The point of a nonprofit is to make a difference, but the paperwork and compliance regulations that come with it can be time-consuming. Here are some tips to help streamline your accounting and save you valuable resources!
Nonprofits must follow best practices to stay compliant and have accurate financial reports. These best practices include establishing policies around economic issues and putting them in writing.
Assess Your Needs
Many nonprofits are founded by innovative change-makers passionate about driving social impact but may need more extensive financial backgrounds. That’s why nonprofits must seek outside help besides implementing solid internal controls when necessary. There are numerous options for obtaining nonprofit accounting services, including CPA firms, courses, and other resources.
A needs assessment is a critical first step for any new nonprofit program. It will help you determine in what context a perceived need exists, who is suffering from it, and how you can best address it through your program or service.
It’s also essential for nonprofits to keep their financial records organized. This will make it easier to meet reporting requirements, especially if their grantors or donors require audited financial statements for funding. Moreover, finding the information they need at tax time will be easier. This will include receipts of sales and use tax documents to loan amortization schedules.
Look for Experience
Money is a top concern for every organization; nonprofits are no exception. Whether seeking funding or deciding on a suitable fundraising model, managing a nonprofit’s finances is challenging.
For example, nonprofits must adhere to strict guidelines regarding their financial records. The IRS requires detailed records of cash and noncash gifts, and the information must be in line with Generally Accepted Accounting Principles, or GAAP. The nonprofit’s board also has a fiduciary responsibility to ensure these records are accurate.
As such, choosing a CPA with experience in the nonprofit sector is essential. If you’re having trouble locating a CPA with the proper credentials, start by checking for references and asking to see their portfolio of work. Ask for a list of clients and choose a few to call so you can verify their experiences. It would help if you also looked for a firm with an established record of working with tax-exempt, charitable nonprofit organizations. This helps ensure the audit process is as straightforward and seamless as possible.
Look for Qualifications
An audit will likely be required if your nonprofit organization receives grant funding. Most grants require that you adhere to Generally Accepted Accounting Principles (GAAP) and have an annual audit conducted by a certified public accountant. Some banks also need nonprofit organizations to have an independent audit as a condition for obtaining a loan.
When you’re looking for a CPA for nonprofits, look for one who understands the unique requirements of charitable nonprofits and has experience auditing nonprofits. They’ll be able to provide you with the guidance and support you need to meet the strict requirements of your funders.
You’ll also want to find a CPA with the credentials to create internal controls at your nonprofit organization. This will help to limit the likelihood of fraud and help your team catch mistakes. For example, it’s good practice to have someone else record incoming revenue, and another person approve write-offs.
When interviewing potential CPAs, refer to other tax-exempt, charitable nonprofit clients. Choose a few of these to call and speak with so that you can see if they are a good fit for your organization.
Look for Value
Hiring accounting services isn’t just a way to ensure compliance or avoid costly mistakes for many nonprofits. It’s also an opportunity to learn and grow. That’s why it’s essential to find a service that isn’t just willing to perform the work but will teach you as well. You can find an accounting firm specializing in nonprofits or taking classes on nonprofit bookkeeping and accounting.
Nonprofits must adhere to specific guidelines when creating their financial reports, including Generally Accepted Accounting Principles (GAAP). GAAP is an international set of standards for accountants that helps define best practices across sectors. Nonprofits that don’t adhere to GAAP could be subjected to annual audits and may not be eligible for some grants or bank loans.
While accounting isn’t the most glamorous part of a nonprofit, it’s crucial to the organization’s health. The right accounting firm can help navigate nonprofit accounting best practices easier and provide transparent, accurate reporting. That’s why many prioritize robust, precise accounting within our donations platform.
Look for the Right Fit
Accounting may not be the most glamorous part of any business, but it’s vitally essential for nonprofits. Accounting provides the systems and information nonprofits need to thrive, from compliance to financial management. That’s why finding a CPA and auditing firm that understands accounting for charitable nonprofits is critical.
One of the best places to start is with the IRS – they’re a massive resource for nonprofit accounting policies and offer plenty of help, guidelines, samples, and tools for charities looking to find the right digital agency for their fund accounting needs.
It’s also essential to look for a firm that works with nonprofits exclusively – this will help ensure they’re familiar with the unique challenges and requirements of funding. In addition, they’ll be more likely to have in-depth knowledge of fund accounting and other specialized practices. Additionally, they’ll be able to provide you with specific reporting that can help you meet your fundraising goals and track your progress over time. Finding the right fit can help your nonprofit’s finances grow even more successfully.