• Schedule a Demo

Avoid These 5 Fund Distribution and Management Mistakes

Better application management of scholarships, grants, awards, and more.

Avoid These 5 Fund Distribution and Management Mistakes

Making a mistake is never fun. Sometimes a mistake can just be an annoying grievance such as forgetting your lunch at home. But some mistakes have severe consequences. Business altering consequences. For example, fund distribution mistakes - those can be devastating to one’s organization. Not only could it result in delayed payments and frustrated recipients, but they can also cause potential legal issues. The ramifications of these types of mistakes can lead to serious consequences for organizations that provide scholarships, grants, and awards.

So let’s take a look at what some of the common fund distribution mistakes are, and how you can avoid them.

Mistake 1: Lack of Transparency

One of the most significant fund distribution mistakes organizations make is failing to maintain transparency throughout the process. When program managers and accounting teams don't have clear visibility into the status of funds, it can lead to a host of consequences.

Recipients may be left in the dark about when they can expect to receive their funds, leading to frustration and mistrust. Internally, a lack of transparency can cause miscommunication and confusion between departments, resulting in delays and errors. Moreover, without a clear audit trail, organizations may struggle to provide accurate reports to stakeholders and face difficulties during audits.

The consequences of poor transparency

The consequences of poor transparency in fund distribution can be far-reaching. When recipients are uncertain about the status of their funds, they may become anxious and lose faith in the organization. This can damage the organization's reputation and make it harder to attract future applicants. Internally, lack of transparency can lead to blame-shifting between departments, lowered morale, and decreased productivity. In the event of an audit, organizations without clear records may face legal and financial repercussions. Ultimately, the lack of transparency in fund distribution can undermine an organization's mission and impact.

How to avoid this mistake

To maintain transparency and avoid the negative consequences of poor visibility, organizations should implement a comprehensive fund distribution system that offers the following features:

  1. Real-time payment tracking: This allows program managers and accounting teams to monitor the progress of funds at every stage, identify potential issues early on, and take corrective action if needed.
  2. Centralized information management: A centralized system ensures that all parties have access to the same accurate and up-to-date information. This reduces the risk of miscommunication and errors caused by siloed data or manual record-keeping.
  3. Automated notifications and reminders: To keep recipients informed and engaged, the fund distribution system should automatically send notifications and reminders about key milestones, such as when funds are processed, approved, or disbursed.
  4. Comprehensive audit trail: Your system of choice should automatically log every action taken, by whom, and when, creating a clear record of all transactions. This audit trail should be searchable and exportable, making it easy to generate reports and comply with audits or legal requirements.
  5. Role-based access control: To ensure the security and integrity of fund distribution data, the system should allow organizations to set granular access controls based on user roles and permissions. This ensures that only authorized personnel can view or modify sensitive information, reducing the risk of errors or breaches.

Platforms like SendGrant offer a comprehensive solution that addresses these needs, empowering organizations to streamline their fund distribution process and focus on their core mission.

Mistake 2: Manual Processes

Another common mistake in fund distribution is relying on manual processes. Many organizations still use paper checks, spreadsheets, and emails to manage their fund distribution, which can be time-consuming, error-prone, and inefficient. Manual processes often involve multiple steps and handoffs between departments, increasing the chances of mistakes and delays.

For example, when program managers need to manually enter recipient information into a spreadsheet and then send it to the accounting team for payment processing, there's a risk of data entry errors, lost emails, and miscommunication. These manual processes also make it difficult to track the status of payments and quickly resolve issues when they arise. 

Impact on efficiency and accuracy

The impact of manual processes on fund distribution efficiency and accuracy cannot be overstated. When organizations rely on manual tasks, they spend countless hours on data entry, cross-referencing information, and following up on payment statuses. This time could be better spent on more strategic initiatives that further the organization's mission. Additionally, manual processes are inherently prone to human error, which can result in incorrect payment amounts, funds sent to the wrong recipients, or missed deadlines. By automating fund distribution with purpose-built software, organizations can significantly reduce the time and effort required to manage the process while ensuring a high level of accuracy.

How to avoid this mistake

To streamline operations and reduce errors, organizations should adopt automated fund distribution software that integrates with their existing systems and provides a centralized platform for managing the entire process.

Mistake 3: Compliance Errors

Compliance is a critical aspect of fund distribution that organizations cannot afford to overlook. Failure to adhere to legal and regulatory requirements can result in serious consequences, including financial penalties, legal action, and reputational damage. Common compliance errors include not properly vetting recipients, failing to obtain necessary documentation, and not following established protocols for fund disbursement.

For example, if an organization distributes funds to a recipient who is not eligible under the program guidelines, it may face legal repercussions and be required to recover the funds. Similarly, if an organization does not maintain accurate records of fund distribution, it may struggle to demonstrate compliance during an audit.

Legal repercussions

The legal repercussions of compliance errors in fund distribution can be severe. Organizations that violate laws and regulations related to fund disbursement may face significant financial penalties, legal action, and damage to their reputation. In some cases, non-compliance can even lead to the loss of tax-exempt status or the revocation of licenses and certifications. 

How to avoid this mistake

To mitigate these risks, organizations must prioritize compliance and implement robust processes and controls to ensure adherence to all relevant laws and regulations. Furthermore, organizations must stay up-to-date on changing compliance requirements, provide regular training to staff, and implement systems and processes that ensure adherence to guidelines.

Mistake 4: Poor Communication


Effective communication is essential for successful fund distribution, yet many organizations struggle in this area. Poor communication can lead to misunderstandings, delays, and frustration for all parties involved. When program managers, accounting teams, and recipients are not kept informed about the status of funds and any changes to the distribution process, it can lead to confusion and mistrust.

For example, if a recipient is not notified about a delay in payment or provided with clear instructions on how to access their funds, they may become frustrated and lose confidence in the organization. Similarly, if program managers and accounting teams do not have a clear line of communication, it can result in miscommunication about payment amounts, deadlines, and other key details.

Risks of misinterpretation

The risks of misinterpretation in fund distribution communication can be significant. When messages are unclear, incomplete, or inconsistent, recipients may misunderstand important details about their funds, such as how much they will receive, when they will receive it, and how they can access the funds. This can lead to confusion, frustration, and even legal disputes. Similarly, when program managers and accounting teams are not on the same page, it can result in errors and delays in fund disbursement.

How to avoid this mistake

To avoid these pitfalls, organizations must prioritize clear, timely, and transparent communication throughout the fund distribution process. Put another way, establish clear communication protocols, use plain language in all correspondence, and provide regular updates to all stakeholders. 

By ensuring that everyone involved in the fund distribution process has access to accurate and up-to-date information, organizations can reduce the risk of misinterpretation and maintain strong relationships with recipients and internal teams.

Mistake 5: Inadequate Security Measures

Now, more than ever, data security is a top concern for organizations involved in fund distribution. Inadequate security measures can leave sensitive information vulnerable to breaches, hacks, and other cyber threats. This can include recipient personal and financial information, as well as confidential organizational data. The consequences of a security breach can be severe, including financial losses, legal liabilities, and damage to the organization's reputation.

Threats to funds and data

The threats to funds and data in the fund distribution process are numerous and constantly evolving. Hackers and cybercriminals are always looking for new ways to access sensitive information and steal funds. Phishing scams, malware, and other tactics can be used to trick staff into revealing login credentials or other sensitive data.

Once a breach occurs, the consequences can be devastating, including:

  • Loss of funds
  • Exposure of sensitive recipient information, and
  • Damage to the organization's reputation.

How to avoid this mistake

To protect against these risks, organizations must implement robust security measures throughout the fund distribution process. This includes using secure payment portals, encrypting sensitive data, and implementing access controls to ensure that only authorized personnel can view and manage fund distribution information. Organizations should also regularly train staff on security best practices and have a clear plan in place for responding to potential security incidents.

It is crucial to stay vigilant and proactive in your security efforts. This includes regularly updating software and systems, conducting security audits, and partnering with trusted security vendors. Taking a comprehensive approach to security and staying ahead of emerging threats ensures that organizations can protect their funds and data while maintaining the trust of their stakeholders.

Most Poor Fund Management Mistakes Can Be Avoided


While fund distribution mistakes can have serious consequences, the good news is that most of them are avoidable. A comprehensive platform like SendGrant from the team who created SmarterSelect, empowers organizations to streamline their fund distribution process, reduce errors, and maintain compliance. With features such as real-time payment tracking, centralized information management, automated notifications, and a comprehensive audit trail, SendGrant provides the transparency and efficiency needed to avoid common fund distribution pitfalls.

Don't let poor fund management hold your organization back from achieving its mission. Sign up for SendGrant today and get your first five transactions absolutely free.

New call-to-action

Schedule a Demo



see all