Banking for Nonprofit Organizations

Nonprofit organizations have financial responsibilities that extend beyond managing deposits and paying bills. From tracking donations and grants to maintaining operating reserves and protecting funds from fraud, nonprofit banking requires careful planning, clear oversight, and dependable financial tools.

Unlike traditional businesses, nonprofits often rely on contributions, fundraising events, and grants that can arrive at irregular intervals. At the same time, expenses such as payroll, facility costs, and program operations continue throughout the year. Having the right banking structure can help organizations manage those obligations while maintaining accountability to donors, board members, and the communities being served.

At First State Bank and Trust (FSBT), we work with organizations throughout the St. Croix Valley to support their financial needs. Whether you're opening a nonprofit checking account, building cash reserves, or exploring treasury management services, understanding your banking options is an important part of supporting your organization's mission.

• Nonprofit organizations need banking solutions that support financial oversight, donor accountability, and cash flow management.
• Choosing a checking account depends on transaction volume, account fees, access, and whether earning interest is a priority.
• Nonprofits are commonly advised to maintain three to six months of operating expenses in cash reserves, although individual needs vary.
• Dual-control procedures, transaction monitoring, and fraud prevention tools can help protect organizational funds.
• Opening a nonprofit bank account typically requires an employer identification number (EIN), organizational documents, and information about authorized signers.
• Local banking relationships can provide financial guidance and opportunities for community connections.

What Banking Services Do Nonprofit Organizations Need?

Nonprofit banking services help organizations manage funds while supporting the financial accountability required of tax-exempt entities. Although many nonprofits use traditional business checking and savings accounts, their financial needs may differ from those of for-profit businesses.

For example, a nonprofit may receive a large grant at the beginning of the year but distribute those funds gradually across several programs. Another organization may depend on seasonal fundraising events to cover expenses throughout the following months.

These circumstances make it important to consider more than the cost of a checking account.

Common nonprofit banking needs include:

• Checking accounts: for receiving donations, paying expenses, and managing regular transactions.
• Savings and money market accounts: for maintaining operating reserves and setting aside funds for future needs.
• Cash management services: for processing payments, making deposits, and monitoring account activity.
• Fraud prevention tools: for identifying suspicious transactions and strengthening financial controls.
• Financial guidance: for evaluating account structures and planning around changing funding needs.

The right combination of services depends on an organization's size, funding sources, transaction activity, and internal financial policies.

A nonprofit checking account should provide convenient access to operating funds while supporting the organization's recordkeeping and financial oversight needs.

For nonprofits comparing checking accounts in Stillwater, Minnesota, or Hudson, Wisconsin, several factors deserve consideration.

Some organizations process dozens of donations and payments each month, while others maintain relatively few transactions. FSBT offers several business checking options that may accommodate different organizational needs. 

For example, Business Value Checking is designed for businesses, clubs, and community organizations with limited transaction activity. The account requires $100 to open and a $250 minimum balance to avoid a monthly maintenance charge. It also includes online banking, mobile banking, and electronic statements.

Organizations with higher transaction volumes or more complex deposit needs may benefit from exploring FSBT's other business checking options.

Operating reserves provide a financial cushion that helps nonprofit organizations continue their work when funding is delayed, expenses increase, or unexpected needs arise.

A commonly recommended starting point is three to six months of operating expenses in cash reserves. However, the appropriate amount depends on the organization's financial circumstances, including its funding sources, recurring expenses, and overall cash flow. An organization that depends heavily on one annual fundraiser, for example, may need a larger reserve than one receiving consistent monthly contributions.

How To Calculate Your Operating Reserve Target

Begin by reviewing your organization's essential operating expenses, including:

• Employee salaries and benefits
• Rent, utilities, and facility costs
• Insurance and administrative expenses
• Ongoing program expenses
• Regular vendor payments

Divide your annual operating expenses by 12 to estimate your average monthly costs. Then multiply that amount by the number of months your organization wants to maintain in reserves.

For example, if a nonprofit has $240,000 in annual operating expenses, its average monthly expenses would be $20,000. A three-month reserve would total $60,000, while a six-month reserve would total $120,000.

These figures are planning benchmarks, not universal requirements. Organizations should also distinguish unrestricted operating funds from donor-restricted contributions that must be used for designated purposes.

The National Council of Nonprofits provides additional guidance on establishing an operating reserve policy.

Reserves should generally remain accessible enough to support the organization during unexpected financial challenges. Depending on liquidity needs and account requirements, options may include business savings or money market deposit accounts.

FSBT's Business Statement Savings account provides an option for nonprofits looking to separate reserves from operating funds while earning interest. For organizations maintaining larger balances, FSBT's Investors Plus Business Money Market account offers tiered interest rates and access to funds.

Before choosing an account, compare interest rates, balance requirements, transaction limitations, and applicable deposit insurance coverage.

Nonprofits face many of the same financial fraud risks as other organizations, including check fraud, unauthorized transactions, and payment scams.

However, nonprofit organizations may have additional vulnerabilities when financial responsibilities are shared among staff members, volunteers, and board members.

Establishing clear financial controls can help reduce these risks while creating stronger accountability.

Dual control is a financial safeguard that requires more than one person to participate in or review certain financial activities. For example, one authorized staff member may prepare a payment while another reviews and approves it before funds are released.

Useful practices include:

• Requiring two authorized individuals to review significant payments
• Separating payment preparation from approval responsibilities
• Limiting account access based on individual roles
• Reviewing monthly account statements
• Updating authorized signers when board or staff roles change

These procedures can reduce the risk of unauthorized transactions and help protect organizational funds.

Technology can strengthen internal controls by helping nonprofits identify unusual activity and review transactions more efficiently.

FSBT offers Positive Pay, a fraud prevention service that allows organizations to compare checks presented for payment against previously authorized check information. Through FSBT's cash management services, organizations can also access transaction history, review account activity, and manage payments.

Fraud prevention works most effectively when digital tools are combined with consistent internal procedures and regular financial reviews.

How Treasury Management Supports Nonprofit Operations

As nonprofits grow, managing incoming donations, outgoing payments, and financial reporting can become more complex.

Commercial treasury management services can help organizations streamline certain transactions and improve visibility into their cash flow. FSBT offers several cash management services that may be useful for qualifying nonprofit organizations.

ACH services allow organizations to make electronic payments for payroll, vendor invoices, and reimbursements. They can also support collections such as dues, fees, and donations, potentially reducing the administrative time associated with processing checks.

Nonprofits receiving donations by check may benefit from remote deposit capabilities.

FSBT offers remote deposit services that allow qualifying organizations to deposit checks electronically without visiting a branch for every deposit. Availability, limits, and service requirements depend on the selected service.

Online banking provides access to account information, transaction history, statements, and payment services. For nonprofit finance teams, these capabilities can help simplify reconciliation, support reporting to the board, and maintain visibility into organizational spending. Explore FSBT's cash management services.

Before opening a nonprofit bank account in Minnesota or Wisconsin, organizations should be prepared to provide documentation confirming their legal structure and identifying the individuals authorized to manage the account.

Requirements vary by institution and organization type, but commonly requested documents may include:

1. Employer Identification Number (EIN): a federal tax identification number issued by the IRS.
2. Articles of Incorporation or Organizational Documents: documentation confirming the nonprofit's legal formation.
3. Bylaws or Governing Documents: information describing how the organization operates and manages its affairs.
4. Board Resolution or Authorization: documentation identifying individuals authorized to open and manage the account.
5. Identification for Authorized Signers: personal identification and other required information for individuals with account access.
6. IRS Determination Letter, if applicable: documentation confirming the organization's federal tax-exempt status.

Not every nonprofit has the same legal structure or documentation. An organization may also need to provide additional information depending on its activities and banking requirements.

FSBT recommends contacting a banker before opening a business account to confirm which documents are necessary. Preparing these materials in advance can make the process easier to navigate.

For nonprofit organizations, a banking relationship can provide value beyond account access.

Local nonprofits often work closely with the communities being served. Organizations in Stillwater, Hudson, and surrounding St. Croix Valley communities may benefit from working with a financial institution familiar with the region's businesses, charitable organizations, and community initiatives.

FSBT has served the St. Croix Valley for more than a century, providing financial services to individuals, families, businesses, and organizations throughout the area.

A local banking relationship can provide opportunities to:

• Discuss financial needs directly with a banking professional
• Compare checking, savings, and cash management options
• Review account structures as the organization grows
• Receive guidance when authorized signers or financial responsibilities change
• Build a relationship with a financial institution involved in the surrounding community

For nonprofit boards and leadership teams, having a consistent point of contact can be especially useful when making decisions that affect the organization's financial operations. Connect with FSBT's business banking team.

Financial support for nonprofits extends beyond traditional banking services. Community banks may participate in charitable giving, event sponsorships, employee volunteerism, and partnerships with local organizations.

FSBT supports community organizations through charitable contributions, sponsorships, and volunteer efforts. These activities reflect the bank's long-standing involvement in the St. Croix Valley.

For nonprofits in Washington County, Minnesota, and St. Croix County, Wisconsin, local relationships can create opportunities to connect with organizations and businesses that share an interest in supporting the community. Nonprofits exploring potential grants or sponsorships should contact financial institutions and community partners directly to ask about current opportunities, eligibility requirements, and application processes.

Community support programs vary, and charitable funding is not guaranteed.

Yes. Many nonprofit organizations use business checking accounts to manage donations, operating expenses, and other transactions. Eligibility, documentation, and account features vary by financial institution. FSBT offers business checking options that may accommodate the needs of different organizations.

Maintaining separate accounts can help nonprofits distinguish regular operating funds from money set aside for reserves or future expenses. However, the appropriate account structure depends on the organization's size, funding restrictions, and internal financial policies. Separate bank accounts do not replace proper accounting for donor-restricted funds.

How Many Months of Operating Expenses Should a Nonprofit Save?

Three to six months is a commonly recommended starting point. Organizations with irregular funding, significant fixed expenses, or higher financial uncertainty may need a larger reserve. Each nonprofit should determine an appropriate target based on its circumstances.

Consider account fees, transaction limits, interest options, cash management capabilities, fraud prevention services, accessibility, and the availability of financial guidance. A bank that understands nonprofit financial oversight and cash flow needs can be especially valuable.

Managing a nonprofit's finances requires balancing immediate operating needs with long-term financial stability. From selecting a checking account to maintaining reserves and protecting funds from fraud, thoughtful banking decisions can support the organization's ability to serve its community.

The right financial structure should make it easier to oversee spending, manage incoming funds, and prepare for changes in revenue or expenses.

At FSBT, we work with clients throughout Stillwater, Hudson, and the surrounding St. Croix Valley to explore banking solutions aligned with their needs. Whether your organization is just getting started or reviewing its current financial practices, our team can help you evaluate available options.

Connect with FSBT's business banking team to discuss checking, savings, and cash management services that can support your organization's ongoing work.