Bookkeeping for Nonprofits: A Basic Guide & Best Practices

These guidelines will help you transparently tell your organization’s story through its financials. The FastFund Accounting program is available for as little as $42 per month, and there is no setup fee. Also, you don’t have to commit to a contract; you can cancel at any time.

AccountEdge Pro is a desktop accounting solution for small businesses, with an optional cloud app for more flexible access. It allows you to manage banking, credit card and expense accounts, and set up recurring transactions that include a reminder to record them. It has a comprehensive payroll system with a setup assistant that walks you through getting started, and an option to add on a payroll tax module for an additional fee. If you use nonprofit accounting software, your chart of accounts will include the option to use multiple segments to manage multiple funds, which is a necessity for adequately managing funds, programs, and grants.

Best for Free Basic Accounting Tools

Nonprofit organizations exist to further a mission or goal, and they rely on funding sources that include donations, grants and program revenue. Like for-profit businesses, nonprofit organizations are expected to document earnings and expenses for full financial transparency. Accounting can help nonprofit organizations function properly, thereby indirectly providing a wealth of opportunities to create change for people in need. Nonprofit Plus uses the Acumatica finance suite to offer a range of functions. In addition to fund accounting, you can also manage your board, volunteers, donors, grants, and budgets.

You can eliminate repetitive tasks that run up labor costs such as sending recurring invoices to contractors, sending payment reminders, categorizing transactions and auto-charging cards for recurring transactions. A recent study found that 19% of Nonprofits reported having limited staff as their greatest challenge. The current average full-charge bookkeeper’s salary fluctuates between $34,000 to $54,000 per year plus benefits and overhead, according to Salary.com. Depending on your location, this number can be even higher, current listings in high-cost-of-living cities like New York or L.A. In addition, you’ll need to add around 20% on top of salary, for benefits and overhead, including office space.

Workday Adaptive Planning

Reporting tools help you create a spending roadmap so you don’t overextend your cash flow. Finally, the software’s CRM helps you get to know and retain donors via targeted engagement to keep your cash flow healthy. Jitasa is an outsourced nonprofit bookkeeping accounting service specifically designed to help nonprofits with their bookkeeping and accounting processes. For-profit companies leverage an income statement to show how much they have earned or lost over a specific period of time.

Accounting for nonprofits requires professionals who value not only integrity, but also full financial transparency. Unlike for-profit companies, which depend on profitability, nonprofits focus on providing services for the community and other nonprofits. Accounting for nonprofits requires professionals to exhibit a certain level of financial accountability to prove how an organization is spending its funds and furthering its cause. While IRS 501(c)(3) status allows nonprofits to be tax-exempt, they are permitted by law to make a profit. Nonprofit accounting software is beneficial for your nonprofit organization to manage resources. Such tools also help you file proper tax returns to keep your organization’s nonprofit status intact.

Shop QuickBooks

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. In addition, checking in on the budget one or more times each month will allow you to adapt to change.

• If you upgrade to the local network version—which costs $220 for the first year—up to five users can access the database at once.
• This might sound obvious, but you’d be surprised how many organizations do not adhere to the latest accounting standards in the industry.
• 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.
• In fund accounting, accountants must distinguish between a general fund and special-purpose funds, according to a fund accounting training manual from the U.S.
• Double-entry accounting gives you a complete picture of your business’s financial activity.

Net assets are equivalent to the net worth of your nonprofit organization. GAAP calls for these net assets to be divvied and classified as unrestricted, temporarily restricted, and permanently restricted funds. The common statements and forms used for effective nonprofit bookkeeping are those that will thoroughly and effectively communicate the financial information for your nonprofit. Whether you’re communicating with other organizational departments, the public, or the government, using a proper statement or form with all the necessary components is key. In this article, we’ll dive into bookkeeping for nonprofit organizations. Using the QuickBooks Online Advanced plan, your nonprofit can keep a close eye on each project’s cash flow via the Cash Flow Dashboard.

Tax-exempt tracking

Your statement of activities should show the changes in your organization’s net assets for a set period of time. Once you have chosen an affordable software and respective plan that includes the accounting features and functionality your nonprofit needs, evaluate its more advanced plans. Determine if you are likely to be able to afford them and if they include the necessary features your nonprofit needs as it grows.

• Statements of financial position, activities, and cash flow are not documents you want a novice to address.
• QuickBooks is known and loved by many specifically for its polished, no-fuss desktop and user-friendly interface.
• Some key features of Intacct include accounts receivable/payable, activity tracking, asset management, bank reconciliation, compliance management, partnership accounting, and purchasing and receiving.
• You can even get discounted accounting software for your nonprofit if you use certain software on this list.
• In addition, they can track expenses and capture receipts to simplify tax filings and report to donors the nonprofits’ overhead-versus-project costs.

Net assets are what is left after you subtract your liabilities from your assets. To reconcile your bank account, you will go through every transaction line to make sure your bank account and accounting system align perfectly. Reconciliations performed each month will help you track your cash flow better, keep accurate books, and detect bank errors or fraud. Non-profit organizations should have a system in place to manage cash flow, including processes for invoicing, accounts payable, accounts receivable, and petty cash management. Non-profit organizations need to create a budgeting system to ensure they are allocating their resources efficiently and effectively.

Master the challenges of tax-exempt status

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. Just like the statement of financial position, the statement of activities keeps net assets that have conditions and stipulations attached to them separate from unrestricted funds. The statement of activities (also sometimes called the operating statement) is like the nonprofit version of the income statement. Like the income statement, it tells you how “profitable” your NFP was over a given period by showing your revenue, minus your expenses and losses.

It may not be the best accounting solution, but it beats manual data entry when you are working with restricted funds. Cloud-based software is a popular choice because it offers many of the same features as dedicated nonprofit accounting software. https://www.bookstime.com/ Cloud-based nonprofit accounting programs also allow you to tailor the software to your specific needs. Having dedicated nonprofit accounting software such as Capital Business Solutions allows you to tailor the program to your organization.

Don’t overthink overhead expenses.

I am ever appreciative of their quick response time, clean reporting, financial advice, and personal flair for making something as tedious as bookkeeping enjoyable. Wheelchairs For Warriors is on a mission to help as many injured veterans as possible. However, as they began applying for larger grants, without accurate reporting they did not look healthy from a financial perspective and were initially turned away.

One of the greatest differences between these types of organizations is in bookkeeping. While there are some nonprofit professionals who migrate to this world of charity from a for-profit organization, they are often faced with some major differences between the two industries right off the bat. Save the day, the month, the quarter—with 5-Minute Financials from Nonprofit Bookkeeping.