Nonprofit Bookkeeping and Accounting Services: Basics Guide

This way you can track to see how your income and expenses compare to the goals of your budget. These groups are just one way of keeping nonprofit organizations on track with their finances. Nonprofit accounting may seem complex, but with a solid understanding of the fundamentals and strategic use of technology, it becomes easier to manage. Implementing meticulous practices enables accuracy and transparency, assuring stakeholders. Thus, robust nonprofit accounting not only upholds an organization’s fiscal health but also enhances its reputation and longevity.

When the time comes to report your financial activity or make a budgetary decision, you’ll be equipped with precise and thorough information. That way, you can be sure that your nonprofit maintains both its 501(c)(3) status and the trust of its supporters. Bookkeeping for nonprofits is recording and analyzing financial transactions to ensure compliance with state and federal accounting rules. If you’re looking for a one-stop-shop online fundraising tool that seamlessly integrates with your CRM, marketing tool, or accounting software, take a look at Donorbox. Over 80,000 nonprofits worldwide have used our tool to boost donations with features like peer-to-peer fundraising, text-to-give, event ticketing, recurring donations, and more.

Nonprofit Bookkeeping Software: An Overview

Considerations such as ethical use of funding and resource allocation also set nonprofit accounting apart from standard business accounting. In this guide, we talk about the essential components of bookkeeping for nonprofits and provide handy tips for keeping your paperwork impeccable bookkeeping for nonprofits and your compliance squeaky clean. From project and event management, interacting with board members and fundraising, to accurate bookkeeping, there’s so much on a manager’s plate. Separating financial duties among multiple individuals is crucial to prevent fraud or errors.

Nonprofits must maintain thorough and accurate financial records to comply with both Generally Accepted Accounting Principles (GAAP) and maintain their tax-exempt status with the IRS. Furthermore, nonprofit bookkeeping differs in some critical ways from for-profit bookkeeping too. Because nonprofit bookkeepers must manage restrictions, grants, and expenses in significantly more detailed ways than a for-profit bookkeeper. They can choose to hire in-house accountants or outsource their accounting to a specialized firm. 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.

Step 7: Monitor In-Kind Donations

And ensuring that every receipt, bill, check, credit card charge, and bank transfer gets into your system is a core function of nonprofit bookkeeping. Because while nonprofit bookkeeping and accounting are related, they’re not the same thing. However, there are several actions all nonprofits need to take to ensure data quality and reliability. As you choose your organization’s bookkeeper and financial software, remember to consider your organization’s needs and abilities.

Most nonprofit-friendly accounting software like QuickBooks Aplos or Nonprofit Treasurer will allow you to generate financial statements automatically. Although it’s possible to manually generate financial statements from your ledger or spreadsheet, it takes a ton of accounting knowledge and time to do it right. In most cases, it’s better to let your accounting software or a bookkeeper take care of this step for you.