A nonprofit organization should focus most of their time on their mission, not managing their finances. A proactive and thoughtful approach to financial management is essential for ensuring the organization’s sustainability and effectiveness.
“Treasury management with its suite of financial tools and services can significantly benefit nonprofit organizations,” says James Hill, VP, Treasury Management Sales Officer, First Federal Lakewood. “These services streamline payables, receivables and account reconciliation, reducing the need for manual entry and enhancing security. This means more time can be spent on mission-driven activities and less on administrative tasks, which leads to improved efficiency and financial confidence.”
Smart Business spoke with Hill about why nonprofits should consider utilizing treasury management services.
Why should nonprofits consider treasury management services?
The advantages of treasury management extend beyond convenience; these services are crucial for risk management. Nonprofits are built on the principles of safeguarding information and acting in the best interests of their clients and beneficiaries. Yet, many nonprofits underestimate their vulnerability to financial fraud. Nonprofits are frequent targets for payment scams, phishing attempts and check fraud.
To mitigate these risks, nonprofits can utilize services like Positive Pay and ACH origination. Positive Pay ensures that only issued checks are honored to prevent fraud before it happens, while ACH origination manages and authorizes electronic payments. These are often easier to set up than many organizations realize.
Cash flow management is another critical area where treasury services can provide significant support. Nonprofits may face irregular revenue cycles, with funding from grants, donations and fundraising events not following a predictable monthly pattern. Treasury management tools, such as zero balance accounts, can help smooth out these inconsistencies. Zero balance accounts prevent overdrafts by ensuring that funds are allocated efficiently across different accounts, such as payroll, operating expenses and other payables. Greater visibility and control over liquidity can help manage day-to-day operations, plan for growth and avoid costly cash crunches.
How do mutual banks help nonprofits succeed?
Mutual banks may offer tailored lending solutions informed by treasury insights. These banks often maintain closer relationships with their clients, using real-time data and transaction histories to make faster, more personalized lending decisions. This can be especially beneficial when nonprofits are expanding their programs, hiring more staff, upgrading office space or investing in new technology.
Technology is also transforming treasury management. AI tools can detect anomalies in spending, automate bank reconciliations, forecast cash needs and optimize operations. Mutual banks can offer the support and guidance a nonprofit needs to work with these tools. Additionally, this means that nonprofits can leverage advanced technology without needing a dedicated tech team.
Technology may also bring security concerns. Confidentiality and the protection of sensitive information are non-negotiable for nonprofits. Treasury services can offer added peace of mind with features like encrypted email for sensitive documents, dual control approvals for wire transfers, and automated fraud detection.
The choice of a local banking partner can make a significant difference. Banks that understand the nonprofit industry, including the nuances of fiduciary funds and trust account management, can provide better support and fewer headaches. Because mutual banks are owned by depositors rather than shareholders, they prioritize long-term relationships over short-term profits. This often translates into better service, lower fees and more flexibility when needs change.
Treasury management can support an organization’s community engagement goals. Mutual banks reinvest profits into local initiatives, sponsor community efforts and support economic development. Choosing a banking partner that has similar values and invests in the community can align with an organization’s mission and strengthen their presence in the area. ●
INSIGHTS Banking & Finance is brought to you by First Federal Lakewood.
