Year end in 3.. 2..

Posted in financial management / annual audit / year end

Year end in 3.. 2..

Executive directors are forced into a complicated little dance during a non-profit’s year end. It starts simple enough, making sure all the invoices are sent out, and all the bills are paid. As a non-profit grows, the accounts become a little more complex, and there might be a bill or two that is forgotten until it shows up on the last day of the fiscal year. That creates a balancing act to make sure there is enough budget to pay all the bills while at the same time making sure there isn’t too much left over that the organization would have to return money to a funder. Factor in self-generated revenue and there’s another little dance between building up emergency reserves while not keeping too much that it might jeopardize future grant funding.

You try something and it backfires.

One of the more common frustrations is thinking you will use a little extra year end funding to pay for a few items for next year, only to have the auditor recognize the purchase as a pre-paid expense and you end up finishing the year with the money you were so desperate to use up. From pre-paid expenses to accounts payable and accounts receivable, year end is a lot of stress for a non-profit executive director, and even harder if you are new to the job.

As long as I’ve been working in this field, year end has always had its share of surprises. I still dance all the little dances and feel all the stress, but over the years I’ve developed a plan going into year end, to help me cope with the year end weirdness.

Make payables your BFF.

Get to know your accounts payable schedule. Sometimes an executive director will plot out major expense on a calendar, to better track items that will need to be paid near the end of the year. Even the most experienced executive director will forget a recurring expense or two, and think there is enough budget room to run just one more workshop, only to be snapped back to reality when the forgotten invoice comes in.

Some executive directors will move as many recurring annual expenses to earlier in the year, to avoid year end misses. Others will leave a healthy buffer to allow for forgotten payments. …and some executive directors will build in several little ‘hidden’ buffers in their carefully crafted budgets to cover whatever comes up at year end.

Which ever method you choose, develop your own reliable system for being ready for payables at year end.

Create a line item in the budget and start with $0.

Some non-profits deliberately leave specific expenses until year end to be sure there is enough budget room. Give-aways, or swag, are very common. A non-profit will work very hard to put every possible budget dollar towards programs and services. The expense of buying company pens or ball caps for the board of directors is rarely a priority. But at year end, when programming has wrapped up there might be a small pool of funds left over to make a purchase.

I do this, and I approach the practice in 2 ways. First, I make sure there is a line item in the master budget for swag. It starts the fiscal year at $0, and each month, I add a little to the budget as funds become available. I might even need to drain the swag budget if a higher priority program needs extra funds in the middle of the year, and then I start all over. But by the end of the operating year, I know exactly how much I can spend, and I always make that purchase within the last month of the year.

To support my year end swag purchase, my board of directors has created a policy allowing me to move budget dollars around to maximize the use of grant revenue. If your board hasn't created this sort of policy, you will want a board motion to support your changes to the budget. When I first started this practice, I had a conversation with my auditor about being more strategic at year end. I asked what kind of paperwork she wanted to read when conducting our annual financial review. Then I made darn sure that my policy from the board and the paperwork the auditor wanted to see, was attached to the financial documentation for that year end swag purchase. This has saved me many times from having the auditor recategorize my swag purchases as pre-paid for the new year.

Wait for revenue if you can.

Something I find particularly annoying at year end is having a flood of next year revenue coming in. When I am trying to finalize the books for one operating year, I don’t want to be spending time making deposits and issuing receipts for the next year. For me, this happens when receiving payments for membership renewals.

To avoid what has always felt like to me as double the bookkeeping work, I make sure membership reminders are not mailed out until the first day of the new operating year. Then, by the time I start receiving renewals and payments, I have finished my year end, and I am very ready to dedicate the time needed to process new year revenue.

Give yourself some grace.

There is nothing you can do to prevent the end of the fiscal year. It will come and go. There will always be some transaction that didn’t happen or happened too soon. There will always be a weird surprise or two, or three, or…

I know you worry about the budget. You plan. You could let the stress get to you. You could stay up late wondering where the mistakes are. You could call an emergency meeting with the board because you are starting to panic.

Or…You could give yourself some grace. You did your best. You planned. Like the good executive director you are, you tried to anticipate every problem that might come up. You aren’t perfect, and you did your best.

Don’t stress. Do your best. Deal with the rest as it happens. I give you permission to be human.

Your turn.

Your turn. When is your non-profit’s year end? Are you ready? What surprises did you have last year? How are you working to make it easier this year? I want to know! Please use the form on the side of the page to let me know, ..or send me an email, ..or message me on socials.


P.S. - I've had a few questions asking why I'm writing about year end in April. It is very common for non-profits in my province to have March 31 as their year end, myself included.

Hi, I'm Christie. I help executive directors develop the systems and processes needed to run a non-profit.

I learned early in my career, there is no non-profit school. Browsing the internet for resources from big-city experts doesn’t provide practical solutions to balance the budget, write a work plan, or conduct an employee evaluation. Leadership development tips don’t really resonate when you are also taking out the recycling and cleaning the washroom.

I created so non-profit leaders never need to wonder how to do the job – no matter how big or small that job is.

I have been the executive director of small-team, small-budget, non-profits for 20+ years. My experience isn’t theory. It is the real, operational, and practical solutions I use every day.

I love my work and I want to help you love yours too.

© Christie Saas 2024 All Rights Reserved

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