Bookkeeping for a nonprofit is vital because it proves how an organization is spending its funds. Learning how to do nonprofit accounting and understanding which statements a nonprofit needs to prepare is crucial for anyone who wants to run a successful nonprofit. Form 990 is a tax form that tax-exempt organizations—which include most nonprofits—must submit to the IRS every year. The form details your organization and its aims, and shows where your funds came from and were distributed during the tax year. Unlike individual and small-business end-of-year tax forms, Form 990 is available for the public to view. Unfortunately, NetSuite’s site is pretty sparse, and it’s definitely on the pricier side of accounting software (third parties estimate it starts at around $499 a month).

Record and classify payments and bank transfers

The Statement of Cash Flows shows you received the money in January but spent it gradually through December. This public accessibility means your financial management needs to be spotless. These reports need to show how they helped advance the organization’s mission. Take our 2-minute survey to find out if outsourced accounting and bookkeeping is a good fit for your organization.

Monitoring compliance

• In addition to paying employees, office & equipment expenses, and technology costs, nonprofits also need the right processes and procedures in place for audit readiness and mitigating watchdogs.
• This includes recording donor information, donation amounts, and any restrictions or conditions attached to the contributions.
• These areas are typically covered by your organization’s chief financial officer (CFO) and treasurer, respectively.
• A well-structured chart of accounts (COA) is fundamental for efficient bookkeeping in non profit organizations.
• In nonprofit accounting, the statement of activities represents an organization’s bottom line, reporting on the changes in net assets of the nonprofit and characterizing the revenue and expenses accordingly.

In addition 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. In addition to paying employees, office & equipment expenses, and technology costs, nonprofits also need the right processes and procedures in place for audit readiness and mitigating watchdogs. Before you start a new project, it’s a good idea to refer back to the budget to see how much money your organization has available. That way, it’s easier to avoid overspending or losing track of your finances. Keep in mind that your budget is a living document, so you might need to make changes during the year. 4) Add your current funds, pledged donations, expected fundraising revenue, and other sources of income.

Resources

The main difference between non-profit and for-profit bookkeeping is the application of fund accounting principles for non-profit organizations. NGO (Non-Governmental Organization) accounting follows similar principles to nonprofit accounting but often deals with international funding sources and reporting requirements. Unlike traditional business accounting, which focuses on accounting services for nonprofit organizations profit, nonprofit accounting monitors how organizations use their funds to achieve their mission.

Best nonprofit accounting software

Nonprofit bookkeeping emphasizes accountability and transparency, guided by mission rather than profit. In contrast, for-profit bookkeeping prioritizes revenue generation and financial growth. The right approach depends on your organization’s size, complexity, and budget.

Making financial statements

Book a demo today to see what running your business is like with Bench. Our team is ready to learn about your business and guide you to the right solution. For example, a lawyer may review a contract for your nonprofit and refuse to charge a fee.