How to Align Your Nonprofit’s Development and Finance Departments for Maximum Impact
In my 20+ year career, I’ve worked with countless nonprofits.
One of the most common complaints I hear?
That development and finance feel like they’re on different teams.
Development is chasing the next gift while finance is trying to close the books.
Somewhere in the middle, documentation gets lost and timelines crossed. And inevitably, frustration ensues.
When I was in school, I pursued an MBA instead of a master's in philanthropy so I’d understand not just the development side of nonprofits, but finance too.
In this blog, I'll share:
How fundraisers can meaningfully support the finance team
What finance needs to know about fundraising
A simple approach for keeping fundraising data organized
How to prepare for an annual audit without the last-minute scramble
How Fundraisers Can Support Their Finance Team
I've had wonderful relationships with finance staff and some that were downright hostile.
If you’re not seeing eye to eye, it’s important to step back to understand where your CFO or Controller is coming from.
The finance department’s job is to track your organization's income and expenses every day. They’re constantly thinking about cash flow, scarcity, and potential cutbacks that the rest of the team doesn't see.
At the same time, they don't always understand how long it takes to secure a grant or close a major gift. Their world runs on specific rules, laws, and processes. Fundraising runs on relationships and timing that shifts by the week.
As a fundraiser, part of your job is learning finance's world well enough to bring them into yours.
A little accounting literacy goes a long way. Knowing the difference between an audit and financial review, accrual and cash-based accounting, and understanding what your 990 is for can truly transform your relationship with finance.
Accounting Terms Every Fundraiser Should Know
You don't need a finance degree to improve communication with your team. These terms will take you far:
Audit: The highest level of financial review, in which an independent CPA examines your financial statements, records, and internal controls in depth, and verifies the numbers. Funders, lenders, and your own bylaws often require one.
Financial review: A lighter-touch version of an audit where a CPA runs analytical procedures, asks questions, and flags inconsistencies, but doesn't test your internal controls or independently verify the numbers. It's faster, less expensive, and often implemented when a board or funder wants assurance without a full audit.
Form 990: Your organization's annual information return to the IRS. Since you're tax-exempt, there's no tax bill to calculate here. The form exists so the IRS and the public can see your programs, governance, revenue, and expenses. Plenty of donors and funders look at your 990 before they give.
P&L: Short for profit and loss statement. Nonprofits usually call this the Statement of Activities. It shows your revenue and expenses over a set period and whether you ended up in the positive or negative.
Balance sheet: Nonprofits usually call this the Statement of Financial Position. It's a snapshot of what you own, what you owe, and what's left over as of a specific date, not a stretch of time like the P&L.
Accrual vs. cash-based accounting: Cash-basis accounting records a gift when the money arrives and an expense when it's paid. Accrual-basis accounting records a gift when it's pledged or earned and an expense when it's incurred, whether or not the cash has moved yet. Most small nonprofits start on a cash basis. As you grow, especially with grants and multi-year pledges, you'll likely move to accrual, because it gives a truer picture of what's actually coming and going.
GL codes: Short for general ledger codes. These are the numbers finance assigns to every transaction to categorize it as revenue, expense, restricted fund, and so on. When your gift coding matches finance's GL codes, a donation and a deposit are easy to match up. When they don't, someone has to translate between the two systems every time.
Here’s how development and finance can partner together to help your nonprofit thrive:
Meet regularly on your grants pipeline. Finance needs to know what's been solicited, what's secured, the timeline, and the restrictions they'll be responsible for tracking.
Be honest early about cash flow. Communicate campaigns timing so finance can project revenue peaks and valleys.
Own good recordkeeping. Keep copies of checks and envelopes, grant applications, budgets, agreements, and the actual language used in each solicitation. Any of it may be requested in an audit.
Build a controls process together. Decide who opens the mail, who processes the gift, and who makes the deposit, and make sure it's not the same person every time. Separation of duties protects your organization and your staff.
Align designation tracking (campaigns, funds, and appeals) with finance's GL codes. When you have the same codes, matching a gift to a deposit takes minutes instead of a full afternoon of cross-referencing.
What Finance Needs to Know About Development
Partnership works both ways. Development isn't the only department that needs to learn a new language.
Fundraising isn't transactional. It's relationship-based, and it takes time, especially with major gifts, planned gifts, and grants.
A major donor conversation might take 18 months from first meeting to first gift. A grant can take a full year from relationship-building to award. Development doesn't set that timeline; the relationship does.
Accounting staff should understand their organization’s fundraising cycle, development goals, and strategy, and trust that the fundraisers are doing what they can to reach revenue goals.
Accounting and development should build the annual budget together, not separately. Map out what your organization needs, backed by a realistic revenue goal.
Year-over-year revenue growth depends on your sector, board culture, available funding, policy change, and more. If your budget isn’t realistic, you’ll set yourself up to fail. Creating the budget should be a collaborative team effort so everyone’s on the same page.
How to Organize Your Nonprofit's Fundraising Data
Tension between development and finance is usually born from disorganized data. If your gift records live in multiple spreadsheets and email inboxes, no one can trust the numbers, including you.
Your organizational system should include:
One system of record. Your CRM should be the single source of truth for gift data. Everything else should point back to it, not compete with it.
Clean allocation and acknowledgment records. Every gift should clearly show which fund or appeal it's tied to, and whether it's been acknowledged. This is often the first thing an auditor asks to see.
A monthly close. Set a recurring date each month to reconcile what development recorded against what finance deposited, and resolve any gaps before they pile up.
When you build these habits into your workflow, you’ll save time and cultivate a collaborative relationship between your development and finance departments.
How to Prepare for the Annual Audit
I once had an auditor ask to see everything tied to a single $5,000 donation: the appeal it responded to, the digital copy of the gift, the entry in the database, and the acknowledgment letter.
It’s impossible to do this without consistently tracking your data all year. When you’re organized, audits can actually feel calm.
Here’s how to prepare for an audit:
Reconcile gift records monthly, not just at year-end.
Keep documentation for every restricted gift and grant.
Maintain a clear paper trail for board-approved policies and financial controls, including your separation of duties process.
Foster a collaborative relationship between development and finance.
An audit shouldn’t be a scavenger hunt—it should be a quick conversation. But that’s only possible when your team stays organized.
Your Infrastructure Matters
At Sprout, we build supportive systems that empower your development and finance departments to work together.
The more aligned you are, the better you can serve your mission. You’ll not only raise more, you'll have more capacity to innovate and implement big ideas.
If you need help getting on the same page with your team, I’m here for you. Book a free 30 minutes on my calendar and let’s make a plan together.
