Nonprofit 101: Cash Disbursements

Disbursing funds or paying bills is a critical target for internal controls. Loose policies have multiple consequences such as, lack of a defined paper trail for audits or an open door to fraud. The following six guidelines are helpful to protect an organization’s resources:

  1. Segregate processing from initiation/authorization of purchase – If staff or time is limited, ask another person in the organization to ‘join’ a transaction. One person should not have responsibility for both processing and authorizing the disbursements.
  2. Review costs paid with third party support – Electronic payments need the same approval and scrutiny as paper checks. Even if set up for auto-pay, verify the e-payments at least monthly.
  3. Review/approve invoices before paying – Small organizations are often stretched for personnel, but don’t skip such an important step as invoice review. Catching errors before paying saves time and money.
  4. Periodically check vendor lists and changes to vendor information – Ask a person unrelated to bill paying (such as the treasurer or executive director) to independently audit vendor lists and identify any red flags.
  5. Ask someone other than the A/P person to mail vendor checks – Don’t return the signed checks to the a/p clerk for mailing. Policies that segregate duties in an organization make fraud less likely to happen.
  6. Reimburse employee expenses only when properly substantiated – Make it a rule to not reimburse expenses without approval and tangible back-up, such as a detailed receipt (not a credit card bill).

Learn more about cash disbursements for nonprofit organizations at our upcoming Taco Tuesday event in Dallas on September 22nd.  For more information and to register click here: