Fiscal Year-End for Nonprofit Organizations: How to Strengthen Your Financial Foundation
For many nonprofit organizations, June isn’t just the start of summer—it’s the close of the fiscal year. That means it's time to finalize reports, prep for audits, and reflect on your financial systems. If you're like most nonprofit leaders, this season can bring a mix of relief, urgency, and more than a few spreadsheets.
But year-end doesn't have to be a scramble.
As a fractional Chief Financial Officer (CFO), I help nonprofits survive year-end and use it as a springboard for clarity and growth. From cleaning up financials to strengthening grant management, here are key strategies to close your books confidently and prepare for a stronger, more sustainable year ahead.
Make Audit Readiness a Year-Round Practice
Start early, stay ready.
One of the biggest challenges nonprofits face during audit season is disorganization. If documentation is scattered, accounting entries haven’t been reconciled in months, or in-kind donations weren’t tracked as they came in, the audit becomes reactive and stressful, not strategic.
To prepare more effectively:
✅ Quantify In-Kind Donations Quarterly
In-kind donations—like pro bono services, donated supplies, or volunteer hours—can make up a significant portion of your resources. Many organizations wait until the end of the year to tally them, which leads to inaccuracies or missed value. Instead, create a system to log these contributions and assign fair market value as you go.
✅ Use Accrual-Based Accounting
If your nonprofit has $1 million or more in annual revenue or handles multiple grants and contracts, it’s time to transition to accrual-based accounting. Unlike cash-based accounting, which only records transactions when money changes hands, accrual accounting clarifies what you've earned and owe, aligning with Generally Accepted Accounting Principles (GAAP), which most auditors expect. It ensures income and expenses match accurately, even with delayed payments.
✅ Reconcile Regularly
It is advisable to reconcile your bank, credit card, and grant balances monthly. This helps catch errors early, spot irregularities, and ensure that what’s in your financial reports matches your accounts.
💡 Heather’s Tip: Consider audit prep like weeding your garden—do it consistently for a neat and healthy garden.
Manage Grants Like a Pro
Every dollar has a story. Make sure yours is easy to follow.
Grant management is one of the most persistent pain points for nonprofit leaders. Even well-funded organizations struggle to align grant budgets, track restrictions, and produce the reporting funders expect.
Here’s how to stay in control:
✅ Track by Grant in Your Accounting Software
Many accounting systems have a "class" or "project" tracking feature that isolates each grant's financial activity. This makes reporting how funds were used easy and ensures you don’t accidentally dip into restricted dollars for general expenses.
✅ Align Grant Budgets with Actuals—Monthly
Set a time each month to compare budgeted vs. actual expenses. If your grant allows $10,000 for training but you've only spent $2,000 in six months, it could affect future funding. Conversely, overspending without documentation can lead to a return of funds.
✅ Centralized Grant Documentation
Every grant should have a digital file with the award letter, terms and conditions, reporting deadlines, deliverables, and contacts. I recommend using a cloud-based document management system like Google, Microsoft 365, or Dropbox.
Diversify Your Revenue Streams
If one stream dries up, will the mission survive?
Prevent dependency on a single funding source to prevent issues if that disappears. With budgets tightening and priorities shifting, diversification isn't an option. In other words, it's a necessity.
Here’s how to begin:
✅ Build Unrestricted Revenue
Unrestricted revenue, or funds you can use however you want, gives you flexibility. Make an effort to grow this through individual donations, recurring monthly donations, and annual campaigns.
✅ Explore Earned Income Opportunities
Can your organization monetize a skill, space, or service? Consider additional ways of generating consistent revenue through workshops, consulting, memberships, facility rentals, or training programs that support your mission. These methods reduce your reliance on external grants.
✅ Reconnect with Your Funding Network
Be intentional about nurturing your relationships. Take the time to check in with past funders, local businesses, and community stakeholders. Funding often follows trust and transparency—so don't wait until you need money to start the conversation.
📈 Heather Insight: When I work with nonprofits on financial strategy, we often uncover untapped revenue potential hiding in plain sight—like a donor database that hasn’t been segmented or a program with fee-based potential.
Turn Your Board Into Financial Champions
An informed board is an empowered board.
Your board plays a key role in financial oversight, but many board members feel under-equipped to interpret financial reports, let alone ask strategic questions. That’s not a failure on their part—it’s a leadership opportunity.
Here's how to build financial confidence at the board level:
✅ Simplify the Reports
Swap complex spreadsheets for visual dashboards that show trends over time. A simple pie chart or bar graph of revenue by source or expense by program can tell a powerful story.
✅ Tie Key Performance Indicators (KPIs) to Your Mission
Board members care about impact. Instead of just reporting administrative vs. program costs, show data like:
Cost per person served
Retention rate of program participants
Fundraising return on investment (ROI)
These metrics connect money to mission.
✅ Offer a Board Training Session
A one-hour workshop on reading financial statements or asking the right financial questions can transform your board from passive reviewers to strategic partners.
Cleanup. Focus. Optimize.
Year-end is more than a finish line—it’s a reset button. Using this time to strengthen your systems, improve transparency, and evaluate the future gives your nonprofit the foundation it needs to grow with purpose.
Whether you need hands-on help cleaning up your books, navigating grant compliance, or building a financial plan for the future, I’m here to help.
🔗 Let’s talk about what’s possible for your organization. Visit https://www.interlinkcfo.com/contact or reach out to schedule a consultation.