All organizations, including nonprofits and associations, are held to financial management standards. Sound financial management signals to your supporters and members that you’re handling their investments wisely—ultimately encouraging their continued involvement.

Financial management for associations includes your approach to finance, revenue generation, and reporting. Here are five best practices that will help your organization achieve greater financial health. This is by no means an exhaustive list or a deep dive into accounting specifics, but it can help gauge your overall financial fitness and seek additional support where you need it.

1. Use the Right Tools for the Job

Responsible financial management for associations requires attention to detail. There’s a lot to consider, even when it comes to the type of bank your association uses.

You need to be able to keep a variety of accounting practices and documentation requirements organized, such as your balance sheet, expenses, grant funding, and budget. Dedicated association management software can help with this. Several of its features are valuable for responsible financial management:

• Payment processing that securely accepts and tracks online payments, including automatic invoice and receipt generation for added transparency.
• Nondues revenue options, such as online stores, that allow you to diversify your funding streams more easily for greater financial stability.
• Automatic dues collection, which can increase your member retention rate by making the renewal process simple.

Robust association management software (AMS) options also often include integrations with accounting software. This can be extremely valuable, as it lets your systems talk to each other and ensures you don’t miss documenting any revenue or expenses.

2. Carefully Separate Revenue Streams

Your association likely has multiple revenue streams, such as member dues, individual donations, corporate sponsorships, foundation grants, and more. These sources can be restricted funds—meaning you can only spend them on specific budget items—or unrestricted. Each will have different reporting requirements, so they must be accounted for separately.

Your AMS and accounting software should be able to help separate your revenue streams by letting you tag incoming funds with specific sources. Additionally, look for tools that offer entity management features. You may have separate divisions or organizations under the broader umbrella of your association that must be tracked and managed separately.

For example, an association may operate a foundation for its philanthropic projects and a young professionals group for its outreach efforts. The finances for each of these entities must be accounted for individually.

3. Automate the Renewals Process as Much as Possible

As a membership association, the bulk of your incoming revenue likely comes from member dues. Use tools to automate the dues-collection process and reduce the logistical burden of maintaining this income stream.

An AMS can help with this aspect of financial management through features such as:

• member self-service portals
• ability to save payment information
• automated recurring billing
• automated reminders

Automating this process as much as possible allows you to focus more on strategic tasks that will bolster your financial health, such as retaining at-risk members and exploring new nondues revenue sources.

4. Clearly Define Financial Roles and Responsibilities

While all staff should receive training in basic financial-management responsibilities, such as documentation and reporting requirements, the bulk of financial responsibilities will fall to your senior leadership staff, including your executive director and board members.

For example, roles you may want to designate for your senior leadership staff include:

• Oversight on which staff or board members are allowed to sign the organization’s checks
• Maintenance of income, expenses, and other transaction records
• Quarterly financial report presentations to the board and key stakeholders
• Completion of federal and state annual reports.

Meanwhile, your board members may be given financial responsibilities such as:

• Routine evaluation of financial checks and balances
• Approval of annual budgets, including the executive director’s compensation and expense reports
• Development and oversight of written policies and procedures to guide financial-management processes
• Annual review of financial and operational risks.

Ensure your bases are covered in terms of reimbursements, gift acceptance, conflicts of interest, and other policies that should be included in your bylaws and governing documentation. Don’t leave anything up to chance—especially when a lapse in compliance could have serious negative repercussions.

5. Diversify Nondues Revenue Sources

Once you’ve established foundational financial-management processes to safeguard your financial health, look for ways to diversify your revenue streams. This will ensure the financial sustainability of your association for years to come, especially in the face of unexpected challenges like economic downturns.

Some additional revenue sources to consider in addition to member dues include:

• Digital advertising
• Sponsorships for programs and events
• Certification programs
• Ticketed events
• Nonmember access to job boards 
• Grants 

As you consider new ways to diversify your funding streams, always remember that the ideal sources are true value-adds for members. Look for options that serve double duty, making new or continued membership more attractive to your audience.

Finally, remember that using the right foundational tools, including an AMS, can make the process easier through automation and organization.