Nonprofit Accounting Services to Build Stronger Nonprofits

Like any organization, nonprofits also have financial responsibilities requiring proper bookkeeping practices. Audits may be required by state law, grant agreements, or board what are retained earnings policy. Provide auditors with a year‑end trial balance, bank statements, grant agreements, and board minutes. Bookkeeping for nonprofits deserves the same rigor as any corporate ledger, yet it must also respect the purpose that drives every donation. This guide shows nonprofit leaders, treasurers, and volunteers how to keep books that satisfy regulators, win donor confidence, and fuel programs that change lives.

Do all nonprofits have to file Form 990?

• Most organizations will also need to track payments they are owed (accounts receivable), bills that they haven’t paid (accounts payable).
• Propriety and fund accounting are salient features distinguishing between restricted and unrestricted resources.
• If someone goes out of town, you have a team that will take care of your account while they are away.
• Board finance committees should also review financial reports at least quarterly to maintain proper oversight.
• Quality internal audits and audited financial statements aren’t cheap, but they’re worth it.

Bookkeeping for nonprofits is recording and analyzing financial transactions to ensure compliance with state and federal accounting rules. Nonprofit accounting is essential to running a successful nonprofit organization. You can check out Bloomerang’s accounting consulting recommendations to find other accounting firms that can help you build out your nonprofit’s financial management strategies. The statement of functional expense is especially helpful when it comes time to file your nonprofit’s annual Form 990, which Cash Flow Management for Small Businesses we’ll cover later on. Because expenses have to be separated into the three categories above on your tax forms, this report makes it easy to find specific allocation information. For-profit companies leverage an income statement to show how much they have earned or lost over a specific period of time.

Ignoring Donor Restrictions

• This statement remains just as accurate in the context of nonprofit accounting.
• This way, all of your data will be consistent, and it’ll be easier to review your funding model and make adjustments to increase your organization’s financial stability.
• Nonprofits have daily operating costs similar to other organizations, like salaries, supplies, utilities, etc.
• Regularly reviewing these metrics helps spot potential issues before they become problems.
• Detailed financial documents, upon request, should be readily available.
• It goes beyond basic transaction recording to include fund allocation, restriction management, and financial decision-making support.

An audit and compliance system can help you ensure compliance and provide a framework for regular reviews of the organization’s financial practices. Non-profit organizations need to create a budgeting system to ensure they are allocating their resources efficiently and effectively. Your budget should include projected income and expenses, which should be updated periodically. When selecting the right bookkeeper for your nonprofit, you’ll need to decide between hiring an in-house bookkeeper or outsourcing to a virtual service. Each option has its unique advantages for your nonprofit’s financial management.

Easy nonprofit accounting software

• Zoho Checkout is free as long as you accept only 50 donations—ever, not per month.
• While these expenses are important to your cause, they contrast with program costs, which are directly related to the initiatives that further your organization’s mission.
• Investing in specialized nonprofit bookkeeping software and regular training to keep staff up to date can help overcome these challenges.
• While tax-exempt status might be determined by the IRS and federal law, nonprofit status is determined by state law.
• They need an organized system that makes sure purchases are ordered, budgeted for, and fulfilled properly from the get go.
• Treat the 65/35 “rule” more like a guideline to direct as much of your nonprofit’s funding toward its programs as is reasonably possible.

Unfortunately, NetSuite’s site is pretty sparse, and it’s definitely on the pricier side of accounting software (third parties estimate it starts at around $499 a month). Still, since Oracle NetSuite focuses on ERP and CRM software, it’s a better fit for midsize to large nonprofits with a bigger budget for accounting. In addition to requirements for filing specific accounting reports, nonprofits must follow additional accounting compliance requirements to keep their tax-exempt status. For your organization to succeed, you’ll need a great team who is happy with their compensation. When it comes to payroll management, your nonprofit should be doing your accounting just like any other business with employees. You have real-time access to your books and tailored grant financial statements.

Yes, it takes time, but good documentation makes everything else easier—from grant reporting to tax preparation. Likewise, keep a tax deduction cheat sheet handy for quick reference during donor inquiries. For instance, a low program expense ratio might mean you’re investing in technology that will improve efficiency later. Likewise, high fundraising costs may be justifiable if you build a donor base from scratch. Small nonprofits might qualify for simpler forms (990-EZ or 990-N), but the basic requirements remain unchanged. This public accessibility means your financial management needs to be spotless.

We’ll help you modernize your nonprofit accounting & bookkeeping systems to get consistent and accurate reports. And we’ll show bookkeeping for nonprofits you how to use those reports to make smarter decisions for your organization. Learn the six essential steps that every nonprofit should take to determine the ideal reserve fund amount. Overspending a grant budget may have significant financial implications for a nonprofit.