Nonprofits are big on heart and impact. Comprised of people dedicated to solving problems where they live, nonprofits are part of the pulse of any community. But don’t let the name “nonprofit” fool you. As anyone working in nonprofit knows, it still takes funding to carry out a mission.
Nonprofits typically acquire their funding from donors and grants who want their money to make a difference. That’s why financial transparency and compliance are critical components to nonprofit management. If you run a nonprofit or are thinking of starting one, it’s important to have systems in place that keep your finances organized, stable, and transparent. Keep reading for our roundup of best practices for nonprofit finances.
Nonprofit Finances 101
Nonprofits pull together many different stakeholders–including donors and granting organizations–to move the needle on their mission. That’s why financial stewardship is key to the long-term sustainability of any nonprofit. Here’s our top tips for maintaining transparency, sustainability and integrity for your nonprofit.
Create a Budget
Develop an annual operating budget that accounts for revenue and expenses. Regularly review budget and compare it to actual financial performance to stay on track.
Keep Accurate and Consistent Records
Maintain detailed, up-to-date records for all financial transactions. This includes keeping track of donations, grants, and any expenses.
Use Accounting Software
A nonprofit accounting software such as QuickBooks Nonprofit or Blackbaud is a great way to track income and expenses, generate reports, and maintain donor records. These tools are designed to handle the specific needs of nonprofit organizations, such as fund accounting and grant tracking.
Generate Regular Financial Reports
Your accounting software can help you easily create a statement of financial position (similar to a balance sheet in for-profits) that tracks your organization’s assets, liabilities, and net assets and cash flow.
Comply with IRS Regulations
Nonprofits are required to file IRS Form 990 annually, which provides financial information to the IRS and the public. Keeping strong records will help you stay accurate and timely when filing to maintain tax-exempt status.
Conduct Regular Audits
Hire an independent auditor annually or biannually to review financial statements and internal controls. Many nonprofits are required to have external audits depending on state laws or donor/grant requirements.
Transparent Financial Communication
Publish annual financial reports and share financial information with stakeholders like board members, donors, and the public to build trust.
When to Hire a Professional Accountant for Your Nonprofit
Running a nonprofit requires flexibility, resourcefulness and creativity. Employees often have multiple areas of expertise and wear a lot of different hats. The work is never boring, but the demands can make finding time and space for healthy financial practices a challenge.
If you’re struggling to stay on top of your financial tasks while running your nonprofit, it might be time to reach out to a professional accounting firm for help. At Neely’s we specialize in helping individuals, small businesses and nonprofits with their accounting needs. Our friendly team of experts brings over 20 years of experience to each project and delivers professional results every time. We have a variety of solutions to work with your unique needs and budget:
- Outsourced Accounting: Get support with account reconciliation, expert advice, tax preparation, payroll, and bookkeeping all for a fixed monthly rate at a fair price.
- Bookkeeping: We can provide a full menu of services including daily transaction classification, expense tracking, payroll, bill payment and invoicing, tax planning and prep, and reporting.
- Payroll: Let us handle your payroll so you can focus on running your nonprofit. Our Roanoke CPAs will take care of everything including, scheduled payrolls, filings, employee setup, time tracking, W2 and 1099 processing, and more.
- Business Taxes: Don’t go it alone during tax season. We offer customized and convenient services to make tax time a breeze.
Let Neely’s support you while you cultivate a better world through your nonprofit. Give us a call or visit us today to learn more about how we can help.