Nonprofit bookkeeping is recording and reporting financial transactions for a nonprofit organization. This includes maintaining accurate records of income and expenses, preparing financial statements, and ensuring compliance with applicable laws and regulations. Nonprofit bookkeeping can also include budgeting, forecasting, and financial analysis. That helps the organization make informed decisions about its operations and goals. It is crucial for nonprofit bookkeeping to be transparent, accurate, and in compliance with laws and regulations to maintain the trust of donors and stakeholders.
Nonprofit Bookkeeping Services
Nonprofit bookkeeping services refer to professional financial record-keeping and reporting services to nonprofit organizations. These services may include bookkeeping, financial reporting, budgeting, and tax preparation. The goal of nonprofit bookkeeping services is to ensure that the organization’s financial records are accurate. Accurate bookkeeping also helps to stay compliant with relevant laws and regulations. Bookkeeping services provide the organization with the financial information it needs to make informed decisions.
Best Nonprofit Bookkeeping Services
We have listed the best accounting firms which specialize in nonprofit bookkeeping.
NumberSquad is a small business accounting firm that offers affordable and quality bookkeeping, payroll, and tax filing services to nonprofits. The company has extensive expertise in nonprofit bookkeeping, and its platform allows nonprofits to manage their finances remotely and efficiently.
BKD is a national accounting and advisory firm that provides a wide range of services to clients in various industries, including the nonprofit sector. The firm has a dedicated nonprofit practice, which offers multiple services specifically tailored to the needs of nonprofit organizations.
3. Eide Bailly
Eide Bailly has a team of professionals with expertise in accounting, finance, and nonprofit management, which can provide a comprehensive set of services to nonprofit clients. The firm is based in the Midwest and has offices in multiple states. Offices are located in Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Oklahoma, South Dakota, and Wyoming.
CliftonLarsonAllen is an accounting and advisory firm that provides a wide range of services to nonprofits. The company helps nonprofits to develop strategies to support their mission, strengthen communication between staff and boards, and enhance overall execution.
Jitasa is an accounting firm focused on improving the efficiency and effectiveness of nonprofits. The company offers nonprofit bookkeeping, accounting, and tax filing services.
Nonprofit Bookkeeping Service Pricing
The cost of nonprofit bookkeeping services depends on some factors. For example; the size and complexity of the organization, the level of service provided, and the location of the bookkeeping firm. Some bookkeeping firms charge an hourly rate for their services, while others charge a flat monthly or annual rate.
1. Hourly Rate
The hourly rate can range from $25 to $200 per hour, depending on the firm and the level of service provided.
2. Flat Rate
A flat monthly or annual rate can range as low as hundred dollars. It can also cost several thousand dollars per year, again depending on the size and complexity of the organization and the level of service provided.
3. Bookkeeping Pricing Packages
Some bookkeeping firms also offer tiered pricing, based on the number of transactions processed or the number of accounts managed. For example, NumberSquad nonprofit bookkeeping packages are based on monthly revenue starting at $145 per month.
4. Fees for Additional Service
Nonprofit organizations may also need to pay for additional services such as payroll processing, tax preparation, and audit preparation. These services can also vary in cost and can add to the overall expense bookkeeping expenses
Benefits of Using Outsourced Nonprofit Bookkeeping Services
Outsourced nonprofit bookkeeping services from a bookkeeping company can provide several benefits to nonprofit organizations, including:
- Cost savings: Outsourcing bookkeeping services can be more cost-effective than hiring a full-time bookkeeper. It eliminates the need to provide benefits and other employment-related expenses.
- Expertise: Bookkeeping firms specializing in nonprofit work have a team of professionals with specialized knowledge and experience in nonprofit organizations’ unique accounting and reporting requirements.
- Flexibility: Outsourced bookkeeping services can tailor to the specific needs of the organization and adjust as those needs change.
- Time savings: Outsourcing bookkeeping services can save the organization’s staff time, allowing them to focus on their core responsibilities and mission-related activities.
- Access to the latest technology: Outsourced bookkeeping firms often use the latest software and technology to manage their client’s financial records, which can help to improve efficiency and accuracy.
- Scalability: Outsourced bookkeeping services can be scaled up or down as the organization’s needs change.
- Back-up and continuity: Outsourced bookkeeping services provide a level of back-up and continuity in case of staff turnover or unexpected absence. It makes sure that the financial records are always updated and accurate.
- Risk management: Outsourced bookkeeping services can help nonprofits mitigate financial management and compliance risks by providing oversight and guidance.
Outsourcing nonprofit bookkeeping services can help nonprofit organizations stay compliant, make informed decisions, and focus on achieving their mission.
The Most Common Nonprofit Expenses
A nonprofit organization incurs nonprofit expenses to carry out its mission and operations. These expenses can be divided into two categories: program and administrative costs.
- Program expenses are directly related to the organization’s mission and programs. Examples include the costs of providing services or programs to clients or beneficiaries, such as salaries and wages of program staff, materials, and supplies.
- Administrative expenses: These are expenses related to the overall management and administration of the organization. For example; the cost of rent, utilities, office supplies, insurance, and accounting services.
Some other common types of nonprofit expenses are:
- Fundraising expenses: These are expenses incurred in raising funds for the organization, such as costs of direct mail campaigns, grants application fees, and fundraising events.
- Depreciation expenses are incurred due to the wear and tear of assets such as equipment and vehicles.
- Professional Fees: These are expenses incurred for hiring outside professionals such as lawyers, accountants, and consultants.
- Travel expenses: These are expenses incurred while traveling for the organization, such as airfare, lodging, and meals.
Nonprofit organizations must report these expenses in their financial statements and their annual tax returns (Form 990) to the IRS. It is crucial for nonprofit organizations to keep accurate records of their expenses. Expenses must be reasonable, necessary, and directly related to their mission to maintain compliance with regulations and ensure transparency to stakeholders.
Features of Nonprofit Bookkeeping Software
Nonprofit bookkeeping software is a type of software that is specifically designed to meet the financial management and accounting needs of nonprofit organizations. This software can help nonprofit organizations manage financial transactions, produce financial reports, and comply with tax regulations and accounting standards. Some of the features that nonprofit bookkeeping software may include are:
- Bookkeeping and financial record-keeping
- General ledger, accounts payable and receivable, and payroll management
- Fund accounting (e.g., tracking multiple funds)
- Donor management and fundraising tracking
- Grant management and compliance
- Financial reporting and analysis
- Budgeting and forecasting
- Tax preparation and compliance
- Automated financial reports and compliance with nonprofit-specific regulations
- Auditing and assurance services
- Risk management and internal control evaluations
- Consulting and financial management advice
- Integration with other systems, such as donation platforms, payroll, and banking
Popular examples of nonprofit bookkeeping software include QuickBooks, Sage, and Xero. Some software may be cloud-based, which allows for remote access and collaboration. Nonprofit organizations can also opt for specialized software that caters to specific industries or verticals like grant management, membership management, etc.
7 Best Bookkeeping Softwares for Nonprofits
There are several bookkeeping software options available for nonprofits, and the best choice will depend on the specific needs and budget of the organization. Some popular options include:
- QuickBooks: QuickBooks is a well-known accounting software that offers a variety of features, including general ledger, accounts payable and receivable, payroll management, and financial reporting. It also has a nonprofit edition that is tailored to the specific needs of nonprofit organizations.
- Xero: Xero is accounting software that offers small businesses and nonprofit organizations a range of features, including invoicing, bank reconciliation, and expense tracking. The nonprofit edition of Xero can handle multi-currency and fund accounting.
- Sage Intacct: Sage Intacct is a cloud-based accounting software that offers advanced financial management and reporting capabilities, including multi-entity and multi-currency support.
- Zoho Books: Zoho Books is a cloud-based accounting software that offers a range of features, including invoicing, bank reconciliation, and expense tracking. It also has a nonprofit edition that can handle fund accounting.
- Accufund: Accufund is software specifically designed for nonprofit organizations. It offers features like fund accounting, grant management, and donor management and also integrates with other systems like donation platforms and payroll.
- Realm is a software designed specifically for churches and other faith-based organizations. It is a cloud-based system that provides churches with various tools to help manage their operations and engage with their congregations.
- Aplos is a cloud-based accounting software that is specifically designed for small to mid-sized churches, nonprofits, and mission-driven organizations.
It is important to research and compare the features and pricing of different software options before deciding.
Nonprofit Financial Statement: Guide and Description
A nonprofit financial statement is a document that presents a nonprofit organization’s financial performance over a certain period, typically a year. It is a tool that helps the organization’s management, board of directors, donors, and other stakeholders understand its financial position. It also shows the ability of the organization to generate revenue, and how it uses its resources to achieve its mission.
There are three primary financial statements that nonprofit organizations commonly use:
1. Balance Sheet
A balance sheet shows the organization’s assets, liabilities, and net assets (or equity) at a specific time. It helps to understand the organization’s liquidity or its ability to meet short-term obligations.
2. Income Statement
An income statement shows the organization’s revenues, expenses, and net income (or loss) for a specific period of time. It helps to understand the organization’s overall financial performance and whether it is generating enough revenue to cover its expenses.
3. Statement of Cash Flows
The statement of cash flows presents the organization’s cash inflows and outflows for a specific period. It helps to understand the organization’s cash position and ability to generate cash.
Chart of Accounts for Non-Profit Organizations
A nonprofit chart of accounts is a system of categories used to classify and organize financial transactions for a nonprofit organization. The chart of accounts is used to record financial information in the organization’s general ledger and to produce financial statements.
A typical nonprofit chart of accounts will include the following types of accounts:
- Asset accounts include cash, accounts receivable, investments, and fixed assets such as equipment and buildings.
- Liability accounts include accounts payable, loans, and other debts.
- Income accounts: These accounts include all the revenue sources of the organization, such as donations, grants, membership fees, and program revenue.
- Expense accounts: These accounts include all the expenses incurred by the organization, such as program expenses, administrative expenses, fundraising expenses, and depreciation expenses.
- Equity accounts include the organization’s net assets, such as retained earnings and endowments.
- Fund accounts: These accounts are used to track the finances of specific funds or programs, such as grants, donations, or endowments.
The structure of a nonprofit chart of accounts is different based on the size and complexity of the organization, as well as the organization’s specific needs.
It is important to have a well-structured chart of accounts for a nonprofit organization. Statements provide accurate financial information, comply with regulations and make informed decisions. Organizations should regularly review and update their chart of accounts to ensure that it remains relevant to their operations and regulatory requirements.
Nonprofit Organization Tax Filing Requirements
Nonprofit organizations must file certain tax forms with the Internal Revenue Service (IRS) to maintain their tax-exempt status. The most common form filed by nonprofit organizations is Form 990. 990 is an annual information return that provides the IRS and the public with financial and other information about the organization.
There are different versions of Form 990, depending on the size and type of the organization:
- Form 990-EZ: This form is for smaller organizations with gross receipts of less than $200,000 and total assets of less than $500,000.
- Form 990: This form is for larger organizations with gross receipts of more than $200,000 or total assets of more than $500,000.
- Form 990-N (e-Postcard): This form is for organizations that have gross receipts less than $50,000
In addition to Form 990, some states require nonprofits to file annual reports or register with the state attorney general’s office. Some states also require nonprofits to file annual financial statements, which may be audited.
Nonprofit organizations must file other forms, such as the W-2 and Form 941, to report wages and payroll taxes.
It is important for nonprofit organizations to understand their tax-filing obligations and file their forms on time to maintain their tax-exempt status and avoid penalties. Many organizations work with an accountant or tax professional to ensure that their forms are filed correctly and on time.
7 Steps to Start a Non-Profit Organization
Starting a nonprofit organization can be a complex process. We have broken it down into several key steps:
- Develop a mission and purpose: The first step in starting a nonprofit is to develop a clear and compelling mission and purpose for the organization. This statement should describe the organization’s overall goal and how it plans to achieve it.
- Conduct a feasibility study: Before starting a nonprofit, founders of the organization should conduct a feasibility study to determine whether there is a need for the organization in the community and whether it can be sustained financially.
- Create a business plan: A nonprofit business plan is a document that outlines the organization’s goals, strategies, and projected financials. It describes the organization’s target population, services, and the impact it hopes to achieve.
- Choose a name and register the organization: Choose a unique and not already used by another organization. Once the name is chosen, the organization must be registered with the state where it will operate.
- Obtain tax-exempt status: To be eligible for tax-exempt status, the organization must be organized and operated exclusively for tax-exempt purposes. The most common form that nonprofits use to obtain tax-exempt status is Form 1023 (Application for Recognition of Exemption).
- Obtain necessary licenses and permits: The organization must get all the required permits and licenses to operate legally in the state where it will be based.
- Build a board of directors: A board of directors of a nonprofit is responsible for the overall governance of the nonprofit organization. The board should be composed of individuals committed to the organization’s mission. They have the necessary skills and experience needed to help guide the organization.
Nonprofits to Stay in Compliance: Guide
Nonprofit compliance refers to ensuring that a nonprofit organization adheres to the laws and regulations governing its operations. This includes compliance with federal, state, and local laws. Some of the rules and regulations are set forth by the Internal Revenue Service (IRS) and other government agencies.
Some of the key areas of nonprofit compliance include:
- Tax compliance: Nonprofit organizations must file certain tax forms with the IRS to maintain their tax-exempt status. These forms include Form 990, an annual information return filed with the IRS.
- Governance Compliance: Nonprofit organizations must have a board of directors and follow certain governance practices, such as holding regular meetings and maintaining accurate financial records.
- Reporting and Disclosure: Nonprofit organizations must provide accurate and timely financial and other information to stakeholders, including donors, members, and the public.
- Fundraising Compliance: Nonprofit organizations are required to follow state and federal laws related to fundraising, such as registering with the state attorney general’s office and reporting fundraising activities.
- Lobbying and Political Activities Compliance: Nonprofit organizations are prohibited from engaging in certain lobbying and political activities.
- Compliance with grantor’s rules: Many nonprofits receive funding from foundations, government agencies, or other grantors and are required to comply with the laws and regulations of these grantors.
Nonprofit organizations should have a compliance plan to help ensure that they adhere to all relevant laws and regulations. They should also conduct regular compliance reviews and audits to identify potential issues and make necessary changes to their operations.
How to Close a Nonprofit?
Closing a nonprofit organization requires following some steps, which are listed below:
- Please review and follow state laws: Before closing a nonprofit, it is essential to check and follow the laws of the state where the organization is registered. This may include filing articles of dissolution and giving notice to the state attorney general’s office.
- Notify stakeholders: The organization should notify its members, donors, and other stakeholders of its intent to close. This may include sending out a notice in the organization’s newsletter or mailing a letter to stakeholders.
- Settle outstanding debts and obligations: The organization should settle any outstanding debts and obligations before closing, including paying any bills, loans, and taxes that are owed.
- Dispose of assets: The organization should dispose of any assets, such as real estate, equipment, or inventory, in accordance with state laws and regulations.
- Distribute remaining assets: Any remaining assets of the organization should be distributed under state laws and the organization’s articles of incorporation or bylaws. This may include distributing assets to another nonprofit organization with a similar mission or purpose.
- File final tax returns and forms: The organization should file the final tax returns and forms with the IRS and the state.
- Dissolve the organization: The organization should formally dissolve itself by filing the necessary documents with the state and the IRS.