Nonprofit Accounting: Basics and Best Practices Guide

To effectively track all of your nonprofit’s revenue streams, expenses, and restricted funds, you’ll need the right tools. While many organizations start out managing their finances in a spreadsheet, a specialized accounting platform will become necessary as your nonprofit grows. Proper accounting and financial management are necessary for nonprofit organizations to stay viable and remain accountable to the public, donors, funders, and other stakeholders. The delegation also helps alleviate leadership of day-to-day accounting tasks and allows them to focus on other organizational objectives. It also helps nonprofits measure their financial performance against their charitable goals. Typical small-business accounting revolves around profit—how much a company is making, spending, losing, and saving.

• Discover the challenges surrounding the use of paper checks and how best to migrate to e-payments.
• Modern fundraising and donation management platforms can integrate seamlessly with your bookkeeping systems, simplifying tasks such as donation tracking and financial reporting.
• For large nonprofits, the Intuit Enterprise Suite solution provides additional project management and multi-entity reporting features that are particularly useful for tracking finances across locations.
• Let’s get started by ensuring we’re on the same page about what nonprofit accounting is and how it’s different from business accounting.
• You can either assign this task to one of your staff members or trust a professional to handle it.
• The form details your organization and its aims, and shows where your funds came from and were distributed during the tax year.

If I qualify for tax-exempt status, do I still have to pay some taxes?

With our nonprofit bookkeeping and accounting services, we’ll ensure your books are always audit-ready. Plus, give you timely accounting services for nonprofit organizations financial reports and expert advice that help you carry out your mission. At YPTC, we’re passionate about helping nonprofits with their bookkeeping and accounting needs.

Where can non profit staff and volunteers find educational resources on bookkeeping?

Your chart of accounts (COA) serves as the backbone of your accounting system. This organized directory categorizes all financial transactions and provides a clear framework for reporting. Bookkeepers and grant managers regularly review expenses and progress to ensure compliance with the grant’s terms, including spending deadlines and reporting requirements. Kristine Ensor is a freelance writer with over a decade of experience working with local and international nonprofits.

In-depth training and unlimited support

Determine if you are likely to be able to afford them and if they include the necessary features your nonprofit needs as it grows. 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. Learn how to build, read, and use financial statements for your business so you can make more informed decisions. For instance, quarterly reviews of financial statements provide opportunities to assess trends and make strategic adjustments.

• A nonprofit reconciles bank accounts by comparing the recorded amounts to the amounts on bank statements.
• Fortunately, with the right accounting practices and organization, you can feel confident with complete compliance and transparency when it comes to your nonprofit’s finances.
• Hiring a full-time bookkeeper is essential when your organization is ready.
• You don’t need to be an Excel wiz to understand your organization’s financials.

In her free time, she likes to https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ make ceramics, bike, and visit museums. We’ll implement new technology and processes to modernize your bookkeeping and improve transparency. That helps us ensure your transactions are entered accurately and on time to give you confidence in your decisions. Their focus is to record the data so the accountant can analyze this and perform more complex functions.

The financial expertise your organization is missing

Design a chart of accounts that mirrors your programs and funding streams. Group revenue by grants, donations, membership dues, and special events. When recording donations for a nonprofit, there must be a distinction between unrestricted and restricted funds. Accurate documentation distinguishes between these categories, guiding how each donation can be used to support your organization’s mission. Bank reconciliations are done by gathering your latest bank statements and bookkeeping records. You compare each transaction in your nonprofit bookkeeping software against the bank’s records, identifying any discrepancies.

• Treasurers offer high-level financial oversight as members of the board of directors.
• If you decide to hire and manage a bookkeeper, you’ll also have to decide whether the position is part-time or requires a full-time, full-charge bookkeeper.
• From accounting and month-end close to financial reporting to data visualization, we conduct a variety of services and can customize them to your nonprofit’s specific needs.
• Unlike traditional business accounting, which focuses on profit, nonprofit accounting monitors how organizations use their funds to achieve their mission.
• Get the accurate reports you need and expert insights into what those reports mean for your nonprofit.

Fund Accounting: Managing Restricted and Unrestricted Funds

You may want to visit the National Council of Nonprofits to learn more. An annual budget plan represents a roadmap for nonprofits and ensures the organization is on the right track. As mentioned, nonprofits have to follow strict rules to justify their financial position and fundraising expenses. The basis for an accurate bookkeeping and accounting system is recording all financial transactions. However, there are several actions all nonprofits need to take to ensure data quality and reliability.

State Requirements

We’ll dig into your current processes and accounting structure and help you find new tools or reports that make your life easier. And we’ll implement solutions that are supported by the best technology, highly efficient, and 100% compliant with nonprofit best practices. A key benefit of Outsourcing is that it gives you the ability to customize the services with your bookkeeping needs. An outsourced bookkeeping and accounting service should be able to scale with you by adding full-service accounting when you are ready for it. A full-time bookkeeper handles the day-to-day accounting functions for your office.

Why is bookkeeping important for nonprofit organizations?

Internal reviews build audit‑ready confidence and satisfy governance best practices. Use digital receipts and attach them to transactions in your software. If necessary, adjustments are made to reallocate funds within the grant budget to align with changing project needs, always in accordance with the grantor’s guidelines. Bills and vendor invoices need to be categorized and recorded upon receipt. This ensures payments are processed promptly and your financial reporting remains precise.