That’s why your first step in the bookkeeping process should be finding a bookkeeper (and evaluating your outsourcing options). We know that when it comes to running your nonprofit, every dollar counts. With ZipBooks you can accept donations via credit card, PayPal, or Stripe, and ZipBooks will automatically let you know the second a donation arrives, making donor follow up easier than ever. If you’re interested in text-to-donate capabilities, you can upgrade to Aplos Core at $139 a month. And if you own a larger nonprofit with multiple ongoing projects, Aplos’s customized solutions start at $189 a month. This mix of employees and hours, however, can make paydays complicated.

FAQs About Nonprofit Accounting

Analyzing each financial document independently gives insight into a nonprofit’s fiscal situation. Any significant, unexpected expense or decline in revenues may dip into the fund balance. Establishing strong internal controls is the first step toward ensuring accurate audits and reports. It also ensures compliance with legal requirements and enables effective communication with stakeholders. Similarly, all expenses incurred by the organization should also be recorded diligently. This post is to be used for informational purposes only and does not constitute legal, business, or tax advice.

Segregate Restricted Funds

• A well-organized chart of accounts is essential for effective bookkeeping in nonprofits.
• Your statement of activities should categorize revenues into restricted, temporarily restricted, and unrestricted.
• Separate program, management, and fundraising costs to comply with IRS and FASB guidelines.
• This tax form is not only necessary for your nonprofit to stay compliant with federal and some states’ regulations, but it can also be key for your fundraising efforts.
• Sharon Farris has been involved in the grants industry for more than ten years.

Non-profit financials are publicized to help government agencies and donors understand how the organizations operate. Engaging an independent certified public accountant (CPA) to conduct an external audit is crucial for nonprofits. External audits objectively evaluate financial statements, enhance credibility, and ensure compliance with accounting standards and regulatory requirements. It helps nonprofits analyze past financial performance, project future income, and expenses, and make informed decisions regarding program activities, fundraising efforts, and resource allocation. Fund accounting, commonly used by nonprofits, separates resources into different “funds” based on restrictions and purposes. This differs from regular accounting, which tracks your expenses and income.

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• For example, a lawyer may review a contract for your nonprofit and refuse to charge a fee.
• GrowthForce accounting services provided through an alliance with SK CPA, PLLC.
• Effective budgeting and forecasting are critical for non profit organizations to plan for future activities and ensure financial stability.
• Over 100,000 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.

Generally Accepted Accounting Principles (GAAP) are the standard framework of guidelines for financial accounting used in the United States. Established by the Financial Accounting Standards Board (FASB), GAAP ensures consistency, transparency, and comparability in financial reporting across organizations and industries. Nonprofit cash flow statements will refer to “change in net assets” instead of “net income,” and will sometimes list cash flows that are restricted to certain uses. Unrestricted net assets are any funds your nonprofit has received from donors that have no rules or conditions attached to them, like a pure cash donation. Nonprofit-friendly accounting software shouldn’t just allow you to create professional-looking budgets.

• Cash-based accounting records income when received and expenses when paid out.
• Once a year, you’ll send the required documents to an accountant to submit Form 990 to the IRS and provide tax documentation to staff.
• Once you’ve got your bookkeeping system setup and have started generating financial statements, the final piece of the nonprofit accounting puzzle is getting your tax obligations straight.
• Established by the Financial Accounting Standards Board (FASB), GAAP ensures consistency, transparency, and comparability in financial reporting across organizations and industries.
• For example, instead of measuring equity, nonprofits record their net assets in a balance sheet.

Assign fair market value to donated goods or services and record them as revenue with a matching expense. Shows assets, liabilities, and net assets—broken into restricted and unrestricted categories—on accounting services for nonprofit organizations a specific date. Generate the three core statements each month and share them with the executive director and finance committee. Track pledges and grant installments so you can follow up before due dates slip by.

It’s crucial to understand the distinctions between a nonprofit bookkeeper and a nonprofit accountant. Implementing robust financial controls and conducting internal audits helps identify and mitigate potential risks, errors, or fraud. Internal controls may include segregation of duties, regular bank reconciliations, and review processes for financial transactions. Without access to accurate financial reports and expert financial guidance, your organization will never be prepared for what’s coming next. Fire off estimates and invoices, snap receipts, and track expenses—even on-the-go—with Wave’s simple money management solutions for contractors.

A Guide to Nonprofit Accounting (for Non-Accountants)

A bookkeeper is a financial professional who manages the day-to-day finances of your nonprofit. Their role is to track daily transactions, record income, and monitor expenses to keep financial records accurate. Nonprofit and for-profit organizations follow certain similar fundamental accounting practices. These contributions have no stipulations https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ and can be utilized freely to accomplish the organization’s diverse needs, be it operational costs, programs, or projects. The flexibility aids nonprofits in maintaining cash flow, handling unforeseen expenditures, and budgeting effectively. Bookkeeping involves recording financial transactions and keeping track of all incoming and outgoing funds.

We’ll help you modernize your nonprofit accounting & bookkeeping systems to get consistent and accurate reports. And we’ll show you how to use those reports to make smarter decisions for your organization. But when you’re trying to paste together your numbers with a part-time bookkeeper or a volunteer accountant, it’s nearly impossible to get the transparency you need to run your nonprofit organization. All of our bookkeepers are US-based, Quickbooks ProAdvisor certified, and experts in nonprofit accounting. Nonprofits should track revenues and expenses for multiple program service areas and product lines.