Board of Directors should review a nonprofit’s Statement of Financial Position (i.e. Balance Sheet) and Statement of Activities (i.e. Income Statement) monthly. Other important financial reports to review regularly include the Statement of Cash Flows and Statement of Functional Expenses. You should be able to set all these reports up in your accounting software so you don’t have to recreate them each month.
- Who has access to your bank accounts? For security purposes, you’ll want to limit the number of people who has access to your bank accounts. Usually, this is the Executive Director, Board Chair, and Board Treasurer. And although a couple different people may have access to your different bank accounts, restricting WHO can open them is just as important…
- Who has the authority to open additional accounts? Sometimes nonprofits may choose to open separate accounts for things like rainy day funds or restricted funds, but this doesn’t happen every day. Identifying who is approved to do this and keeping this information up to date – and keeping it written down and within arms’ length – is handy when it does come time to open one up. Keep in mind that some banks require a copy of the minutes of the Board meeting where it was voted on to open a new bank account.
- How is your savings account to be used? While you need a checking account to handle day-to-day operations, savings accounts can come in handy when you have some cash reserves, a building fund, or a rainy day fund. Be sure to define the goal for this account and outline the reasons why money can be withdrawn or transferred from this account.
5. Filing & Record Keeping
- How will the filing system work? This may seem as simple as the A, B, Cs (pun absolutely intended), but take the time to think this one through because it’s one that will get out of hand the quickest – I promise you. Things to consider as you develop your system: the “index” for filing (ex. donor files are filed alphabetically by last name whereas financial reports are filed chronologically per month) and if you’ll keep electronic or paper files or both.
- Who has access to files? Not everyone at your nonprofit needs to have access to every file. For instance, your program folks probably don’t need to be messing around with the accounting files. On the other hand, sometimes several different people need to be able to see the same files, like volunteer doctors and nurses reviewing patient files at a free clinic. Just think this one through before moving onto the next point…keeping your files.
- Where will you keep electronic and paper files? Whether it’s in the cloud, on the computer, or in a filing cabinet, having a secure, permanent location for your files is a smart thing to figure out before you start saving things. Sometimes, you have must hang on to documents for years, so consider that too. Also think about which files need to be locked up tight, like personnel files, and where those files will be stored under lock and key. Oh, and who will have access to the keys?
6. Data Protection
- How will you ensure data confidentiality? Nonprofits have a lot of sensitive and confidential information that needs to be protected. Whether its patient files, donor credit card numbers, or any other number of hush-hush details…just keep it safe. Keep files locked, when necessary, whether it’s a file cabinet in the office or a password-protected file in the cloud.
- Where will you keep your passwords? These days, we keep our passwords password-protected – do we not?? If your nonprofit shares passwords, keep them in a single repository so everyone has access to them. This makes keeping up with password updates a cinch. For confidential passwords you use, here’s an idea: keep them on a flash drive locked in a drawer at your desk.
7. Risk Assessment
- How do you identify, analyze, and respond to a variety of risks? Start by ensuring sufficient levels of expertise are in place on your Board to ensure effective organizational oversight is occurring – meaning, your Board has a working knowledge of critical areas of nonprofit management like law, accounting, human resources, and programs or operations.
- How do you determine what insurance you need? Consider things like workers compensation, general liability, directors and officers coverage (to protect the Board, leaders, and organization against lawsuits brought for ‘wrongful acts’), property, auto, and cyber liability. Be sure to keep these current and update persons covered as policies change.
- How do you know if you have the right security in place for your facility? If you have an office or building where your programs take place, think about who gets keys and how the are keys managed. Also think about security systems, fire safety, disaster preparedness, and more. Capture these details in a business continuity plan, which is a document that consists of the critical information an organization needs to continue operating during an emergency or disaster.
There are tons of other systems you will need, especially as your nonprofit grows. Consider creating systems for things like human resources, governance, and programs your nonprofit runs.
Getting started with systems
Shew!! That’s a lot of systems to create!
So, where do you even begin to put them all in place, especially when you’re trying to grow a nonprofit and you already have a jillion things on your plate?
Bite sized pieces, that’s where.
Don’t try to create all these systems at once because that’s way too overwhelming.
Instead, start with one that gives you most leverage. Create it and put it in place.
Once it seems to be working well, go on to the next one.
If you tackle one system a month and you get it solidly in place, you’ll see tremendous improvement over the next 12 months.
If you can work through them faster, even better!
Now, let’s look at how to create those systems.
- Identify the system you need. Pay attention to anything that seems hard or time consuming. A system will probably make it easier and faster.
- Decide on the end result. What is the result you want from the system every time it’s used, no matter who is using it?
- Identify system users. Who will be using the system? What do they know now about the end result you’re trying to achieve? What training and support will they need?
- Flowchart the system. Break the system down into small, separate steps that will be easy to understand and teach. Flowcharts give you a nice easy visual to work with, and you can do this with software (there’s a SmartArt tool in most Microsoft products with flow chart boxes) or sticky notes can work, too. Just put each step on a separate sticky.
- Create system support tools. What can you create that will help the user? Think about written instructions, checklists, worksheets, forms, etc., that can make learning and using the system easier.
Here’s an example of a system flow chart for reimbursing employees for things they’ve paid for out of pocket. It’s pretty simple, yet effective.
- Create a form for each employee/volunteer to complete once each month. You might establish a due date that reimbursement forms are to be turned in (for example, “your completed form along with receipts for each item must be turned in to the Bookkeeper within 30 days of the end of the month that the expenditures occurred”).
- Collect the completed forms from employees.
- Check the list of expenditures and make sure there’s a receipt for each one.
- Determine the correct accounting code for each expenditure (you’ll need this later).
- Double-check the math on the form.
- Cut a check to the employee/volunteer for the amount of the total.
- Note on the form the date and amount of the reimbursement along with the check number.
- Enter the info into the accounting software.
- Distribute the reimbursement checks.
It’s a good idea to document systems, creating a procedure outlining each step and including screen shots of the form and the accounting software for easy reference.
Yes, it may seem like a lot of detail, but that’s what will set you up for success long-term. You have your way of doing things, and if you want others to do it your way, you have to systematize it. Then, it becomes the organization’s way of doing things.
When you’re THIS CLEAR about how to do a task and you get the right person helping, the end result will be no different than if you had completed the task yourself. It will be done exactly the same way by each person, and that’s the result you want.
Systems are best when:
- They are in writing.
- They are clearly understood by those who will be using them.
- They are reviewed from time to time to make sure they still work.
Using systems for nonprofit success
Once you have systems created and begin using them, review them from time to time to make sure they still work by:
- Asking those who use the system for feedback. Because they use it regularly and frequently, end users are usually quick to share with you what works, what doesn’t work, and what might work better.
- Checking the system output to make sure you’re still getting the results you’re looking for. If you’re not getting what you desire, making a few adjustments might do the trick.
- Updating your procedures. Systems are not a “set it and forget it” type of deal, my friends. Times change, technology changes, and the way things are done sometimes has to change so make adaptations when necessary.
The Bottom Line
Take the time to create the systems you need to produce predictable results.
Everything will run smoother, making it easier to get things done. Plus, there will be fewer fires to put out during the day, and you’ll have more time to spend doing the things that only you can do.
Understanding Nonprofit Financial Statements: http://nonprofitinformation.com/understanding-nonprofit-financial-statements/
Types of Insurance Nonprofits Should Consider: https://www.thebalancesmb.com/insurance-nonprofits-should-consider-2502320
Disaster Prevention and Mitigation Strategies – Strike Early and Often – Business Continuity Plan: https://searchdisasterrecovery.techtarget.com/definition/business-continuity-action-plan