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Bridging Finance and Human Resources for Nonprofit Efficiency and Compliance

When managing a nonprofit, the relationship between finance and human resources (HR) is often overlooked. An effective, communicative partnership will ensure efficiency, compliance, and mission advancement. Here are some ways to create an environment that encourages communication and cooperation, which is essential to fostering effective collaboration:

  • Regular meetings between the two departments help address issues promptly and ensure alignment on key initiatives.

o   Suggested meeting agenda:

Segue: Get to know each other better; share something you look forward to, hobbies, personal or work achievements to build rapport.

HR updates: Share stakeholder challenges and HR deadlines that may impact accounting practices (e.g., payroll, hiring, terminations, HR team transitions, operations/client challenges).

Accounting updates: Discuss stakeholder and accounting deadlines and changes that may impact HR practices (e.g. budget planning, audits, finance team transitions, operations/client challenges).

  • Establish clear communication channels, such as shared digital platforms and regular status updates to facilitate information sharing and problem-solving.

  • Identify cross-training opportunities help staff members understand each other's roles and responsibilities, fostering a culture of mutual respect and cooperation.

Enhancing collaboration between finance and HR in the following areas can advance the organization’s overall success: payroll management, compliance checks, benefits administration, budget allocation of grants, data analytics and reporting, internal controls, and audits.

Leadership support: Organizational leaders must champion the importance of this collaboration and provide the necessary resources and support for joint initiatives, such as investing in technology, providing training opportunities, and creating policies that encourage cooperation.

Invest in integrated HR and accounting technology:  Integrated technology can significantly enhance collaboration between the two departments by automating routine tasks, such as onboarding, payroll processing, benefits administration, and onboarding, reducing the workload for both departments and improving accuracy. Integrated software solutions also provide real-time financial and HR data access, enabling better decision-making and strategic planning. By leveraging technology, nonprofits can create a more efficient and effective collaboration between Finance and HR. Furthermore, investing in integrated HR and accounting technology not only enhances collaboration between these two critical departments but also has a significant positive impact on employee morale and retention.  Employees appreciate the reduction in manual, time-consuming processes, which allows them to focus on more meaningful and strategic work.

Streamline payroll management:  HR and Finance can work together to streamline payroll management by creating integrated systems. Automating payroll processes can help reduce errors, ensuring that employees are paid accurately and in a timely manner, while staying in compliance with tax laws and labor regulations.

Efficiently allocate budget for nonprofit grant resources: Finance and HR can work together to help prepare grant proposals, manage fund allocation, monitor capacity, and ensure compliance with grant terms. Finance tracks expenses, prepares reports, and conducts audits, while HR ensures compliance with employment terms and participates in evaluations. Finance prepares budgets, forecasts revenue, develops financial plans, and ensures compliance with funder requirements. HR provides input on staffing needs, salaries, benefits, and training costs. Regular communication and joint meetings align finance and HR with strategic goals, ensuring effective grant management.

Accurate financial reporting and smoother annual audits: Accurate data is crucial for both Finance and HR. Nonprofits must adhere to strict financial reporting standards and undergo regular audits to ensure transparency and accountability. By collaborating, Finance and HR can ensure that all employee-related expenses, such as salaries and benefits, are accurately recorded and reported. This collaboration is particularly important during audits, as both departments must provide comprehensive documentation and explanations to auditors. Effective collaboration can make the audit process smoother and more efficient, reducing the risk of discrepancies and ensuring compliance with regulatory requirements.

Better management of new hire forms:  Ensure forms are processed efficiently by aligning financial and administrative requirements, which speeds up the onboarding process, and allows both teams to focus on more strategic tasks.

Ensure Compliance: Regulatory compliance is a fundamental aspect of nonprofit management. Nonprofits must comply with various federal, state, and local regulations, including labor laws, tax filings, and financial reporting standards. By working together, finance and HR can stay informed about regulatory changes and implement the necessary policies and procedures to ensure compliance. Compliance documents or regulations should be reviewed and updated on an annual basis and completed by both the finance and HR teams. This partnership reduces the risk of non-compliance, safeguarding the organization from penalties, fines, and reputational harm. Furthermore, a proactive approach to compliance can enhance the organization's credibility and build trust with donors, beneficiaries, and other stakeholders.

By embracing a collaborative approach to finance and HR, nonprofit organizations can strengthen their operations and better achieve their mission, making a greater impact on the communities they serve.


Please contact us to learn more about Kiwi Partners' outsourced accounting & CFO services, HR services, technology implementation consulting, and analytics solutions for nonprofits.






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