How to Do Bookkeeping for Nonprofits

Small organizations who are just getting started may be able to get away with a general accounting software solution. However, they’ll likely outgrow it incredibly quickly and start looking for a new software investment. However, we all have a tendency towards optimism in our budgeting. We want to do all sorts of important tasks with the money, so we’ll squeeze our expenses to try to fit everything in. Not only that, but different departments within nonprofits tend to bookkeep differently.

This section reports the cash spent to purchase long-term assets and the amount received from the sale of valuable assets. Statements of functional expenses share some vital information with your annual Form 990, which also requires you to report expenses by function and nature. Reports that follow these principles are especially useful as a resource of cross-organizational comparisons due to their consistency in report components.

If I qualify for tax-exempt status, do I still have to pay some taxes?

Here are the best accounting software for nonprofits available today. We selected these solutions based on features, pricing, reputation and more. It should also offer nonprofit-specific accounting functionality, such as the ability to receive donations, manage restricted funds and file Form 990. The FastFund Accounting program is available for as little as $42 per month, and there is no setup fee. Also, you don’t have to commit to a contract; you can cancel at any time. For organizations that want total remote access, Araize FastFund Accounting is our pick for the best cloud-based solution.

However, if you’re used to pricier programs like Financial Edge, you may find that the reports aren’t as customizable. Michael Rosenston is a fact-checker and researcher with expertise in real estate bookkeeping business, finance, and insurance. The current average full-charge bookkeeper’s salary fluctuates between $34,000 to $54,000 per year plus benefits and overhead, according to Salary.com.

Use specialized software.

Non-profit organizations should have a board of directors or trustees responsible for overseeing financial management. The board should review financial reports, approve budgets, and provide strategic guidance for financial planning. A nonprofit’s statement of financial position is similar to a for-profit’s balance sheet. Unlike for-profits, a nonprofit does not have ‘equity’ but ‘net assets.’ Net assets are left after subtracting liabilities from assets.

• They then enter this information into the appropriate spreadsheet or software.
• Meet with your budget task group to analyze every cost and get rid of unnecessary ones.
• The default version is only available via desktop, so employees cannot access it remotely.
• It’s crucial to understand the distinctions between a nonprofit bookkeeper and a nonprofit accountant.
• Nonprofit bookkeepers oversee the day-to-day operations of the organization.

In addition, nonprofits that need highly intuitive software even employees with no accounting experience can use should consider Zoho Books. Nonprofits that need in-depth reports on different projects and the ability to compare actual reports against alternative scenarios for planning purposes should consider Xero’s accounting software. Review budget projections and compare the projected budget to actual results. To ensure that you have revenues to take care of expenses, evaluate what happened the previous month and what the impact will be on future months.

What is nonprofit accounting?

Every business, including nonprofits, must protect themselves from fraud. While you’d obviously like to trust everyone that volunteers or works for your organization, you cannot assume that you’re immune from these types of problems. This might sound obvious, but you’d be surprised how many organizations do not adhere to the latest accounting standards in the industry. Take our 2-minute survey to find out if outsourced accounting and bookkeeping is a good fit for your organization. The impact of accurate bookkeeping trickles down to every aspect of your nonprofit. Efficiency, transparency, and compliance are the hallmarks of an organization with effective bookkeeping.

Set up automatic reports to be created and emailed to colleagues, board members, and donors. With QuickBooks Online and QuickBooks Advanced, you can Instantly review the statement of financial position, the statement of financial activities to budget, actual reports, and more. Send your donors yearly donation statement with thank you letters attached.

We evaluated each accounting software program based on its features, pricing, ease of use, and customer reviews on Capterra. If your organization is larger, has hundreds of donors, or accepts a significant amount of online payments, you likely need a more robust program and will need to pay more money for accounting software. Large-scale organizations with thousands of donors will need enterprise-scaled solutions, such as QuickBooks Enterprise Nonprofit or Blackbaud’s Financial Edge. For small organizations like churches or community organizations, we selected ACCOUNTS as the best accounting software. It’s affordable and easy to use, with all of the necessary features you need to track income and expenses and create reports. While there are cheaper versions of QuickBooks available for nonprofit organizations, we selected QuickBooks Enterprise Nonprofit because of its robustness.