Financial integrity for a nonprofit is what keeps the doors open and the lights on so that you can continue your mission. Without good financial practices, nonprofits can’t continue their work.
If you’re a nonprofit seeking information about how to start using finance services, look no further. This guide will tell you everything you need to know about how to switch to a financial service and why you should.
We’re going to do a deep dive on what type of financials nonprofits need to manage, from bookkeeping to expenses and invoices. Then we’ll explore why it’s important to outsource your organization’s finances.
Let’s dive in!
Bookkeeping for Nonprofits
Every nonprofit has cash in and cash out, just like a for-profit business. All of this information is arranged on a daily basis on a general ledger. Your first thought might be a big thick binder with line after line of additions and subtractions. We’re lucky that in 2020, it doesn’t have to be that way.
Some key elements of bookkeeping are accounts receivable, accounts payable, payroll, and cash. These can all be managed online to ensure accuracy.
Many nonprofit organizations use services that put bookkeeping into an easy management system. Some nonprofits use Excel or an online financial tool. While these are great methods, it’s still important to manage physical receipts and cash transactions, even if they’re small.
A key component of proper bookkeeping is reconciliation. Essentially, the reconciliation process makes sure that your own records match the bank. In addition to knowing all the money is in the right place, the reconciliation process can catch issues. Some that might come up are double transactions, refunds, fraud, and bank errors.
Reconciliation can also be done between departments at the same nonprofit. For example, a nonprofit fundraising team that logs donations has a financial record. Double-check all transactions, including online donations and cash, with the fundraising team’s books. Doing this once a month is a good way to make sure everything is accounted for.
Nonprofit Tax Preparation
Wait, but I thought nonprofits were tax-exempt? That’s true! Nonprofits don’t pay federal tax, sales tax, or property tax.
But nonprofits still have to file an informational return, known as a 990. These are actually public data, which means that anyone can view them. If you’re applying for a job and want to see how much income a nonprofit has, you can look at their recent 990.
In 2016, 1.5 million nonprofits were registered with the IRS and that number is only growing. It’s a ton of work to compile all the information needed for taxes. Luckily, nonprofit financial services can help you do this.
Read up on these six common mistakes that nonprofits make during tax season and get together all of your financial information for the prior year to share with our team.
Accounting for Nonprofits
It’s easy to think that accounting and bookkeeping are the same thing, but they actually have a complex relationship. Accounting focuses on the big picture of the institution and overall financial stability.
Accountants ask questions like: What is the overall financial health of the organization, based on the books? They are also typically required to present financial reports on the wellbeing of the charity to the board.
Financial services can be very helpful for accounting because it requires many skills like data analyzation, mathematics, and a background in finance.
Cloud-based accounting systems are critical for ensuring accuracy. Our approach to affordable accounting for your organization incorporates reconciliation with banks and expenses that can be very complicated to the untrained eye.
A key component of financial health for a nonprofit, budgeting for each department of your organization ensures that you’re bringing in more money than you’re making.
Budgeting doesn’t just include how much you can spend and how you can spend it, it also includes forecasts for fundraising and builds out each line item for developing your impactful programming.
Finance services can help with budgeting for your nonprofit, even down to the grant level. As professional money managers, they know how to extend your dollars.
In 2017, $410 billion was donated to various charitable organizations. That’s a lot of donations to track!
As your organization grows, it’s almost reckless to use something as simple as an Excel sheet to track donations. Many content management platforms are able to house all sorts of information about your donors and can inform fundraising campaigns with data like giving history and membership levels.
Content management systems are integral to growing the fundraising for a nonprofit. In addition to generating funds that go to a good cause, your nonprofit is also building valuable relationships that deserve to be tracked appropriately.
These platforms can do everything from making you remember your wealthiest donor’s birthday (don’t forget to send a card!) to generating reports that assess your organization’s fundraising pipeline and fundraising goals year over year.
If You’re on the Fence About Finance Services…
You might not be totally sold yet on the idea of outsourcing your finance services. Many nonprofit organizations prefer to keep a tight ship, but here are a few key reasons to make the switch today.
Outsourced finance services can:
- Reduce costs for your institution
- Save time for your staff and increase bandwidth
- Ensure accuracy for all accounting and bookkeeping
- Be scaled easily when your organization grows
Drop Us a Line
Affordable services for nonprofit organization management can be hard to come by. Our expert team and reasonable pricing can help your nonprofit surpass your goals.
Don’t think of us as another line item, we’re here to build a true relationship with your organization. Our job is to help you make financial choices that will ensure your organization is making an impact.
Ready to make the leap to using outsourced finance services? Gather some quick information on your charity, foundation, nonprofit, museum, faith-based organization, or membership organization and request a meeting.
We’re so excited to help your nonprofit excel!