When people think about the nonprofit world, they often think about the work they do to help others. Their mission and impact come to mind, but the way they’re actually run rarely comes up.
A nonprofit may not make money the way a traditional business does, but money still plays a significant role in the nonprofit world. Donations need to be made, some employees may need compensation, and the books need to be balanced.
Proper accounting is important for the longevity of any organization, but luckily, it’s easy to handle with the right background.
If you want to learn the best way to handle finances in the nonprofit world, you’ve come to the right place. Keep reading to learn some simple accounting tips and tricks that can help you in the long run.
The Simple Guide to Nonprofit Accounting
A financially healthy nonprofit is one that has the right accounting setup.
If you want to know how to handle accounting at your nonprofit, make sure you pay close attention to the tips in this post.
Understand the Law
Accountants that don’t understand IRS tax law could be losing the organization thousands in exemptions and filings.
If you want to handle accounting right at a nonprofit, you need to understand the differences between managing money for a regular business and a nonprofit organization.
The IRS has a comprehensive and free resource guide that nonprofits can use to educate themselves on the ins and outs of handling finances for their organization.
Everyone on your finance team should be familiar with tax guidelines. Even if they aren’t necessarily handling filing your taxes, encourage them to take advantage of the IRS’ free courses.
Have a Solid Budget
A budget is important for any business or nonprofit organization. It’ll help you set goals for the coming year, and ensure that you’re operating your business in the most financially healthy way possible.
A realistic operating budget is the first step to handling accounting the right way in your organization.
Keep in mind that an ideal budget should be able to evolve throughout the year. Money from donors can ebb and flow depending on the time of year and market forces that are out of your control.
Think about the best and worst times to limit expenses. There are some times of the year where you can expect a lot of cash flow like the holidays, and other times where you’ll have to be leaner.
It’s also important to make sure that your board members understand and approve the budget.
We all know how important the siting board is in a nonprofit organization. If they understand the rationale behind why you’re setting certain expectations and limits, they’ll be able to better understand upcoming initiatives and support them.
Have Several Checks and Balances
Fraud can occur in any organization, but frauds for nonprofits and charities can be absolutely devastating.
Aside from taking money from an important cause, it can also undermine people’s faith in your organization. They may think that their money isn’t being spent correctly, and you could see your donations quickly dry up.
One of the best ways to protect against fraud and to keep your accounting books balanced is to have plenty of eyes on the numbers. This means creating a series of checks and balances to ensure that everything literally adds up.
Never have one person only handle financial matters in your organization. Always have someone else that can double-check their work and make sure that their numbers, bank deposits, and projections make sense.
Having a professional with no financial stake in your nonprofit can be a great way to keep things balanced. Some nonprofits go the extra mile to bring in an external accounting consultant during tax time or when they’re planning budgets.
Getting solid accounting software is one of the best things a nonprofit can do. Software doesn’t just make it easy to track expenses, it also gives everyone the opportunity to access important financial information.
Take time to think about the kind of software you want. Some accounting software can come with special features like payroll and benefits tracking help. Others can hone in on specific nonprofit areas like fundraising and donations.
The Nonprofit Plus Account Suite is one of the highest-rated niche accounting software packages you can use.
Aside from this software being specially designed for non-profits, it can help you handle nearly every financial aspect of your business. You can manage donations, handle employee payroll, and use its stellar forecasting capabilities.
Stay in the Loop
Do you know whenever someone in the marketing/communications department goes to an event and charges their Uber to the company card? Could you easily find receipts from operations during their last office supply shopping trip?
Having a deep understanding of what’s happening in every department is critical for the financial success of every nonprofit.
You won’t be able to read people’s minds or be around for every purchase. That’s why it’s important to create simple systems for people to report expenses and keep key people informed about purchases.
This is where having solid software can come in handy. A software system that makes it easy for people to report their expenses and easily track spending can save people in accounting a lot of time and stress.
Start off by training people in other departments the right way to keep you informed about expenses. Let them know that reporting small expenses and big purchases are equally important.
We covered a lot of ways to handle nonprofit accounting in this post, but there’s one surefire thing that will always be helpful for nonprofits: hiring the right people to handle accounting.
If you’re in need of experts that can manage your accounting needs, we’re here to help.
We offer services that can cover every financial aspect of running a nonprofit. Be sure to contact us today so we can talk about the best way to handle your accounting and finance needs.