A Guide to Nonprofit Accounting for Non-Accountants Bench Accounting

An outsourced bookkeeping and accounting service should be able to scale with you by adding full-service accounting when you are ready for it. If you have the spare time to manage your work and some of the accounting each month but need a little extra help, a part-time bookkeeper might be a good solution for your nonprofit. In addition to these basic bookkeeping activities, your costs will be impacted by how your accounting systems, policies and procedures, and reporting needs are set up and administered.

Fund accounting enables nonprofits to allocate their money into different groups or “funds” in order to keep them organized and only spend funds on what they’re designated for. To learn more about exactly which taxes your tax-exempt nonprofit might still be on the hook for, consult IRS Publication 557, or better yet, consult with a nonprofit tax specialist. They’ll have experience helping organizations like yours minimize their tax bill and make sure you aren’t breaking any tax code rules. This is the part of the tax code that concerns charities, nonprofits, and religious organizations that are exempt from paying federal taxes to the IRS.

Streamline all your donation apps

You can also make financial statements from your manually entered Excel spreadsheet. However, this takes a lot more time, effort, and accounting knowledge. Most organizations will let a software, accountant, or professional bookkeeper to create these statements for them. The major responsibilities of a bookkeeper relate to keeping accurate records of all financial details and transactions.

If you view reporting as a hierarchy, FASB reports fall higher on the spectrum than the GAAP reports. They follow the guidelines set by GAAP but are even more specialized. Access your constituent contacts, enter donations, review activities, membership, events, and store purchases right from your mobile device. You might be able to network with specific software providers who can supply you with a lower cost on software.

#4: Conduct Regular Bank Reconciliations

To stay organized and on top of your nonprofit’s bookkeeping and accounting responsibilities, complete tasks that need to be done daily, weekly, quarterly, and yearly. Keep necessary financial information up-to-date so you’re prepared to submit paperwork to the government and to the people involved in your nonprofit organization who plan your budget. It’s important that you’re using a bookkeeper and accountant who have experience preparing financial statements for nonprofit organizations. If you do something incorrectly, it could have a damaging effect on your organization. Bookkeepers are in charge of maintaining your books closely day in and day out. They are responsible for all data entry into accounting ledgers or software.

Most businesses and nonprofit organizations operate on annual budgets throughout their calendar year. Well planned out budgets guide nonprofit’s down a path of knowledge of how to best use their resources to remain financially healthy. If you have a knack for numbers and organization, you can be your own bookkeeper! You'll be responsible for setting up bank accounts, recording transactions, conducting bank reconcilliations, making a budget, and producing financial statements. These rules ensure that all businesses use the same methodology for financial reporting. Nonprofit accounting is vastly different from for-profit accounting. Nonprofits are backed by donations and grants, so they have strict financial accounting standards they have to meet.

Create internal controls for everything financial management.

In this section, we’ll cover some best practices that nonprofit accountants can use to better handle their finances. Since 2017, you’re also required to disclose the “nature” of the activities your nonprofit lists on this report. For example, what percentage of your postage needs are for bookkeeping for nonprofits marketing materials and direct mail fundraising versus administrative duties like paying bills. Providing detailed information on your statement of functional expenses also helps when it’s time to complete your annual Form 990 which requires expenses to be separated in a similar fashion.

• Statements of financial position, activities, and cash flow are not documents you want a novice to address.
• With FastFund Fundraising, you can create detailed donor profiles, track cash, pledges, and in-kind gifts, and create customized donor receipts.
• If you are in fact in search of a bookkeeper, you can elect someone within your organization or find someone externally to fill this important role.
• But any size nonprofit, including a part-time one, needs to create a good profit and loss statement each month.

A cash flow statement tells you how much money your organization has through its portfolio of investments, operations, and financing. Look for software that helps you track donations, automate recurring tithes, manage grants, manage donors, and prepare financial statements. Some software will even integrate with third-party donation apps like Fundly or DonorPerfect. A nonprofit’s statement https://www.bookstime.com/ of financial position is similar to a for-profit’s balance sheet. It highlights assets, money owed, and the remainder of the two. Unlike for-profits, a nonprofit does not have ‘equity’ but ‘net assets.’ Net assets are left after subtracting liabilities from assets. Luckily, options exist for nonprofit leaders who need assistance with bookkeeping or require QuickBooks training.

Complete quarterly progress reports for government grants and contracts. Quarterly progress reports indicate performance results in terms of numbers. They evaluate your progress by comparing what you expected to accomplish with what actually happened. In a situation when you are categorizing transactions, one of the best practices is to organize by source as there are many rules that come into play that depend on where and how funds are acquired. Of course, if the person already has previous bookkeeping experience, the transition into this position may run more smoothly. If your bookkeeper has used software, such as QuickBooks or a similar product, the transition will be even easier. But lots of nonprofits forget to track other types of contributions.