3 Tips for Successful Nonprofit Board Development
Nonprofit board development is critical to healthy long-term functioning of your organization. Learn 3 key strategies to build a better board that helps you execute your vision.
How to Fill Out a 501c(3) Application for Your Nonprofit
Starting a nonprofit organization can be confusing and tricky, especially if it’s your first time and you don’t have any experience filling out a 501c(3) application. However, filling out the application is an essential step in setting up a nonprofit charity with the full benefits of tax-exempt status.
Follow along below as we discuss tips on how to fill out your 501c(3) application correctly so that your request is approved and your organization can get off to a great start.
What is a 501c(3) application?
A 501c(3) application is a document nonprofit organizations file with the Internal Revenue Service (IRS) to request tax-exempt status as a charitable organization. IRS Form 1023 is the document you must complete to apply for tax-exempt status with the IRS as a 501c(3).
Once granted tax-exempt status, your organization is exempt from paying federal taxes on revenues from donations, grants, and income your nonprofit generates in carrying out your stated mission. When you’re not giving a percentage of your income to the IRS, you can use those financial resources to carry out your nonprofit’s mission.
PRO TIP: Only income from activities “related to your mission” are exempt from tax. For more details on this, check out our article on which taxes nonprofits do (and don’t) have to pay here.
What should I include with Form 1023?
IRS Form 1023 is 28 pages long, and some applications can reach more than 100 pages when you count the attachments and schedules needed to substantiate your application. The more information you include with the form, the lower your chances the IRS will have additional questions.
Think of Form 1023 as a business plan for your nonprofit organization, including your governing structure, planned programs, and purpose. The IRS wants to see detailed information on how you plan to carry out your stated objective. And they want to ensure that your organization has the resources to follow through with your planned programs.
The IRS will also look out for possible conflicts of interest that can be grounds for denying your application for tax-exempt status.
What should you have before filing Form 1023?
Before you file your application, you’ll need to choose a type of legal entity for your nonprofit organization. The most common legal entity for a nonprofit is a C Corporation, but you can also be an LLC, unincorporated association, or a trust.
Which organizational type is right for you depends on what kinds of activities or services your organization will provide. But you’ll need to decide on your business entity type before applying for tax-exempt status because you need to file formation documents before submitting Form 1023 to the IRS.
You’ll also need to have an Employer Identification Number (EIN) before completing Form 1023. (You can get one for free by filing Form SS-4 with the IRS.)
Form 1023 vs. Form 1023-EZ
Now that you are ready to apply for a 501c(3) status with the IRS, you need to decide whether to file a Form 1023 or a Form 1023-EZ.
Form 1023 is considered the long-form version. It is a thorough questionnaire about your nonprofit organization over 40 pages long. You’ll have to pay $600 to file the form, and processing times can be as long as 6 to 12 months.
The shorter Form (1023-EZ) is more manageable to file, so many eligible nonprofits elect it over the longer form. If your nonprofit expects to have less than $50,000 in annual gross receipts in each of the next three years and does not have assets exceeding $250,000, you can file the shorter form. The form is only three pages long. It costs $275 to file with the IRS. And you’ll typically get a response within 2 to 4 weeks.
PRO TIP: Consider your choice carefully before deciding which 1023 to file. The EZ form is simpler, but there are some potential drawbacks to taking the easy path, like a higher audit rate and trouble securing large grant funds. Thoroughly assess your plans and goals before deciding which best fits your needs.
What documents should you include with your 501c(3) application?
Starting a nonprofit organization can be confusing, so you should seek professional legal advice. Unfortunately, many people shy away from seeking legal help because they think it will cost them a lot of money. In reality, you might spend more money correcting your mistakes if you decide to do it yourself, especially if you make errors in your application or incorrectly file forms.
You must submit a complete form to the IRS, including all the required attachments, or they won’t be able to approve your application. In some cases, it can take up to 18 months for the IRS to approve. Ensuring all your paperwork is in order can help avoid further delays.
Here are the documents that you should with your application:
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Formation documents
If you formed a corporation, you must ensure that you have all the legal formation documents required in your state and attached to your application. These can include Articles of Incorporation and a list of your Board of Directors and officers.
You may also need to include the business plan for your nonprofit and bylaws. The more information you have with your application, the less likely they will come back to you for additional questions or ask for other documentation.
The bylaws are fundamental to your operation as a nonprofit. They can be beneficial for regulating your members and officers and the Board of Directors to make sure that no unexpected conflicts of interest arise.
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Financial Statements
You have to supply financial statements for the year and a proposed budget plan for at least the next two years for newly-established nonprofits. If you have been operating for at least three years, you need to show the current and prior year’s financial statements.
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Primary and specific project plans
You declare your organization’s purpose to the IRS, which is the primary objective that your nonprofit wants to achieve. You’ll also need to give details on your planned projects. The IRS wants to ensure that your nonprofit will provide legitimate services to the community you choose to serve.
So you’ve filed your 501c(3) application—what’s next?
After you’ve filed your 1023 for 501(c)(3) nonprofit status, it’s mostly a waiting game. Depending on which form you filed and how complete your application is, you may receive a letter of determination in as little as a few weeks. Or it may take up to a year or more.
In the meantime, the IRS says you should act as if your application will be approved. That means you should go about your activities as if you are exempt from federal taxes. And you should file IRS form 990 at the end of your fiscal year instead of a tax return.
The one tricky topic during the waiting period is donations. Your donors’ contributions will only be tax-deductible for them if your application is approved. Once you get your approval, all donations are tax-deductible retroactive to the date of your application. But if your application is rejected, those donors will not be able to claim a tax benefit from any money they’ve donated to you.
Hopefully, your application will be approved quickly, so you and your team can start raising money and executing your mission to help make this world just a little bit better!
Don’t sweat your bookkeeping & accounting!
After your 501(c)(3) application is approved, you will have A LOT to keep track of— donations, grants, expenses, program fees, and more. Keeping up with all that, bookkeeping and accounting often distract young nonprofits from accomplishing their mission.
Nonprofit accounting is a challenging task that requires experience, know-how, and familiarity with the specific rules that nonprofits need to follow. An outsourced nonprofit accounting service can help keep you from getting bogged down in the paperwork, keep you out of trouble with the IRS, and help you create a well-planned path to financial success.
If you’re looking for a skilled nonprofit accountant to accompany you on your journey, reach out to The Charity CFO to see if we can help you!
Set Up a Nonprofit Chart of Accounts (Free Template)
Want to know how to set up a nonprofit chart of accounts for your organization? Here are all of the details.
How to Create A Nonprofit Operating Reserve Policy
A nonprofit operating reserve policy helps you prepare for unexpected events and prove to donors that you’re prepared for anything. Here’s how to get started.
The Basics of Nonprofit Bookkeeping
Do a Google search on nonprofit bookkeeping, and you’ll find page after page of articles on nonprofit accounting. And that’s a problem.
Because while nonprofit bookkeeping and accounting are related, they’re not the same thing.
Sure, you’ll find overlap between the two roles In many small organizations. And it’s sometimes not clear where the line should be drawn. But the experience, responsibilities, and deliverables required of bookkeepers are very different from those required of accountants.
It breaks down like this:
A bookkeeper records and organizes financial data; an accountant interprets and presents that data.
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.
The nonprofit bookkeeper is the front line in the battle for the accurate financial data you need to run your business, so let’s review the core responsibilities of a nonprofit bookkeeper.
What is nonprofit bookkeeping?
Nonprofit bookkeeping is the process of entering, classifying, and organizing financial data for the purpose of creating accurate financial records for your organization.
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. And it’s impossible to do that without accurate bookkeeping.
Recording all of your expenses, revenue, and financial transactions in a timely and accurate manner is the key to achieving accountability and transparency–the primary goals of nonprofit accounting. Here are some of the primary tasks required of a nonprofit bookkeeper:
- Track income and expenses
- Record and classify payments and bank transfers
- Organize and maintain receipts
- Create invoices for goods, services, and donations
- Enter bills and vendor invoices
- Prepare bank reconciliations
- Manage payroll
- Execute data entry to keep the general ledger current
- Allocate revenue and expenses to restricted fund accounts
- Prepare the data accountants used to create income statement, balance sheet, and cash flow statement
Let’s take a deeper look at the four key bookkeeping tasks: payroll, invoicing, expense allocation, and recording business transactions.
What are the basic nonprofit bookkeeping tasks?
Bookkeepers lay the foundation for the accounting processes that will follow. They organize the data and ensure accuracy so the accountant can create reliable and timely financial reports.
Payroll
Managing payroll is a complicated and time-consuming task. And it’s one of the essential roles of bookkeeping in a nonprofit organization.
The stakes are high– if you make a mistake with payroll, somebody might not get paid. And you’re sure to have some anxious coworkers. Yet there’s more to payroll than making sure everyone gets the right check…
Bookkeeping for payroll includes:
- Administering federal and state payroll taxes
- Deducting money for benefits
- Allocating payroll expenses according to their impact on restricted funds and functional expenses.
On top of that, nonprofit bookkeeping requires staying updated on income tax changes and filing requirements to ensure compliance.
So it’s much more complex than it may seem at first glance. That’s why we recommend most nonprofits work with a payroll processing service rather than trying to do it themselves.
A payroll processor makes bookkeeping for a nonprofit easier. They can apply the necessary deductions for each employee, cut checks (and make direct deposit) for each payroll period, and file state and local taxes to help keep you compliant with the most up-to-date tax requirements.
Invoicing
Many nonprofits have earned revenue streams, like membership subscriptions, tuition fees, course enrollments, or sales at company stores. In those cases, nonprofit bookkeeping includes creating accurate invoices (that account for and collect any required sales tax) to track every sale.
Even if your nonprofit isn’t selling anything, you’ll still need to process invoices.
You should create invoices for incoming donations as well. Both to track money coming into your organization and share with your donors as proof of their gift.
Invoices should include a header with your logo and contact information, client contact information, invoice number and date, itemized breakdown of services, and terms and conditions.
Recording & Allocating Expenses
Any money that flows out of your organization must be recorded. And ensuring that every receipt, bill, check, credit card charge, and bank transfer gets into your system is a core function of nonprofit bookkeeping.
Each expense must be recorded in your accounting software and allocated to the correct expense account, like office supplies, rent expense, payroll, etc. This way, you can track precisely how the money was spent.
But expense allocation is even more complex in nonprofit bookkeeping, thanks to the need for functional expense reporting.
You can read more about allocating functional expenses here, but the quick version is that you must allocate all expenses based on how they fit into these 3 categories:
- General & administrative expenses
- Program expenses
- Fundraising expenses
A crucial responsibility of nonprofit bookkeeping is tracking exactly how money was spent so that your nonprofit can create a functional expense report at the end of each year.
Recording business transactions
Of course, the central role of nonprofit bookkeeping is to keep the books of your organization current and accurate.
Bookkeeping for some small nonprofits may be as simple as creating invoices for donations received and paying salaries and day-to-day expenses.
Most organizations will also need to track payments they are owed (accounts receivable), bills that they haven’t paid (accounts payable).
And beyond invoices and bills, the nonprofit bookkeeper must record bank deposits, manage donor acknowledgment letters, make adjusting bank entries, review the accuracy of their data, and reconcile bank and credit card statements.
PRO TIP: The secret to better bookkeeping is sticking to a set schedule for processing and recording transactions that establishes tasks to do on a daily, weekly, monthly, quarterly, and annual basis.
What does a nonprofit bookkeeper not do?
It’s important to note that bookkeepers are not certified public accountants (CPAs). Bookkeeping does require training and experience but not a specialized degree.
There is often some overlap in smaller organizations. But here is a list of tasks that some nonprofits push onto their bookkeepers that are instead the role of an accountant.
Bookkeepers do not…
- Analyze transactions and business performance
- Prepare financial statements and reports
- Determine budgets and wages
- Compile and file tax returns
Getting started with nonprofit bookkeeping isn’t easy, but it is essential.
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.
Nonprofit bookkeeping solved, once and for all
We’ve done our best to give you a crash course into nonprofit bookkeeping. 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.
Instead, seek out an experienced nonprofit bookkeeping service you can trust.
At The Charity CFO, we handle the books and all of your accounting needs. It’s like having an in-house team dedicated to your organization, without the overhead cost of a full accounting department.
With our nonprofit bookkeeping and accounting services, we’ll ensure your books are always audit-ready. Plus, give you timely financial reports and expert advice that help you carry out your mission.
We’re honored that over 120 nonprofits trust us with their bookkeeping and accounting. And we’d be excited to show you how we can help your organization meet your goals.
No time to read this article now? Download it for later.
Nonprofit Accounting Basics for Founders, Board Members & Executives
Nonprofit Accounting Basics for Founders, Board Members & Executives
If you’re like most nonprofit leaders, you’re not researching nonprofit accounting basics to satisfy your curiosity.
It’s a necessity.
You need to get a better grasp of your organization’s finances now. So you can understand what’s happening in your business and communicate effectively with your board members, donors, and financial team.
Well, you’ve come to the right place!
Start right here ( ) with this overview of nonprofit accounting basics.
Read through each section for a quick overview. And then, click on the links to dive deeper into the ones you need to master.
What is nonprofit accounting?
Investopedia defines accounting as “the process of recording financial transactions pertaining to a business.”
That’s really all that accounting is, so don’t let the terminology intimidate you.
You can grasp nonprofit accounting basics in just a few minutes, even if you’ve never taken an accounting course (and even if you hated math in high school).
Accounting rules exist to help you record transactions accurately and consistently over time.
And then, there are a series of reports and financial statements you’ll use to communicate the financial reality of your organization to potential donors, the IRS, watchdog agencies, and other stakeholders.
The basic accounting principles for nonprofit organizations are the same as accounting for for-profit companies.
So let’s start with the basics, and later we’ll dig into some of the things that make nonprofit accounting unique.
The simple equation behind nonprofit accounting:
Behind all the fancy formulas and financial statements, accounting exists to answer one question: how much financial value, or wealth, has your organization created?
And you can answer that question with a simple equation that looks like this:
(Assets) – (Liabilities) = (Net Assets)
Now before you run away, hold up!
Let’s break that down into simpler language:
(Everything you own) – (Everything you owe) = (The wealth you’ve created)
That wasn’t so bad, right?
And guess what? Your core financial reports, which we’ll look at below, exist to answer this one simple question– how much value has your organization created?
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The concepts in nonprofit accounting basics:
To understand nonprofit accounting basics, you’ll need to grasp some simple accounting terminology. Let’s start by defining the 3 terms we used above and giving you some examples of each. Then we’ll move onto some other common accounting terms:
Assets
Assets are anything that your nonprofit organization owns or is entitled to. So the cash in your bank account is an asset. But so are physical property, real estate, and computers. And money that was pledged to you but you haven’t received yet. Plus, even intellectual property– like patents or trademarks– may have value in certain cases.
Examples of nonprofit assets:
- Cash
- Accounts receivable
- Real estate
- Furniture and equipment
- Pledged donations
- Stocks or bonds
- Inventory of saleable goods or donations
- Trademarks and patents
Liabilities
Your liabilities are anything that your organization owes to anyone else. Obvious examples are loans or lines of credit. But it also includes accounts payable (unpaid bills), credit card bills, outstanding payroll, and more.
Examples of nonprofit liabilities:
- Bank loans
- Lines of credit
- Credit card balances
- Unpaid bills (accounts payable)
- Unpaid payroll
- Payroll tax withholdings
Net Assets
Your Net Assets are the accumulation of all the surpluses and deficits you’ve created since you’ve been in operation.
In other words, it’s the wealth or value that you’ve accumulated over time.
And it’s the core metric that outside observers will use to measure your organization’s financial value (and viability).
Revenue
Revenue is inflows that increase economic wealth. Frequently, this is cash from donations, grants, or fundraising activities. However, it can also be cash from sales of products, courses, or subscriptions. And it may also include non-cash donations (or in-kind donations) of goods or services.
Examples of nonprofit revenue sources:
- Cash donations
- Grant funds
- Sales of products or services
- Donations of goods (food, clothing, supplies)
- Donations of services (free rent, legal services, accounting, nonprofit discounts)
Expenses
Expenses are outflows of cash that decrease economic wealth. They include anything you pay for, from rent to payroll to purchasing supplies. Plus, non-cash outflows, like when you use or give away, resources you received as a donation.
Examples of nonprofit expenses:
- Rent
- Utilities
- Payroll
- Marketing
- Office supplies
- Program supplies
- Distribution or use of donated goods
Accounts Payable
Accounts payable is an account containing any outstanding bills or invoices that you haven’t yet paid. It shows as a liability on your financial reports, so it reduces your net assets.
Accounts Receivable
Accounts receivable is an account containing any revenue that you’ve earned, or that was committed to you, that you haven’t yet received. For a nonprofit, this often includes donations or grants that have been promised but won’t be delivered until a future date.
Accrual Accounting vs. Cash Accounting for Nonprofits
There are 2 main accounting systems that US businesses can use: cash basis or accrual basis accounting. There are distinct advantages to each, but first, let’s take a look at what each one is:
Cash-Basis Accounting
In a cash accounting system, you record transactions only when cash changes hands.
So, if you pay your electric bill in January, the expense is recorded in January even though you used the electricity in December. Similarly, if you receive a $100 donation in January, you’ll record it in January. Even if it was pledged to you last November.
Because this method of accounting tracks directly with money going into or out of your bank account, it’s by far the simplest method of accounting. And it’s preferred by many small nonprofits without experience in bookkeeping or the budget to hire a full-time accountant or outsourced accounting service.
Accrual-Basis Accounting
An accrual accounting system records transactions in the period where they are earned, pledged, or incurred. As a result, it matches your revenue with related expenses in the same period to give you a clearer picture of when you’re making or losing money.
Revisiting the above examples, you would book your electric expense to December in an accrual accounting system because that’s when you used the electricity (regardless of when you paid for it).
And you would record the $100 donation in November (when it was pledged), rather than January (when it was received).
An accrual is simply a manual adjustment to your books made without an exchange of cash. Accrual-basis accounting requires extensive use of both accounts payable and accounts receivable to keep track of these accruals.
How it works in real-life:
Let’s say you host a fundraiser in September that generates a significant number of donations. But you don’t pay your vendors until October and November.
Under cash accounting, you would show the revenue in September and the expenses in October. You would show a large “gain” in September and large “losses” in October and November. So it’s hard to tell how successful the event was.
Under an accrual system, both the event revenue and the expenses are booked to October, giving you a clearer picture of how much money generated by the event.
Accrual vs. Cash: Which is better?
Both cash and accrual accounting systems have their advantages for different types of organizations.
Cash accounting is much simpler and cheaper to maintain. It’s easier for simple tax filings and less susceptible to financial misconduct. Cash accounting may be a good choice for some small nonprofits with funding challenges.
Accrual accounting is required by Generally Accepted Accounting Principles (GAAP), which means that you’ll need accrual-based reports to complete a nonprofit audit. It also more accurately captures your ‘economic reality’ and helps you predict your finances better. Accrual accounting is the preferred method for any organization that needs to be audited or anticipates significant growth.
If you’re not sure which is right for you, read our in-depth article on how to choose cash accounting or accrual accounting for your organization.
How is nonprofit accounting different?
The core principles of nonprofit accounting are the same as for-profit accounting. However, there are a few significant differences that you need to know.
Difference #1: Terminology
While accounting principles are the same for both types of organizations, they don’t always speak the same language. Nonprofit accounting has its own terminology. Here are the key terms you’ll need to know
Net Assets – This term is used in 2 different ways.
- When it’s on the Statement of Activities (or Income Statement) it represents the net revenue for the period, what a for-profit business calls NET PROFIT.
- When shown on the Statement of Financial Position (or Balance Sheet), it represents the wealth you’ve created over time, or what for-profit business calls EQUITY.
Statement of Financial Position – This key financial statement (which we’ll discuss below) is called the BALANCE SHEET in a for-profit business. Some nonprofits will use the for-profit terminology to keep things simple, but the official nonprofit name for this report is the Statement of Financial Position.
Statement of Activities – Like the report above, this core financial statement has a different name than its for-profit version– the INCOME STATEMENT, or PROFIT AND LOSS (P&L) STATEMENT.
Difference #2: Fund Accounting
Most for-profit companies can use their revenue however they choose.
But nonprofits often have revenue that is restricted for certain reasons–the funds may be reserved for a certain program, be required to be spent at a certain time, or have other unique requirements for its usage.
To help track and manage these restrictions, nonprofits and governments use a system called fund accounting. It’s distinguished by its focus on accountability over profitability.
Fund accounting lets nonprofits set up individual “funds” to manage their revenue streams based on criteria like donor, grantor, timing, designated purpose, and restrictions for how, when, where, and/or why it is to be used.
Each fund can have its own revenue and expense report, accounting equation, and balance sheet. Or each fund may have its own line within revenue, expenses, assets and liabilities.
This allows you to see which funds are available for general use, and which are restricted for specific purposes. Check out this article to learn more about fund accounting.
Difference #3: Functional Expenses
Both GAAP and the IRS require nonprofits to report their expenses broken down into 3 categories:
- Program services expenses
- Management and general expenses
- Fundraising expenses
Because some expenses– like rent and payroll, for example– may fall into multiple categories, you’ll need to allocate your expenses according to how much they contribute to each function,
Difference #4: Revenue Recognition
GAAP requires that all pledges to donate are recorded when the pledge is made, not when the donation is received.
The general idea of accrual accounting is to match revenues and expenses in the same period. But this rule for nonprofit revenue recognition can throw a wrench into the works and lead to some big “gains” or “losses” on your financial statements.
We dig into this scenario in more detail in this article on the differences between nonprofit and for-profit accounting.
Nonprofit Accounting Basics: Financial Reports
Nonprofit accounting systems and best practices are established to keep you accountable to the public, your board, funders, grantors, and the government. And your nonprofit’s financial statements are the proof of that accountability.
Here’ we’ll overview the financial reports all nonprofit organizations are required to create regularly, as well as some optional reports that may help you run your business more effectively.
For an in-depth look at these reports, check out our article on the core nonprofit financial statements. Or click on any of the individual reports for a detailed breakdown of that report.
The 3 Core Financial Statements
These financial statements are required for a nonprofit audit. But, more importantly, they are often generated monthly (or quarterly) to help you keep an eye on your financial health.
1. Statement of Financial Position (or Balance Sheet)
The Statement of Financial Position the nonprofit version of a balance sheet. It summarizes your assets, liabilities, and restricted funds and gives a snapshot of what your organization owns and what it owes to others at a specific point in time
2. Statement of Activities (or Income Statement)
This report summarizes your revenue and expenses as net surplus or loss. It shows how much you’ve “earned” or “lost” during a specific period.
3. Statement of Cash Flows
The Statement of Cash flows shows how cash has increased or decreased across 3 segments of your business: operations, financing, and investing. This report can help you and your board members quickly understand which areas of your operation created or consumed cash over a period of time.
Other Common Nonprofit Financial Reports
Statement of Functional Expenses
This matrix-style report breaks down your functional expenses according to the natural and functional expense categories. It’s required for both an audit and your IRS 990 filing, but it’s often created on a quarterly or annual basis (rather than periodically, like the statements above).
Budget vs. Actual Report
Budget vs. Actual is an internal report which displays your planned budget and your actual performance side-by-side. So you and your team can easily see where you’re beating your plan or coming up short. It’s not required by GAAP or IRS, but it might be the single most useful report for nonprofit leaders on a day-to-day basis.
The Basics of Nonprofit Taxes
Thought you didn’t have to worry about taxes as a nonprofit? Think again!
For an in-depth look at taxes for nonprofits check out this article.
Tax Returns (IRS Form 990)
Nearly every nonprofit is required to file some form of the IRS 990 every year. If you fail to file a 990 for 3 consecutive years, your tax exempt status will automatically be revoked.
For some small nonprofits, the process is pretty easy. Others may want to reach out to an accountant for help.
To find out which 990 you need to file, check out this guide from the IRS.
Income Tax
Nonprofits are exempt from income tax on donations and much of their earned revenue. But if the IRS determines that revenue is from unrelated business activities (not directly related to your stated mission when requesting tax-exempt status), then it could be subject to income taxes. So check with your tax/legal team to make sure you’re prepared for any potential tax bills.
Payroll Tax
Nonprofit organizations must pay federal and local payroll taxes for their employees (and withhold payroll taxes on behalf of their employees, just like any other company.
Sales Tax
Rules for paying and collecting sales taxes are complex and vary from state to state. Check with your accountant and/or attorney to ensure compliance.
Other Taxes
Most nonprofits are exempt from property taxes and capital gains taxes from investments. Gains from real estate sales may be taxable income, depending on the circumstances.
Please consult a professional before making any decisions that may have tax implications. The tax code is complex and varies from state to state. It would be impossible to keep this article updated for all jurisdictions– so do your research and be prepared!
Going beyond the nonprofit accounting basics
The basic concepts of nonprofit accounting aren’t that hard to grasp.
But learning all the details and keeping up with your bookkeeping can be a big challenge for nonprofits of all shapes and sizes.
Working with an experienced nonprofit accounting firm could help you and your team focus your valuable time on growing your mission, rather than getting bogged down in your books.
At The Charity CFO, we work exclusively with nonprofit organizations and offer a start-to-finish solution for outsourcing your bookkeeping, financial statements, and expert advice.
Because nonprofit accounting is all we do, there is zero guesswork on terminology, procedures, and nonprofit-specific reporting like fund accounting and functional expenses.
If you want a professional team that understands your business and what you need, reach out to us today for a free consultation.
Accounting for In-Kind Donations to Nonprofits
Get full credit for non-cash gifts with this explainer on accounting for in-kind donations. Learn to properly value and record in-kind gifts.
Understanding Functional Expenses for Nonprofits
Functional expenses are an accounting challenge that’s unique to the nonprofit world. Find out what functional expenses are, how to track them, and why you should bother in this overview.
Do Nonprofits Pay taxes? It’s Complicated.
There’s no one answer to the question “Do nonprofits pay taxes?” In this article, we’ll walk you through the taxes you DO and DON”T need to pay. And offer you additional resources to investigate further.
7 Fundraising Challenges Stump Nonprofit Organizations
Responding to fundraising challenges can be stressful for any nonprofit, but knowing is half the battle. Here are 7 of the most common your charity will face
Nonprofit Financial Statements Explained
Discover the 5 essential nonprofit financial statements that your organization needs, regardless of your size, mission, or revenue.
What’s the difference between nonprofit and for-profit accounting?
If you’ve run a for-profit business, then you probably expect that nonprofit accounting will be a cinch. There can’t be a big difference between nonprofit and for-profit accounting, right?
And if you’re “not a numbers person,” you’ve probably filled your board of directors with the most experienced business folks that you know.
Certainly, those brilliant minds will make quick sense of your financial reports, right?
Well, not so fast…
There are some significant differences between nonprofit and for-profit accounting
Many successful business people have found themselves befuddled the first time they face a nonprofit’s financial statements.
In nonprofit accounting, the terminology is different. Some of the processes are different. And even the rules are different.
But don’t worry– in this article, we’ll walk you through the main differences between nonprofit accounting vs. for-profit accounting. So you can get yourself, your team, and your board onto the same page.
Ready? Let’s get started.
The 6 main differences between nonprofit and for-profit accounting:
1. Tax Status
One of the biggest differences between nonprofit and for-profit companies is that most nonprofit companies don’t pay any federal taxes.
And in the case of 501(c)(3) nonprofits, a donor’s contributions are also tax-deductible on their personal or business tax returns.
That part is pretty easy to understand. But from there, things get complex quickly…
To start, most nonprofits don’t pay federal taxes. But they still need to file a tax return each year. If you don’t file IRS Form 990 each year, you’ll lose your tax-exempt status.
Failure to file an IRS 990 can cause you to lose your nonprofit status.
Plus, some nonprofits DO pay federal taxes, because not all nonprofit income is tax-exempt.
A nonprofit has to pay federal taxes on income from “unrelated business activities.” So what does that mean?
Suppose your nonprofit is set up to battle the homelessness crisis in your city. You wouldn’t pay taxes on any donations you receive. But if you open up a shop to sell artisan crafts, you’d probably have to pay unrelated business income tax to the IRS on any profit generated by the store even if those profits go to support your programs.
Nonprofits have to pay payroll taxes for their employees, just like for-profit companies. And your employees pay income tax on their salaries too.
But your nonprofit may or may not have to pay sales and property taxes. Some states grant nonprofit tax exemptions for sales taxes and property taxes. But others don’t.
The issue of taxes is a crucial differentiator between accounting for nonprofit and for-profit organizations. But, as you see, the tax rules for nonprofits aren’t straightforward or intuitive.
So take your time to research the rules in your area, or hire a professional, to keep yourself out of trouble later.
2. Revenue Recognition
One of the critical rules in for-profit accounting is “the matching principle,” which states that “the revenue and its associated costs must be reported in the same accounting period.”
In its simplest form, this means that if you sell a car in January, the costs associated with building that car must be reported in January too.
Because the revenue and expenses are reported in the same period, it’s easy for shareholders and management to see if they’re making money or losing money.
With nonprofit accounting, there is no such rule. In fact, it’s kind of the opposite.
In most cases, you need to record donations when they are pledged instead of when they are received.
That means:
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- If a grant-maker pledges a $200,000 donation today, you have to report that income today. Even if you won’t receive the donation for another 6 months
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- If a donor promises to make a $500 gift every year for 3 years, you’ll recognize $1,500 of revenue today.
In both cases, you can’t spend that money yet because you haven’t received it yet. But the revenue will show on your monthly reports, making your net revenue number look high.
Then, when you actually do receive and spend the money next year, you won’t show any associated revenue. So your quarterly reports will reflect a loss.
These kinds of swings are normal for a nonprofit.
But they can cause panic for an inexperienced nonprofit accountant, board member, or executive director.
An experienced nonprofit CFO will understand these significant variations and explain them simply to the board and other management staff.
3. Restricted Funds
In almost all cases, when a for-profit company receives revenue, they can use that revenue however they want– to pay employees, buy inventory, or invest in new ventures.
But that’s often NOT the case for nonprofits.
Some donations, and many grants, will come with limitations on how and when your nonprofit can use them.
You may have specific funds that can only be used on particular programs, which means you can’t use them to pay core operational expenses, like payroll or rent.
Or you may have an endowment that you can invest but never actually spend.
Finally, some grant funds may have strict timelines in which you need to use them, or you’ll have to pay them back.
You may not be able to use certain funds for your operational expenses, like payroll, rent, and utilities.
The number of possible scenarios is pretty much unlimited.
A nonprofit accountant must design bullet-proof systems to track all these funding sources correctly and match them to the appropriate program. So you know exactly where every penny is at each moment.
Because if you violate the terms of your grant or lose the trust of your donors, your funding sources could disappear.
You may want to hire an experienced nonprofit accounting team to track your restricted funds to keep your donors happy and your funding safe.
4. Terminology and Financial Statements
When comparing nonprofit accounting vs. profit accounting, the same core financial principles apply to each.
But the terminology is so different that it can often feel like you’re speaking an entirely different language.
If you’re looking at a nonprofit’s finances for the first time, here are a few things you need to know:
Statement of Financial Position = Balance Sheet
The balance sheet for a nonprofit works pretty much the same as a for-profit one. But in a nonprofit, it’s called the Statement of Financial Position instead. You’ll also see some extra lines to account for restricted funds. And some different terminology, like Net Assets in place of equity…
Net Assets = Equity
Legally, a nonprofit doesn’t have an owner. So there is no Owner’s Equity or Shareholder Equity. Instead, you’ll find “Net Assets” in its place on the bottom half of the balance sheet (or Statement of Financial Position).
Statement of Operations = Income Statement / P&L
Your Statement of Operations shows you how much money you “earned” above expenses over a given period. It’s essentially the nonprofit’s version of the Income Statement, or Profit and Loss Statement.
5. Internal Controls
Historically, nonprofits have been easy targets for theft, embezzlement, and misuse of funds. So to protect donors and their donations, the FASB requires nonprofit accounting departments to follow a series of strict internal controls.
Most importantly, a review of your internal controls is a vital part of an independent nonprofit audit.
Not all nonprofits are required to be audited, but you may need to be audited depending on your state, your size, and your funding sources.
Many large grant-makers will only give funds to organizations with fully audited financial statements. So if you choose not to be audited, you could cut yourself off from potential funding sources.
Below you’ll see some examples of internal controls you may need in your nonprofit. Be sure to talk with your nonprofit accountant or CFO about the specific controls that you do or don’t need.
Of course, many for-profit accounting departments have processes and procedures for some of these things too. But the standard of expectations is higher in nonprofits.
Even if you don’t need to be audited today, you should still set up effective controls today.
Because if you wait until you need to be audited, you’ll find yourself with a messy audit result, a big bill, and a LOT of work to do to catch up.
Now that you know the differences between nonprofit and for-profit accounting…
You should better understand what’s expected of you as a nonprofit leader, employee, or board member.
If you’d like to continue your nonprofit financial education, sign up below for our free Nonprofit Accounting & Reporting Masterclass.
In 3 short video lessons, we’ll walk you through the differences between nonprofit and for-profit accounting, discuss the basics of nonprofit accounting, and walk you step-by-step through real-world examples of nonprofit financial statements.
The 8 Nonprofit Accounting Challenges You Need to Conquer
Your nonprofit organization will run into a range of accounting challenges every day.
From managing cash flow to reimbursing employee expenses to creating reports for your board of directors, the challenges just keep on coming.
And as a nonprofit founder or executive director, you may not have the background in accounting or finance to take them all on confidently.
But you’ll need to learn to conquer at least the most common nonprofit accounting challenges if you’re going to set your organization up for growth.
This article will walk you through the biggest challenges and common accounting problems that all nonprofits face. And we’ll give you some tips for how to overcome them to keep your organization out of trouble and your mission moving full-speed ahead.
So let’s get started…
1. Recording donations, paying invoices, preparing invoices, processing expenses…
Your first nonprofit accounting challenge has a name: bookkeeping.
You need accurate and timely financial data to make smart decisions for your nonprofit, just like any business does.
But when your accounting team consists of part-time bookkeepers, volunteer accountants, and multi-tasking team members, then it’s hard to get all your receipts, invoices, donations, expenses, and payroll transactions into the system accurately.
Those invoices aren’t going to enter themselves…
That’s not to mention “on-time.”
Because if you enter receipts, invoices, and credit card transactions every few weeks (or worse, “whenever we get around to it”), then you’ll always be playing catch-up.
So how can you take charge to ensure you have accurate financial data when you need it?
Start by creating and documenting a repeatable process and schedule for entering all your data. And follow it each time. Following a process may save you when you’ve got part-time help, volunteers, or even employee turnover (it happens).
Next, implementing simple accounting software can save your team hours every month by automating tasks like importing bank and credit card transactions. And it ensures that your books are up-to-date when you need them.
Another option is to hire an outsourced accounting service that specializes in nonprofits.
They’ll make sure your revenues and expenses get entered correctly and on time. So you don’t have to wait on your part-time accountant or worry about the accuracy of your numbers.
2. Preparing Accurate Financial Reports
Once you have accurate financial data, you’ve got to be able to make sense of it.
And that’s what financial reports do for you.
At the minimum, you’ll need the five essential nonprofit financial reports:
- Statement of Financial Position (or Balance Sheet)
- Summary of Activities (or Income Statement/Profit & Loss)
- Statement of Cash Flows
- Budget to Actual
- IRS Form 990
Depending on the complexity of your organization, you may need additional reports. Such as reports for tracking your donations, keeping track of your grant funds, and knowing which money is subject to program restrictions.
Your financial reports must be timely, accurate, and consistent.
And the last one— consistency— is a significant challenge for many nonprofits.
Many nonprofit accounting teams are self-trained. And many CPAs or general accountants aren’t familiar with the specific challenges that a nonprofit faces.
For this reason, nonprofit leaders often struggle to get reports that look the same month after month.
When you can’t make sense of your reports due to inconsistency, you’ll find yourself embarrassed in front of the board or failing to land the grant you’ve been counting on.
Want to learn to read nonprofit financial reports? Our Masterclass on Nonprofit Accounting and Reporting is a simple 3-video introduction to the basics of nonprofit accounting. Need a crash course in how to make sense of your finances? Click here to grab it free!
3. Modernizing Accounting Systems
A nonprofit accountant’s favorite phrase is, “Because this is how we’ve always done it.”
And that’s why so many nonprofit financial offices look like a scene from a classic movie– filled with overstuffed filing cabinets and a 3-foot high stack of paper invoices in the inbox.
Modernizing your accounting system is a major nonprofit accounting challenge.
But it’s one you must tackle to make your organization efficient and effective at carrying out your mission.
Modernization for your nonprofit accounting department means adopting simple, straightforward systems that rely on technology to save you tons of time and effort.
Updating your accounting software can allow you to automate basic tasks, like entering bank deposits and credit card transitions.
But other modernization solutions can help you save even more time. here are just some things you can do:
- Digitize employee expense reporting (stop losing receipts!)
- Pay your bills/vendors online
- Eliminate 90% of the paper from your office
- Connect your fundraising system to your accounting system
- Securely view and manage your accounts from anywhere
If you’re wondering which nonprofit tech solutions could benefit you, check out our list of the top tech solutions.
You can also ask for advice from nonprofits in your community or hire a nonprofit accounting or consulting service to help you identify your needs.
4. Accounting for Grants
Grants can be a game-changer for a small or mid-sized nonprofit.
So it’s natural that you’re excited to start writing grants. Until you realize what it does to your accounting department…
Adding grants to your revenue portfolio raises all sorts of new accounting challenges for a nonprofit.
First, you’ll need updated and accurate (generally audited or reviewed) financials to secure the grant. Then you’ll need to provide your grantmaker with regular financial updates to keep your funding.
Secondly, many grants are issued only for certain types of expenses or specific programs.
In many cases, you can’t use grant funds to cover general operating expenses, like payroll.
That means you need to track your grant funds separately to know where how much you’ve spent and what you spent it on, so you can report back to the grantmaker.
Finally, specific rules apply to how to recognize grant revenue on your books.
If you’re dealing with grants, it’s risky and time-consuming to try to do it on your own.
You’ll probably want to hire an experienced nonprofit CFO. Or find an external service with extensive experience and expertise handling the specific challenges of nonprofit teams.
5. Managing Payroll
Payroll presents unique compliance challenges for a nonprofit accounting team.
First, many nonprofits have employees, contractors, and volunteers.
It’s not always easy to figure out how to classify everyone. But you’ll need to get it right so you can withhold and pay your federal and state payroll taxes appropriately.
(Yes, nonprofit employees pay payroll taxes. And nonprofit companies do too.)
You also may need to track your employees’ pay based on the job function they’re performing.
When a nonprofit employee occupies multiple roles— like opening the mail AND running programs— you should allocate their salary based on how much time they spend doing each role.
Why does this matter?
Let’s imagine one of your employees spends 2 days a week in the office helping with administrative tasks.
And the other 3 days, they are in the field running a service project.
If the service project has grant funding, their salary may qualify to be covered by grant funds for those days. But the other 2 days wouldn’t be eligible.
If you’re not tracking your payroll by job function, you could be underutilizing your grant funds. OR misusing your grant funds.
And applying functional expense allocation to your payroll can help you maximize your funds AND comply with best practices for transparency.
An experienced accountant will help you navigate nonprofit payroll challenges. But you’ll probably still want to contract an external payroll service like Onpay or Paychex to handle payroll processing.
They’ll help simplify your payroll distribution and tax management, and you’ll have access to their support team when you have questions.
6. Filing Tax Returns
You didn’t think you were going to get out of this just because you’re tax-exempt, did you?
That’s right– nonprofits have tax accounting challenges too!
The IRS requires nonprofit organizations to file a 990 every year to maintain their tax-exempt status.
If you don’t file a return for 3 years, your tax-exempt status will be automatically revoked!
So this one’s essential. If you have updated financials, you may be able to handle this yourself (it’s not that hard). But many nonprofits prefer to trust a CPA to handle it for them.
A bonus of working with a nonprofit accounting service, like The Charity CFO, is that we’ll file your IRS form 990 for you. Plus, we can tell you what other taxes you might have to file or pay depending on your location and operations, like state taxes, sales taxes, or payroll taxes.
7. Dealing with the Board of Directors
Your relationship with the board of directors is one of the trickiest challenges you’ll face as a nonprofit leader.
It’s not exclusively a financial relationship. But financial oversight is one of the critical roles of your board of directors. So, for better or for worse, accounting and reporting will play a significant role in your relationship.
Suppose your board has members with a lot of for-profit business experience…
They may expect that they’ll “get” nonprofit finances automatically— it’s all business after all, right?
But there are actually a lot of differences between for-profit and nonprofit accounting.
For instance…
The rules for recognizing donation revenue say that you have to record donation revenue when it’s pledged, instead of when you receive it.
This one minor tweak can lead to huge quarterly “losses” on paper that would strike fear into the heart of a for-profit executive. And if you’re not prepared to explain and defend your numbers, it can lead to some high-tension situations.
You can improve your board management skills by leaning on a solid network of nonprofit leaders. So when unfamiliar situations arise, you can ask for advice from people who have navigated similar situations.
Another option is to employ a contractor or an experienced nonprofit CFO.
At The Charity CFO, we help provide expert guidance to all of our clients on managing board interactions. And if one of your board members has questions you can’t answer, we’ll help you understand it so that you can help put their mind at ease.
7. Implementing Effective Controls
You’ll have to get very familiar with the words compliance and transparency as a nonprofit executive.
Nonprofits are challenged to keep everything out in the open when it comes to accounting and bookkeeping.
To maintain a donor-friendly and audit-ready nonprofit, you need a series of internal controls to ensure you comply with industry best practices.
According to First Nonprofit Foundation, “internal controls are policies and procedures that protect the assets of an organization, create reliable financial reporting, promote compliance with laws and regulations, and facilitate effective and efficient operations. They relate to accounting, to reporting, and to the organization’s communication processes.“
You’ll need established and documented policies for things like:
- Segregation of accounting duties (so different people handle incoming and outgoing money)
- Physical controls, like secure passwords and locked cabinets, to protect checkbooks and financial data
- Conflict of interest policies
- A financial whistleblower policy (per the Sarbanes-Oxley Act)
- And more…
To keep things above board, someone other than your bookkeeper should be responsible for signing checks.
And since the board is responsible for financial oversight, your finance chair shouldn’t be moonlighting as a volunteer accountant!
If you’re not sure which internal controls you need, well, that’s part of the problem!
In most cases, ignorance is not an excuse for non-compliance.
So do your research. Talk with your nonprofit network. Or hire a professional to help you be sure you’re doing everything you need to protect your organization.
Because without adequate internal controls, our last nonprofit accounting challenge will be your worst nightmare…
8. Preparing for (and passing) audits
There are few scarier words than “audit” in the English language (and this comes from a team of former auditors!).
And in many cases, passing an independent audit is the biggest accounting challenge a nonprofit will face– especially if you’re not on top of challenges 1 through 7 above…
If you wait until you NEED an audit to start preparing for one, then you could be looking at months of work and tens of thousands of dollars in expense to unravel your accounts.
To pass an independent nonprofit audit, you must comply with generally accepted accounting principles (GAAP). GAAP includes standards for financial statements and robust internal controls (maybe those sound familiar), among other things.
Not every nonprofit needs to be audited, but if you’re big enough, located in certain states, or depend on a lot of grant funding, you may need it.
And even if you don’t need an audit today, you will need it someday if you intend to grow your mission.
That’s why the best time to start preparing for that first audit is right now!
Because the longer you put it off, the more time (and $$$) it will take for your CPA to figure it out later.
Want the Easiest Solution to Your Nonprofit Accounting Challenges?
Nonprofit accounting is not for the faint of heart.
The nonprofit accounting challenges detailed here are the biggest and most common. But every nonprofit is unique and presents its own unique problems.
Building an in-house team that’s capable of tackling these challenges is expensive. And experienced nonprofit accountants and bookkeepers are hard to find. If you’re lucky enough to have a good one, finding and training a replacement can be a full-time job when you lose them due to retirement or turnover.
That’s why many modern nonprofits are turning to a professional accounting service to handle their accounting and bookkeeping needs.
At The Charity CFO, we help over 100+ small and medium-sized nonprofits and charities manage their accounting and bookkeeping from start to finish.
We can help you pay bills, classify credit card transactions, enter & pay vendor invoices, record your payroll expenses, reconcile your monthly accounts, and create consistent, easy-to-read monthly reports.
With 5 former auditors on staff, we know exactly how to prepare you for a successful audit. Your books will always be audit-ready, so there’s never any catch-up to do when you need to write a grant or run financial statements.
Our team of former nonprofit CPAs, CFOs, board members, and auditors have seen just about every situation a nonprofit can face.
So whether you need help setting up controls, a strategy for fundraising, tips on scaling, or advice on how to work better with your board, we’re here to help!
Our expertise is available to ALL of our clients, free of additional charge.
So if you’re looking for ONE solution to conquer ALL of your biggest nonprofit accounting challenges, reach out to us today. And stop worrying about your books so you can focus on your mission.
Book a free consultation with The Charity CFO
Nonprofit Accounting Services: 6 Reasons You Should Outsource Your Accounting Today
Do you want to spend more time developing your programs and interacting with donors and less time chasing down receipts or fussing over payroll reports?
Outsourcing your bookkeeping duties to a nonprofit accounting service can be a great solution to help lighten the load. An expert accounting team with experience in nonprofits can help free up your time and give you the accurate reports you need to face your board and donors with confidence.
Here are six ways nonprofit accounting services help your organization get closer to fulfilling its mission:
1. Audit-Ready Books When You Need Them
You need an effective bookkeeping system to help you maintain your nonprofit status, meet your donors’ requirements, and be prepared for audits. But it’s not easy to keep audit-ready books, especially with a part-time, volunteer, or under-staffed accounting department.
If your books are sloppy or you don’t have the proper internal controls in place, you can’t prove you’ve been using donor donations for their intended purposes — and that’s a BIG problem!
Outsourcing your nonprofit accounting services ensures that your accounts are in order and compliant with required standards at all times. So you don’t have to scramble or work late every time someone asks to see your books.
And with improved accountability, you’ll also build your donors’ trust by showing them you are handling their money responsibly.
2. Get the Time to Focus On Your Mission
As a nonprofit team member, your attention is pulled in a dozen different directions— like fundraising, team management, staffing programs, and more. With all these things to take care of, tracking
Nonprofit accounting services help you spend less time with your calculator and more time guiding your organization toward its goals.
donor contributions should be the least of your worries.
For example, if you’re trying to help with a crisis of homelessness in your city, you should be spending more time building relationships with people in your community than staring at spreadsheets.
Outsourcing your nonprofit’s bookkeeping and accounting can help you succeed by freeing up your time to do the work you really enjoy. You’ll also be able to guide your employees and volunteers more efficiently if you’re not bogged down with bookkeeping tasks like processing invoices, sorting receipts, or paying your vendors.
3. Save a Ton of Time and Energy
Nonprofit accounting can be complicated and time-consuming, especially if you don’t have any nonprofit financial training. And if you don’t find accounting inspiring, it can eat away at your passion and limit the energy you have to dedicate to the cause.
When you outsource your accounting to an experienced nonprofit accounting service, their employees take care of everything for you, which lightens your load. It also removes the stress of hiring, training, and managing your own staff to do the bookkeeping tasks.
Nonprofit accounting services also know the best time-saving software and shortcuts you can use to simplify your processes. And they can recommend modern accounting software that keeps all of your accounting information in one place. So when it comes time to prepare reports or file taxes, you get everything at your fingertips.
4. Know Which Money You Can Spend
You want to be able to put your donors’ contributions and grant funds straight to work to help your programs succeed.
But, for many nonprofit teams it can be difficult to figure out how much of your donations should go toward programs, versus fundraising efforts or operations. And it’s even hard to track which money you CAN spend because of program-restricted funds and grants.
This is where an accounting service that specializes in nonprofits is with its weight in gold. Most general CPA firms ack the industry-specific knowledge you need, so they don’t have established practices for tracking program-restricted or grant-restricted funds. By contrast, a nonprofit accounting service will have experience navigating the specific issues that organizations like yours face every day.
5. Get Reports You Can Trust (and Read!)
Never underestimate the value of accurate nonprofit financial reports in a consistent and recognizable format. It may sound basic, but…
Most small and mid-size nonprofits (and many big ones too) struggle with getting good financial reports in time to satisfy their board members, donors, and auditors. And, oftentimes, the reports they do get vary from month to month in terms of the layout, what info they contain, and how things are categorized.
A professional nonprofit accounting firm will standardize your reports and classify your income and expenses consistently. So you’ll get reports you can trust every month, and actually be able to read them.
That allows you to instill confidence in both your oversight team and your donors. And it helps you make smarter decisions, faster. So that you can move your mission forward!
5. Save a Bunch of Money
You may not believe it, but nonprofit accounting services can save your organization a lot of money.
Employees are expensive, and accounting salaries have risen by as much as 20-30% in just the last year. Plus, staff accountants can easily get stuck in old ways of doing things that waste your organization’s time and money.
Optimized processes and up-to-date technology can make bookkeeping and accounting services much more efficient than your in-house team!
At The Charity CFO, we’ve taken nonprofit accounting departments that were employing 2 full-time staff members and turned it into a 20-hour per week job. Just by leveraging efficient processes and software solutions.
And that’s not to mention the enormous hidden costs in things like dealing with employee turnover, inaccurate or sloppy accounting, payroll taxes, and more. In fact, if your already behind on your books, the cost of cleaning up your books for an audit ALONE might cost more than a full year of accounting services.
When you choose the right outsourced accounting service, you’ll be surprised with how much time and money you’ll save just by doing things right the first time.
Still not sure about working with a nonprofit accounting service?
If you’re a nonprofit that’s thinking about hiring an accounting service, you probably have one big question:
“But won’t it be harder working with an accountant that’s not in my office?”
Actually, we’ve found that most nonprofits find working with an outsourced accounting service easier than having an in-house team. How could that be? There are 3 big reasons:
- Expertise. It’s amazing how much easier things are when you’ve got an expert on your team! As a nonprofit accounting service, we’ve worked with hundreds of nonprofits just like you. That means we have solutions for the issues you face every day, from expense reporting to dealing with irritable board members. Honestly, it’s pretty tough to surprise us. But if you do, we’ve got an office full of nonprofit financial professionals who love a new challenge.
- Efficiency. The first thing we do with any client is simplify and optimize their accounting system. We’ll make sure you’re using the right tools, software, and procedures to make life easier for you. And for us too, quite frankly. We can’t afford to be inefficient, because our model is based on efficiency. So guarantee that we can help your team save time and energy within a few weeks.
- Communication – At The Charity CFO, all of our 100+ nonprofit clients are handled remotely. That means we’ve developed systems, procedures, and technology that allow us to serve them just like we were there in their office. Many of our clients can’t believe that it’s easier to get clear, quick, and accurate responses from us than it ever was working with in-house accountants, volunteer bookkeepers, or “take a week to call you back” CPA firms.
Don’t believe that’s possible? Here’s what a fellow skeptic had to say:
Ready to talk about nonprofit accounting services?
Why not start making your life easier today?
Reach out to us at the Charity CFO for a free consultation today.
We’ll let you know if you’re a good candidate for outsourced nonprofit accounting. And we’ll show you exactly how we’d modernize your systems, organize your complex accounting and simplify your life!
