Hosting a nonprofit gala is one of the most exciting and rewarding ways to raise funds, build relationships, and promote your cause. But with all the glitz and glamour comes the need for precise accounting to make sure that your event is both impactful and financially sound.
Below are some specific accounting steps you should take before and during the event:
Establish a Tracking System in your Software for the Event
Create a separate account or a specific class in your accounting system dedicated to the gala. This helps track income and expenses exclusively for the event. It will also make reporting cleaner and more transparent when presenting financials to your board or stakeholders.
- Example: Imagine you are hosting a gala that has both ticket sales and sponsorship income streams. You create a separate account or class within your accounting software specifically for the event. Every expense—such as venue deposits, catering payments, and marketing costs—gets charged to this account. Likewise, all incoming revenue from ticket sales and sponsorships is deposited into the same account. This segregation makes it easier to monitor the gala’s financial health without mixing it up with your organization’s day-to-day operations. You may also want to create sub-accounts for various categories such as ticket sales, sponsorships, donations, and event expenses, making it easier to generate segmented reports.
Create an event budget
Establishing a detailed budget for your nonprofit gala is critical for financial success. This budget should include all expected expenses, such as venue, catering, marketing, entertainment, and any miscellaneous costs, as well as projected revenue streams like ticket sales, sponsorships, donations, and auction proceeds. Be sure to also allocate a contingency budget to cover unexpected costs that may arise. Additionally, set a budgeted profit goal so the event not only covers expenses but also contributes to your nonprofit’s mission. Once the budget is created, it’s essential to continuously track “budget vs. actuals” throughout the process. This allows you to identify any variances early and adjust your spending or fundraising strategy as necessary to stay on target. Cash flow tracking is also crucial—knowing how much cash is coming in and going out in real-time helps prevent shortfalls and keeps the event on solid financial ground.
- Example: Suppose you budget $10,000 for catering and $20,000 in ticket sales. As the event progresses, you notice catering costs have increased to $12,000. Meanwhile, ticket sales exceeded expectations, bringing in $25,000. Tracking these variances allows you to reallocate funds, such as using the extra $5,000 from ticket sales to cover the catering increase, keeping the event within budget and cash flow stable.
Reconcile Data from Various Payment Systems
When hosting a nonprofit gala, payments may come from various sources such as ticketing software or other payment platforms. It’s important to gather and reconcile all the data from these systems to provide accurate financial reporting and compliance. It’s also important to calculate the fair market value (FMV) of items like tickets, which often have a charitable contribution component. For instance, if attendees pay more for a ticket than its FMV, the difference should be recorded as charitable income.
- Example: Let’s say your gala ticketing software processes $10,000 in ticket sales. The fair market value of each ticket is $100, but you charged $200 per ticket. When reconciling the data, you should account for the $100 difference between the ticket price and FMV as charitable income.
Track Pledge Payments
Sometimes, donors make pledges during the gala but fulfill them at a later date. These pledges should use the accrual accounting method to record pledges as accounts receivable once the commitment is made. Following up on these pledges post-event via email is critical in making sure that all promised contributions are collected. In your accounting system, set up aging reports to track overdue pledge payments and automate reminders to donors about upcoming or missed payments.
- Example: A donor pledges $10,000 but commits to paying it in installments over the next six months. Your accounting system records this $10,000 as a receivable once the pledge is made, but the actual payments will trickle in over time. This allows you to track outstanding pledges and follow up with donors if any payments are missed.
Following these tips will enable you to track every detail and gain a clear and accurate financial picture throughout the entire event. Detailed financial data also gives you the tools to meaningfully communicate the true impact of your gala to your board, donors, and supporters.
Reach out to The A Team Cares today to learn how we can help you stay on top of your accounting, so you can focus on making your next event a huge success.