Bookkeeping for Nonprofits: A Basic Guide & Best Practices

Proper bookkeeping includes entering financial transactions and ensuring accurate ledger balances. Your bookkeeping activities support your compliance with fund accounting rules. Non-profits must file annual reports to maintain tax-exempt status; non-profit accounting supports these filings. Non-profit financials are publicized to help government agencies and donors understand how the organizations operate. Wave’s free invoicing tools offer the ability to send customized and branded invoices and automated payment reminders.

Donation and Grant Tracking

The term “overhead” has historically carried negative connotations in the nonprofit world. However, these administrative and fundraising expenses are essential investments in your organization’s capacity and effectiveness. Finding the right software for your nonprofit helps determine its success, so make sure to snag those free trials and test-drive different options. With the right bookkeeping software on your side, you’ll be able to make the most of your donations and reach people who support your cause. Invoices are legal documents and should have your organization’s logo, name, address, email, phone number, invoice number, and date.

It’s time to fix your nonprofit’s accounting

Our free courses provide in-depth knowledge on key accounting principles, budgeting strategies, and reporting requirements to help your organization thrive. We find that small to mid-sized nonprofits benefit most from investing in the Plus or Advanced plans of QuickBooks Online. The Plus plan includes all of the essential accounting features your organization needs in a cloud-based platform and provides access for up to five users. However, if you want to add more users to your account or leverage more complex tools like batch invoices and fixed asset auto-tracking, it’s worth upgrading to the Advanced plan.

Nonprofit Accounting and Bookkeeping Services from Anywhere

• In addition to knowing how your nonprofit’s financial data is recorded and reported, you should also be familiar with how to use that information to make decisions.
• Since nonprofit organizations operate differently than other businesses, accounting for a nonprofit organization can be complex.
• All expenditures, charity, payments, and other financial information are recorded by bookkeepers in an orderly software platform or worksheet.
• Under the deferral method, all unrestricted contributions are taken into revenue in the period in which they are received.
• This way, all of your data will be consistent, and it’ll be easier to review your funding model and make adjustments to increase your organization’s financial stability.

While revenue diversification mostly falls under the financial strategy umbrella, it also touches the analysis and reporting aspects of accounting. Track your nonprofit’s finances with our customizable chart of accounts template. If you have the spare time to manage your work and some of the accounting each month but need a little extra help, a part-time bookkeeper might be a good solution for your Nonprofit. In addition https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ to these basic bookkeeping activities, your costs will be impacted by how your accounting systems, policies and procedures, and reporting needs are set up and administered. Although charities are exempt from income tax (as are all other not-for-profit entities), they enjoy a privileged position because they are permitted to issue charitable donation receipts. For this reason, charities are held to a high standard and are required to file annual information returns.

Best for Volunteer-Run Nonprofits

This regular monitoring helps catch issues early and ensures proper fund management. Create systems that ensure continuity in your nonprofit accounting practices. The sheer volume of reporting requirements can overwhelm even well-staffed nonprofits.

A Detailed Guide To Bookkeeping For Nonprofits

A beginner-friendly interface makes it easy to get used to managing the books. Bookkeepers must process large volumes of transactional data within tight deadlines. Late transaction recording can create a domino effect, delaying financial reports, board approvals, and IRS filings for tax-exempt status. They must have the skills to interpret them and support the accounting team in decision-making. In this guide, we’ll cover the responsibilities and skills of nonprofit bookkeepers, and we’ve included a job description template to help you get started. A skilled bookkeeper ensures financial transparency and accountability, vital to the organization’s fiscal health.

To avoid common mistakes, non profits should maintain consistent record-keeping, adhere to donor restrictions, implement internal controls, and regularly review and reconcile their financial records. Using the right software and seeking professional help when needed also helps. Internal controls are essential for safeguarding assets, ensuring accurate financial reporting, and preventing fraud.

Can I set different account privileges for employees or my accountant?

For more information related to the blog, or any financial requirements, contact Monily. Engaging an independent certified public accountant (CPA) to conduct an external audit is crucial for nonprofits. External audits objectively evaluate financial statements, enhance credibility, and ensure compliance with accounting standards and regulatory requirements. Non profits should seek professional help for complex financial transactions, regulatory The Key Benefits of Accounting Services for Nonprofit Organizations compliance, audit preparation, and as the organization grows and financial management becomes more complex.