Five Bookkeeping Tips for Nonprofits

There are important bookkeeping fundamentals that every nonprofit organization needs to follow. Like most things, bookkeeping is an expert field, so hiring the professionals is a wise decision, freeing up precious time for you to work on your nonprofit and keeping you compliant so you stay out of trouble with the IRS.

ACCURATE FINANCIAL STATEMENTS

You’ll need to make sure that your organization’s financial statements (balance sheet, general ledger account, cash flow, etc.) are accurate. A nonprofit reconciles bank accounts by comparing the recorded amounts to the amounts on bank statements. We recommend reconciling your bank accounts once a month to prevent fraud and errors, and make sure everything is staying accurate and up-to-date.

Use Purchase Orders

Nonprofits have to follow strict rules to justify their financial position and fundraising expenses. One way to do this is to use purchase orders. A purchase order is a document a purchaser (nonprofit) sends to a vendor to sign and confirm the purchase of different goods and services.

Record In-Kind Donations

An in-kind donation or a gift in kind is a donation of goods or services instead of money for purchasing goods and services. For example, services offered for your nonprofit that you didn’t pay for, still require you to record them.

a working Budget

Stay on track with your organization’s goals and planning with an annual budget. You’ll want to include your expected income and expenses alongside your actuals.

STAY COMPLIANT WITH Tax Obligations

Nonprofit organizations have tax-exempt status, meaning they don’t have to pay federal taxes to the IRS under Section 501. This section regulates the tax status of charities, religious organizations, and nonprofits. Before applying for tax-exempt status with the IRS, you need to register your nonprofit status with your state.

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