There are certain guiding principles you should use to structure your accounting methods and financial reporting and management. When you follow them, your financial information will be easier to understand and more usable by leaders in your organizations who rely on it to make decisions, and by donors, grantors, lenders, and others who use your financial statements. You’ll have to decide how best to apply these principles for your organization, based on your size, structure, industry, and other factors, but they are central themes that all organizations ought to take seriously.

Consistency: Your financial policies and systems should be consistent from year to year. You may refine some parts when your organization changes, but if financial information isn’t presented in a consistent way from year to year, it becomes harder to compare results from different time periods. Also, if you change policies too frequently, it can raise eyebrows about possible manipulation of your financial information.

Accountability: Your organization needs to be able to explain how it used its resources and the resulting program achievements. Different stakeholders will look at different results – your finance department, senior management making program decisions, donors and grantors, people benefiting from your work. They will want to know that you’ve used your money effectively. Accountability is the duty to explain decisions you made, actions you took, and how funds, equipment, and other resources were used.

Transparency: Your organization should be open about its work and make information available to stakeholders about your programs, plans, and finances. Transparency helps build trust with donors and grantors, and also with your staff. From a financial perspective, this includes preparing accurate, complete and timely reports and making them accessible to any stakeholders who need them.

Viability: This principle is about financial sustainability and health. To be financially viable, your organization must take in enough revenue to cover its expenses and maintain a sufficient level of savings. However good and important your work is, if it’s not financial viable, you won’t be able to continue very long. For larger organizations, individual programs may not produce as much income or donations and may merit being subsidized by other programs if they are important to the organization or its beneficiaries, or if the programs are still getting off the ground. Management should monitor these programs and have an ongoing plan for how much to invest in them. They should also have a plan for the organization as a whole for how it will meet its financial obligations while accomplishing its mission and goals.

Integrity: Related to integrity, staff at all levels need to perform their work honestly and with integrity. It’s especially important for management and the Board of Directors to lead by example and set the tone for the organization. Integrity includes following policies, avoiding conflicts of interest, having proper oversight, and segregating sensitive financial duties, among other things. There’s also an element of integrity for your financial records and reports, which relies on accuracy and completeness of the records you keep.

Stewardship: Your organization has a responsibility to properly oversee your funds and make sure they are used for their intended purpose. This includes using restricted donations or grants for what they are specified for, but it also covers managing your overall finances in such a way that your organization will be sustainable and able to accomplish its mission. The Board of Directors has top-level responsibility for this, but management provides the day-to-day oversight. An integral part of stewardship is careful and intentional planning, both financial budgets and plans for how programmatic work will be done. You’ll also need to be aware of internal or external risks that could threaten your organization’s finances, and have appropriate controls and policies in place.

Accounting Standards: You should have competent accounting and finance staff who understand and follow accounting standards. They need to record day-to-day transactions accurately if you want your reports to be reliable. Anyone who reads your financial statements should be able to understand the information being presented, and the information needs to be accurate. It’s wise to have ongoing training to keep staff’s knowledge and skills sharp, especially if you have agreements that require special recordkeeping or compliance items, such as loan covenants, government funding, or grants that require reports in a specific format.

If you’re unsure how to implement any of these principles, or systems and policies you should have in your organization, your auditor or other consultants and advisors will be able to give you feedback. It’s wise to have board members and senior management who have experience managing financial systems. They’ll know what practices to encourage and have an eye for knowing when something seems fishy. Training for staff at various levels is always a good investment, as time and funds are available.