Did you start your nonprofit because you love number-crunching?
Or was it because you have a passion for helping those in need and serving your community?
Most nonprofit directors wish they could focus on relationships, not finances. However, professional accounting help can seem intimidating at first. How do you know when it’s time to transition to professional accounting?
Are you wondering whether nonprofit accounting services are worth it? If so, this article is for you. Read on to learn how specialized accounting services can help your nonprofit succeed.
Lets You Focus on Your Nonprofit
If you founded or joined a growing nonprofit, there are likely many ways you want to give your time. You’re busy hosting galas, networking with your supporters, and doing charity work.
As your organization grows, its finances grow too. Success makes your nonprofit more complex. That means you’ll need to devote more time to financial administration.
Does the financial work take your attention away from your organization? If so, it may be time to seek professional accounting support.
After all, a professional accountant can look after the books. Only you can lead your nonprofit.
Choose the Services You Need
There are two main types of financial administration. Your organization will need both: bookkeeping and accounting.
As a nonprofit, you may be able to fill one of these roles with volunteers. You may find someone to donate their skill to cover a few of these tasks. Every nonprofit has unique resources, and unique needs as well.
That’s why nonprofit accounting services are flexible. They allow you to decide whether you need to outsource some or all of your financial management. This makes professional accounting more affordable as well.
Bookkeeping Services for Nonprofits
A bookkeeper manages the daily financial interactions of your organization, including:
- Accepting and recording donations
- Paying out bills
- Managing banking deposits
- Allocating and recording expenses
- Executing payroll
Many nonprofits manage these tasks in-house. This works well if they don’t overwhelm your time. You may even divide these tasks among your employees for convenience.
However, as your organization grows, your daily financial tasks increase as well. You may find that they put increasing demands on you and your staff’s attention.
Don’t overlook the dangers of assigning bookkeeping to financially untrained staff. Innocent bookkeeping mistakes can reflect badly on your organization.
If your staff is spending its time on financial tasks instead of charitable work, it’s the right time to seek professional accounting services.
Accounting Services for Nonprofits
Accounting involves analyzing your organization’s financial health. It gives an in-depth look at your nonprofit’s transactions and financial history.
CPA services (chartered professional accountants) include:
- Making sure your expenses and income stay in balance
- Planning an annual budget
- Analyzing expenditures
- Preparing your year-end financial report
- Evaluating your organization’s overall financial wellbeing
Some of these services can be conducted in-house if you have accounting-trained employees (or volunteers). However, they are time-consuming, especially for non-professionals.
A specialized accountant can administer your accounts faster and more accurately than non-professionals. You will need an independent accountant to perform your mandatory yearly audit (see more below).
Navigate Nonprofit-Specific Issues
Nonprofit organizations have different financial inner workings than businesses. They face unique financial challenges and unique financial requirements as well.
A nonprofit accounting service understands these differences. It can help your organization navigate the special financial requirements you will face.
Most United States nonprofits are required to have a yearly financial audit. This audit must be conducted by an independent party. Some states require proof of a financial audit before granting registered nonprofit status.
A transparent yearly audit assures donors that your nonprofit is financially responsible. It gives the stamp of integrity to a charity.
However, nonprofit finances are different than for-profit businesses. Their financial audits have to be conducted differently as well. That’s why it’s essential to choose a nonprofit auditor who can analyze your nonprofit finances.
Nonprofit Taxes and Tax Reports
Keeping track of revenue in a nonprofit is always a challenge. Nonprofit revenue streams can include:
- Personal donations
- Fundraising drives
- Membership fees
- Public grants
- Private foundations
- Monthly contributions
With such diverse income streams, nonprofits often struggle to account for their income.
Your organization needs to report your income accurately. Otherwise, you could incur penalizations.
You may also need professional help when it comes to registering for your 501(c)(3) tax-exempt status. Professional accounting services can help in both these areas.
Are Nonprofit Accounting Services Worth It?
Nonprofits often start very small. When is the right time to spend money on outsourcing your accounting tasks?
First, think about how much time your staff currently spends on accounting and bookkeeping.
Time is money, even in the nonprofit sphere. If your staff spends excessive time on finances, you are already spending money on accounting.
Second, think about the quality of your financial management. Do-it-yourself solutions may seem attractive in the short term. In the long term, however, inexpert bookkeeping can make your organization seem unprofessional.
Most importantly, consider the quality of your charity work. Is your staff so busy with administrative work that they don’t have time for your mission? When you spread yourself too thin to do your charity work, it’s time to get accounting support.
Accounting Services For Your Nonprofit
Your nonprofit may have started small. However, it may quickly outgrow your financial administration abilities. If your finances need more time than you can give to them, it’s time to get a professional solution.
Is your organization ready for nonprofit accounting services? Contact us today to schedule your free consultation.