Nonprofit and for-profit organizations could not be more different. The core difference, of course, is the reasons for their existence. For-profit organizations exist to make money, while nonprofits engage in activities geared to improve society. Naturally, the finances trail for both kinds of outfits differs significantly. Nonprofits need to know the best practices when it comes to handling finances; for purposes of accountability and the well-being of the organization. Let’s explore them below:
You Need a Professional Accountant
Many nonprofits make the mistake of assigning the task of managing finances to volunteers or a non-trained staff member. Bookkeeping needs to be professionally managed. Otherwise, your organization risks falling trap to fraudulence and hence running afoul of the law. Besides, many volunteers leave organizations on short notice, and this may lead to gaps in record keeping.
Generally Accepted Accounting Principles (GAAP)
The GAAP guide is one that all accounting professionals must follow, and nonprofit accounting is not exempt. Your nonprofit’s accountant must be well versed with all GAAP requirements. This includes staying apprised to any changes that may be updated through the years.
Accounting Software
Nonprofit accounting is another beast altogether. Your accounting software needs to have provisions for and accurately record the following:
- Grant allocations
- Donations
- Money from fundraising
- Investments
- Crowdfunding
- Sponsorships and any other sources of funding
The software should also be able to capture administrative tasks such as payments, reports, and budgets. There is nonprofit accounting software suited for different types/sizes of organizations. It is therefore crucial that you find one best suited to your needs. This could vary depending on the size of your nonprofit and accounting requirements.
Outsourcing
Since outsourced services are paid for at standard levels, it may well be worth it to outsource than to hire a resident bookkeeper. This will save you administrative costs and resources for training new staff on nonprofit accounting software and other requirements. This also has the effect of compensating your employees better, which will improve morale and productivity.
By following these best practices, you will not only stay on the safe side of the law, but you will be able to focus on your nonprofit’s mission and meet set targets. Contact us today and let us handle your finances with top detail and professionalism.