When a new fiscal year is approaching, most finance directors focus their attention on next year's cash flow and their association's financial future. Unfortunately, many of these organizations often overlook larger systemic problems that could potentially put their 501(c)3 in hot water with auditors.

The good news is that there are many steps your finance team can take now to ensure your nonprofit is better prepared for its next government audit. Here are a few of the biggest mistakes that associations make leading up to audits, along with tips for how to avoid them.

1. There is no system to track restricted grants, gifts, and donations. Many corporations and individuals give grants, gifts, and donations that come with a contingency. Associations need to be able to show that they fulfilled the obligation to legally receive these restricted grants, gifts, or donations. Before the new fiscal year starts, association should take the time to create a workflow that tracks these future restricted gifts or grants, because the last thing your finance team wants to do is face an audit without accurate reporting.

Associations should start their fiscal years on the right foot by scheduling monthly calls with their advisor, bookkeeper, or accountant to ensure that any cash-flow hiccups are dealt with immediately.

2. There is no system to track authorization documents. Documents are a crucial component behind every successful audit. Many audits require an examination of documents that show a signature or initials as part of the authorization process, but many associations don't have a good system for keeping these records. Before the next fiscal year begins, associations should implement a process to track signed documents. Bill.com, Expensify, and Concur are just a few cloud-based systems that can track signatures and initialed documents for future audits.

3. There is no digital archiving system. Every government audit requires the finance team to pull critical documents from the organization's archive. For most associations, this might entail digging through filing cabinets looking for one particular folder. During an audit, this can create delays and frustrations. A digital archival system, such as Dropbox, can be helpful to better organize documents and make them more accessible for an audit.

All three of these mistakes highlight the need for associations to invest in proper financial systems. Without proper systems in place, nonprofits could not only experience headaches during audit time, but they could also risk the financial health of their organizations.

Take cash flow, for example. Because finance directors are human beings, many times their cash-flow forecasts won't align with revenue projections. This can create cash-strapped situations, which can ultimately put the organization's financial health in jeopardy. Most organizations don't address cash-flow problems with a financial advisor, bookkeeper, or accountant until the problem has escalated beyond control. Keep in mind that the faster you address financial holes, the easier it will be to resolve them. Associations should start their fiscal years on the right foot by scheduling monthly calls with their advisor, bookkeeper, or accountant to ensure that any cash-flow hiccups are dealt with immediately.

Although nonprofits might be short on resources, it's important that they invest in proper financial systems. Not only will they save the company time and money, they'll also provide peace of mind during audits.