Nonprofit Best Practices: Fiscal Year Alignment

Many nonprofits find themselves in a situation where their budget period, bylaws and financial software don’t align with their official year as stated with the IRS an their Secretary of State. While it’s possible to manage this with extra effort (and risk), there’s a much simpler solution: fiscal year alignment.

Benefits of Fiscal Year Alignment

We suggest making sure that your budget period and your MoneyMinder financial year match what you have set up with the IRS, and here’s why. It will make reporting super easy. You won’t have to combine reports from two different financial years to get your totals, which reduces room for error.

You also don’t risk forgetting to file your 990 at the required time, or worse yet, filing it with errors. And it also makes it easier for you to transition the treasurer since it’s not so complicated.

How to Align Your Nonprofit’s Fiscal Year

If your budget, bylaws and financial years are currently misaligned to what you have recorded with the IRS and your state, you can bring them into alignment by changing them with those governing bodies.

How? You’ll start by amending your bylaws with the Secretary of State. Remember, changing your bylaws does require a vote, so talk with your board and your membership first. Next, notify the IRS of the change by filing Form 1128.

By aligning your fiscal year in your budget, bylaws, and financial software and making sure those are recorded properly with your state and the IRS, you’ll significantly simplify your nonprofit’s financial management. It’s a small step with big rewards that will make life a lot easier for your group.