Not-for-profit organisations (NFPs) play a critical role in society but they often face big challenges in how they run and plan their activities, including financial management and auditing. Many NFP accounting issues arise from confusion regarding the complex legal requirements surrounding it. Here at BVO Audit we believe in working with you to recognise and deal with these issues, so you can work more effectively and make a bigger difference.

Here’s a closer look at some common problems and our expert solutions to overcome them: 

1. Strategic Planning: The Foundation of Success

A frequent pitfall for NFPs is the absence of a well-defined strategic plan. Having a clear mission is important, but without a solid strategy, NFPs can lose focus and be inefficient. Creating a strategic plan that matches your mission helps prioritise tasks, allocate resources, and track progress easily. 

2. Robust Financial Management: Securing Future Success

Poor not-for-profit financial management can cause instability, misused funds, and even fraud, putting your NFP at risk. To avoid these problems, make sure your financial practices are transparent, accountable, and incorporate an appropriate internal control environment. Part of good financial governance is following recognised financial reporting standards when preparing financial statements and having these financial statements audited. By regularly reviewing and updating your financial processes, you can prevent issues before they arise. 

3. Diversification of Funding: Reducing Dependency

Relying too heavily on one funding source, such as a government grant or a major donor, makes your NFP vulnerable to financial disruptions, if that source dries up. Diversifying funding sources can help avoid financial instability and ensure a steady flow of resources. Charity Services NZ has a great article detailing how you can do that, linked here.

4. Empowering Volunteers: Strengthening Roles and Enhancing Impact

Volunteers are often the backbone of NFPs, but managing them can be challenging. Poor volunteer management can lead to inefficiencies, high turnover, and reduced programme quality. Having clear policies and providing good training can help keep volunteers motivated and effective. 

5. Effective Governance: Steering Organisational Success

A strong and engaged board of governance is vital for providing oversight, guidance, and support. A board that lacks diversity, has conflicts of interest, or lacks training can negatively impact your effectiveness. Regular board evaluations and ongoing training can help strengthen governance. It is also vital that the board understands and makes good decisions around audit requirements and charity reporting.   

6. Programme Delivery: Achieving and Measuring Impact

Delivering effective, efficient, and sustainable programmes is crucial for achieving your mission. Without proper evaluation, feedback, and improvement processes, programme delivery can suffer, reducing your impact and support. Regularly assessing and refining your programmes can help maintain their quality and effectiveness.

7. Risk Management: Safeguarding Organisational Integrity

Identifying, assessing, and mitigating risks to your operations, finances, and reputation is essential. Poor risk management can lead to legal liabilities, financial losses, and reputational damage. Developing a comprehensive risk management plan can help safeguard your Not For Profit organisation. It is also a good idea to consider statutory audit or review requirements to assess and manage risks.  

8. Communication and Marketing: Building Visibility and Support

Effectively communicating your mission, impact, and value proposition is key to attracting and retaining support and funding. Poor communication and marketing can result in a lack of visibility, awareness, and engagement. By utilising charities services, NFPs can increase their visibility, engage with their community, and build a stronger support network. 

9. Collaboration and Partnerships: Extending Impact through Alliances

NFPs often operate in complex and interconnected systems and need to collaborate with other organisations and stakeholders to achieve their goals. Lack of collaboration and partnerships can result in duplication, competition, and missed opportunities. Seeking out collaborative relationships can enhance your impact. 

10. Leveraging Technology: Enhancing Efficiency and Insight

Leveraging appropriate technology and data management solutions can transform an NFP’s operational efficiency. From database management to digital marketing, technology can improve operations, decisions, and impact.  

11. Embracing Diversity, Equity, and Inclusion (DEI)

Lack of DEI can lead to exclusion, discrimination, and reduced impact. Developing policies and practices that embrace diversity, equity, and inclusion can enhance programme relevance and community engagement, creating a more inclusive and effective organisation. 

12. Leadership and Staff Development: Cultivating a Skilled Workforce

Investing in leadership and staff development is crucial for maintaining a motivated and skilled team. Providing training opportunities and career development pathways helps build a resilient workforce capable of navigating the complexities of the non-profit sector. Without this investment, you risk turnover, burnout, and reduced effectiveness. 

13. Adapting to Change

NFPs operate in dynamic and evolving environments. Being agile and responsive to change is essential to stay relevant and effective. Failing to adapt can lead to obsolescence and failure. 

14. Stakeholder Engagement: Fostering Strong Relationships

Engaging stakeholders effectively ensures ongoing support and valuable feedback. Listening to the ideas, needs, and expectations of beneficiaries, donors, volunteers, and partners can strengthen relationships and build trust. Poor stakeholder engagement can result in a lack of accountability and support. It’s why regular charities commission performance reports and not-for-profit reporting are essential.   

15. Continuous Monitoring and Evaluation

Monitoring and evaluating your programmes and services helps assess their impact, learn from experiences, and improve performance. Inadequate monitoring and evaluation can lead to a lack of evidence needed for decision-making and improvement. Implementing a robust evaluation framework can help you continually improve your programmes. Use audited financial statement samples and ensure compliance by understanding not-for-profit reporting requirements.  

By addressing these pitfalls and adopting best practices, your NFP can increase its resilience, effectiveness, and impact. This requires a commitment to continuous learning, improvement, and innovation, as well as a culture of accountability, transparency, and engagement.  

For more insight in financial management of not-for-profit organisations, we have articles on NFP financial reporting, NFP Fundraising Plans and many others to help you with your NFP accounting issues.

At BVO Audit, we pride ourselves on providing plain language reports and constructive feedback that everyone can understand. An audit or review with us is much more than ticking boxes—it’s about helping you and your organisation do what you do best. Contact BVO Audit today to find out more.