The Essential Guide to Nonprofit Accounting SBHQ

Payroll services start at $20 per month and bookkeeping support starts at $149 per month. To process a transaction via credit card, you must pay a fee of at least 2.9% plus $0.60 per transaction. Nonprofits are exempt from income tax on donations and much of their earned revenue.

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So you’re getting many years of experience at a much more affordable cost. The biggest risk of not having a professional nonprofit accountant is the potential for reporting incorrect financial information to the board of directors, funders, and the public. But when you’re trying to paste together your numbers with a part-time bookkeeper or a volunteer accountant, it’s nearly impossible to get the transparency you need to run your nonprofit organization.

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• And if you’re selling products or services, that’s another layer to manage.
• Deciding which form to file depends on the organization’s classification and whether or not the nonprofit reaches certain spending thresholds.
• For nonprofits, GAAP compliance means accurate fund accounting, clear reporting of restricted vs. unrestricted funds, and detailed presentation of program vs. administrative expenses.
• Work with your accountant to plan ahead and ensure you can complete all of them accurately and on time.
• These errors can lead to financial mismanagement and have serious consequences, such as losing tax-exempt status or damaging the organization’s reputation.

Accounting, on the other hand, is using that information to provide a detailed analysis of your finances. Your nonprofit has important work to do, but limited resources to do it with. To fulfill your mission and impact the communities you serve, you have to raise and allocate funds wisely—That’s why bookkeeping for nonprofits is an essential part of what you do. Not following these rules can harm your finances, reputation, and even shut you down. Knowing the rules from the Financial Accounting Standards Board (FASB) and the Internal Revenue Service (IRS) is vital. Since your treasurer is typically a member of the board of directors and your CFO works closely with the rest of your executive leadership team, their roles are fairly easy to distinguish.

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The audit process strains resources, taking staff time away from regular duties and often revealing areas needing improvement. Many experts now say focusing too much on low overhead can hurt your mission because you underinvest necessary tools and talent. Your specific needs might vary—organizations with government contracts might require bigger reserves to handle payment delays. Six months is even better, but a reserve of less than one month can cause potential cash flow problems. Many foundations won’t even look at grant applications without audited statements.

Generally Accepted Accounting Principles (GAAP) are the standard framework of guidelines https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ for financial accounting used in the United States. Established by the Financial Accounting Standards Board (FASB), GAAP ensures consistency, transparency, and comparability in financial reporting across organizations and industries. But most nonprofits don’t need a full-time accountant and generally speaking, employees are expensive. We have staff with nonprofit experience and can be hired at every level of accounting, from basic bookkeeping to fractional CFO.

They immediately feel like they’re back in math class having to turn… There are 3 basic types of nonprofits, and they are distinguished by the way they are funded. There are major differences between the three types of bookkeepers The Key Benefits of Accounting Services for Nonprofit Organizations and what each can offer your Nonprofit. Figure out which works best for your organization and start tackling the problems with your books.

Financial reports provide a snapshot of an organization’s financial health. Bookkeepers record and classify transactions and reconcile accounts to ensure the information in these financial reports is accurate and then prepare the reports. These reports help accountants understand financial situations and prepare financial statements. Your nonprofit’s bookkeeper must prepare regular reports for the organization’s Board of Directors that provide updated financial information. Accounting software can make this process easier and help your bookkeeper follow GAAP standard accounting principles. Nonprofits of all sizes use the following software to create and keep these reports up to date.

Simplify bookkeeping and maximize tax savings

Bookkeeping is the day to day processing of your transactions – getting the information into Quickbooks Online or a similar accounting software. Creating and managing a nonprofit budget is a crucial step in ensuring the financial health and sustainability of your organization. It’s about more than just numbers; it’s a reflection of your nonprofit’s goals, priorities, and mission in action. Let’s break down how to set up a nonprofit budget, explore the steps involved in the budget process, and delve into the specifics of operating and capital budgets. Adminsoft Accounts offers one of the most comprehensive sets of free accounting features available.