How to Manage Internal Controls with a Small Nonprofit Accounting Team

Managing internal controls with a small accounting team can feel like an uphill battle. You know you need better segregation of duties, but limited staff, unpredictable workloads, and competing priorities often make it challenging to implement effective checks and balances.

As the Chief Finance and Operations Officer at A Better Chance, an organization that provides transformational education opportunities to students from underserved communities, I’ve been there. I know what it’s like jumping from one urgent question to the next, while also thinking about the reports I need to run and the payments I need to process.

But internal controls are non-negotiable—they protect your organization from risk, maintain trust with donors, and shield employees from undue pressure. Even with a small team, you can establish strong internal controls to safeguard your nonprofit’s financial integrity and reputation.

Key Takeaways

• Effective internal controls are essential for safeguarding your nonprofit’s finances and reputation, even when your accounting team is small.
• Creative approaches—like involving staff from other departments, incorporating volunteers, and leveraging automation—can help build strong checks and balances despite limited resources.
• Documenting processes and regularly updating procedures ensure continuity, help prevent errors, and strengthen your organization’s defense against risk.
• Prioritizing internal controls protects employees from undue pressure and builds donor trust, positioning your nonprofit for long-term success.

Why Segregation of Duties Is Difficult for Small Accounting Teams

Small nonprofit finance teams often juggle multiple roles and responsibilities, requiring adaptability and a laser focus on organization. For example, you might be processing donations one moment, answering questions about grant balances the next, and preparing board reports by the end of the day. This unpredictability means you often rely on yourself to ensure everything gets done.

But segregation of duties is a cornerstone of effective internal controls, and it’s hard to implement when your team is stretched thin. Often, one person oversees multiple steps in a process—opening mail, entering data, depositing checks, and reconciling bank statements—leaving no room for a second layer of review.

While you may feel confident managing these tasks solo, it introduces risk. Errors or fraud can go undetected, and auditors will flag these gaps in segregation as weaknesses.

Small teams also often struggle to fully utilize fund accounting systems that could help automate workflows or create internal checks. Learning new tools requires time you simply don’t have, leaving spreadsheets as the go-to option despite their limitations.

Risks of Weak Internal Controls

Weak internal controls create vulnerabilities across multiple fronts. Data errors are common, and as one example, a misstep in a spreadsheet might result in incorrect donor mailings—potentially straining relationships with key supporters. These errors aren’t intentional but can cost your organization valuable time and resources to rectify.

Burnout is another major risk. When internal controls are weak, the workload often falls on one or two individuals, leading to stress, long hours, and eventually staff turnover. When key employees leave, your nonprofit loses institutional knowledge, making it harder to onboard new staff and maintain continuity.

Audit findings are another concern. Recurring issues, such as segregation of duties, may prompt donors to question your organization’s ability to manage funds effectively. Protecting your team through clear checks and balances is equally important. Strong internal controls shield employees from accusations by ensuring no single person owns an entire process.

Creative Solutions for Checks and Balances

To stay ahead of deadlines and unexpected fires, tools like detailed task lists, digital planners, and calendar systems can be lifesavers. From my experience, maintaining visibility on your priorities through Microsoft Planner or calendar reminders helps keep operations smooth and ensures you don’t miss critical deadlines, like payroll or end-of-month reconciliations. Multitasking is inevitable, but organization is your best defense.

Even with a small team, you can create checks and balances by thinking outside the finance department. For instance, have the office assistant or receptionist open mail and scan checks before they reach you. This creates a review layer that doesn’t require specialized financial expertise. Development staff can enter gift records, and operations employees can help cross-check deposit slips—building a shared understanding of financial workflows.

Delegating tasks that don’t involve confidential information, such as scanning invoices, is another option. Sensitive processes, like payroll, can be handled by external resources like Professional Employer Organizations (PEOs). These organizations add an external layer of review, ensuring compliance while reducing your workload.

Volunteers and seasonal workers can also be invaluable for one-off projects like donor mailings. Tapping into programs for interns or students may help you access low-cost people resources—possibly the cost of a couple of pizzas for hungry college students who also want some volunteer hours—while freeing up time for your core finance team. If you involve volunteers in sensitive tasks, be sure they sign confidentiality agreements and, where feasible, conduct background checks for added security.

Adding a Layer of Separation with Automation

Automation can simplify workflows and improve internal controls, allowing you to focus on strategic tasks instead of repetitive ones. For example, tools like DocuSign streamline contract approvals, tracking signatures digitally to ensure compliance without the back-and-forth of paper documents. Similarly, automated bank feeds eliminate a lot of manual entry, so you can flag anomalies quickly and prevent errors before they cascade into larger problems. Finally, AP invoice automation can help you track approvals and provide clear audit trails.

With automation, documentation is especially crucial. A well-maintained manual of your processes ensures continuity when staff are out or leave the organization. It’s not enough to rely on informal training or verbal instructions—step-by-step documentation allows anyone stepping into a role to understand what’s required. Regularly review and update these manuals to reflect changes in workflows or technology.

For instance, if your team starts using a new tool to scan checks into your accounting system, update the process in your manual immediately. Auditors will look for these written policies and having them in place strengthens your internal controls while improving efficiency.

Prioritize Internal Controls Even with a Small Accounting Team

Internal controls aren’t a luxury—they’re a necessity for protecting your nonprofit’s financial health, reputation, and the well-being of your team. While small accounting teams face unique challenges, implementing even partial controls can make a significant difference. Start by leveraging staff from other departments, exploring automation tools, and documenting your processes.

Don’t wait for an audit finding or donor concern to take action. Download the white paper, How to Build Trust with Strong Internal Controls, today to learn more about how to safeguard your organization and ensure trust with all stakeholders.