Every organization has different financial needs, so the exact activities that are considered “bookkeeping duties” will vary from nonprofit to nonprofit. As you choose your organization’s bookkeeper and financial software, remember to consider your organization’s needs and abilities. Software that provides top-level financial tools isn’t helpful if your staff and board don’t understand how best to use 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. When managing payroll for a nonprofit, bookkeepers must administer federal and state taxes, deduct money for employee benefits, and determine how funds are affected.
Reconcile your bank statements
Typical categories include program services, management and general, fundraising, and other sources of income. You can use the statement to assess the usage of funds, track performance, and make decisions about future operations. You may also need to provide other information, like unrealized gains or losses on investments and noncash transactions, such as depreciation or amortization expenses. As with any financial statement, ensure that all figures are accurate and up to date before submission. The cash-basis method is usually simpler to maintain than the accrual-basis method and may be adequate for smaller nonprofits. However, the accrual-basis method may be necessary if the organization plans to seek funding from larger donors.
Best Practices of Nonprofit Accounting
In the same way, bookkeeping can prepare your nonprofit’s financial records and budget for tax filings, annual reports, and every other deep dive into your assets. Our clients are provided a deeply-discounted subscription to the leading, cloud-based accounting software platform available, Quickbooks Online. You’ll have secure, 24/7 access to your books and records, from anywhere you have a broadband connection. Write and print checks, sync with your bank account, generate reports…all in the same place.
Streamline your accounting and save time
Although it is ever-changing as it grows, standard accounting principles remain the same. With the right approach and the best tool for the job, your organization can keep better books to help with transparency, annual reporting, and tracking your fiscal health. In this article, we’ll show you eight steps for effective bookkeeping, along with some of the best tools in the market that can help.
- That’s why we recommend most nonprofits work with a payroll processing service rather than trying to do it themselves.
- Some donations and grants will come into your organization restricted for specific purposes.
- 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.
- It’s like having an in-house team dedicated to your organization, without the overhead cost of a full accounting department.
Nonprofit accounting software runner-ups
Consider using a zero-based budgeting system to track and identify potential areas to cut spending. This approach encourages nonprofit staff to review their budgets from the ground up, itemizing and evaluating each expense. By considering these factors, you can ensure that your nonprofit organization has the necessary resources to reach its objectives and is in line with GAAP standards. FreshBooks is a high-quality accounting program that can automate repetitive tasks and daily activities and ensure accurate and reliable bookkeeping.
Accurate and always audit-ready financial reports
Taking care of overhead before seeking out donors for a nonprofit demonstrates financial responsibility and a commitment to efficiency—important decision-making factors for potential donors. Bookkeeping for a nonprofit is the process of entering, recording, and classifying an organization’s finances. 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. It’s like having an in-house team dedicated to your organization, without the overhead cost of a full accounting department.
Unfortunately, while Aplos’s nonprofit features stand out, its accounting features are more limited. Only the customized plan includes in-depth income and expense tracking, budgeting by project or fund, asset tracking, and recurring transactions. Non profits should seek professional help for complex financial transactions, regulatory compliance, audit preparation, and as the organization grows and financial management becomes more complex.
All funds that come to your organization are restricted, unrestricted, or temporarily restricted. Bookkeepers must record these funds in a chart of accounts to better keep track. Restricted funds are donations earmarked by the donor for specific programs or purposes. These funds cannot be used for general operating expenses or other programs unless the donor explicitly allows it.
But if you’re already falling behind in your books, you can’t rely on a google search or blog article to get you back on track. The impact of accurate bookkeeping trickles down to every aspect of your nonprofit. Efficiency, transparency, and compliance are the hallmarks of an organization with effective bookkeeping. Of course, the central role of nonprofit bookkeeping is to keep the books of your organization current and accurate. Each expense must be recorded in your accounting software and allocated to the correct expense account, like office supplies, rent expense, payroll, etc. And ensuring that every receipt, bill, check, credit card charge, and bank transfer gets into your system is a core function of nonprofit bookkeeping.
It also outlines the reporting, filing, and notification requirements related to a nonprofit’s activities. In addition, this code discusses the circumstances in which a nonprofit organization will be liable for taxes, penalties, and other charges. As mentioned, nonprofits have to follow strict rules to justify their financial position and fundraising expenses. You should also hire a financial officer or a treasurer who knows how to do bookkeeping for a nonprofit and is familiar with specialized accounting software. The basis for an accurate bookkeeping and accounting system is recording all financial transactions.
