A Guide to Nonprofit Accounting for Non-Accountants

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December 22, 2014
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how to build a nonprofit bookkeeping system

When choosing a bookkeeper, updating financial information, and developing reports, you’ll want to keep in mind your organization’s mission and goals. Alas, there are bookkeepers in almost every community that can help set up your systems and keep your books on a part-time basis. The best way to find a bookkeeper is to ask around at other nonprofits and find out what they do.

  • In addition, they must implement strategic accounting practices and utilize proper accounting software to ensure financial health.
  • Overhead represents the indirect expenses that are necessary for running the organization but are not directly tied to any specific program or service.
  • Nonprofits rely on donations and grants from individuals, corporations, and other sources.
  • If you notice someone regularly completing tasks assigned to another employee, and you see any discrepancies in the numbers, look into it.

AccuFund is an excellent resource for nonprofits looking for a reliable financial management tool. As your nonprofit grows and steps out into more complicated financial projects, AccuFund lets you purchase tools that fit your organization’s needs. As a nonprofit bookkeeper, you’re responsible for entering cash and in-kind donations, grants, membership payments, etc. If your nonprofit can afford to hire a bookkeeper, you should find someone with fund experience. Bookkeepers with this background will help create internal reports that don’t need much updating by your accountant and can save your nonprofit money and time. When you start a nonprofit bank account, you’ll want to authorize someone as a signatory.

Statement of Financial Position

Nonprofit organizations are entities organized and operated exclusively for educational, social, professional, charitable, health, or other nonprofit purposes. While business stakeholders are concerned with profits, nonprofit stakeholders and board members want to know if the resources are properly utilized and allocated. With areas such as fundraising and grants, you’ll also have to account for fund status, such as restricted, unrestricted, and temporarily restricted funds.

By using this type of software, nonprofits can ensure that they are compliant with all the rules and regulations governing their bookkeeping and accounting practices. While bookkeeping for nonprofits may seem like a daunting task, there are many software programs and online resources available to help simplify the process. The process of reconciling accounts involves comparing bookkeeping for nonprofits the balances in an organization’s bookkeeping records to the corresponding statements from its banks and other financial institutions. For-profit cash flow statements will include items such as investment income, service fees, and sales. Nonprofit cash flow statements will list items such as fundraising proceeds, program fees, membership dues, and donor contributions.

Incorporate Automated Processes

This would take a lot of time if you had to run manual synchronization to export and import data—or worse—if you had to manually reenter transactions. Sage Intacct Collaborate helps you communicate easily with your team to solve accounting issues. While keeping the entire conversation logged in the accounting system and out of email inboxes. According to the Close the Books survey, finance teams that adopt a cloud financial accounting solution are on average 25% more automated than those using an on-premises solution. On average, organizations spend between six to eight days closing their books each period. Want to make this the year you focus on freeing up your team’s time through process automation?

It’s an affordable option that can provide access to deep nonprofit accounting experience and expertise. Not only is a financial audit NOT a bad thing, it can actually be a very good thing. A nonprofit audit is meant to ensure the accuracy of the organization’s financials, as well as the financial health of the organization. In addition, when audit results are published for the public, the results aid in financial transparency with your current and future donors.

Open separate bank accounts

The option you go for should also enable you to do fund accounting (i.e., use different accounts for different purposes). Nonprofits have strict rules regarding funding sources and how they should be spent. For example, large organizations like universities often have dozens, if not hundreds, of bank accounts for different purposes like scholarships, tuition, projects, etc. Bookkeeping for a nonprofit is vital because it proves how an organization is spending its funds. Learning how to do nonprofit accounting and understanding which statements a nonprofit needs to prepare is crucial for anyone who wants to run a successful nonprofit. Bookkeeping for nonprofits is recording and analyzing financial transactions to ensure compliance with state and federal accounting rules.

how to build a nonprofit bookkeeping system

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