Whether you run a soup kitchen or an international relief organization, keeping track of your financial records is vital to your nonprofit’s success. Some of the reasons why so many nonprofits fail are because of mismanagement of funds or a disorganized accounting department. Keep track of your nonprofit bookkeeping and accounting with these tips from the professionals at Qbix Nonprofit Accounting Solutions, LLC.
Another foundational practice of good bookkeeping is to establish an operating budget for your nonprofit. Just like a for-profit business, you’ll have expenditures you’ll need to make throughout the year as well as income from donations and grants that need to be accounted for. If you want to expand your operations in the future, you can use your budget to plan accordingly, but be realistic when it comes to your organization’s goals. The first few years are always the hardest so plan conservatively and build slowly.
More and more nonprofits are moving away from traditional paper bookkeeping and turning to digital or cloud accounting. Bookkeeping software programs made specifically for nonprofits can help you monitor your operating budget, pay bills, generate payroll, and prepare taxes. The software is easy to learn as well as cost-effective. Whichever way you handle your accounting, be prepared to document your transactions with supporting information including statements, invoices, cancelled checks and other financial reports that could be needed when it comes time for the organization’s financials to be audited.
One of the best things you can do to help manage your bookkeeping department is to hire an accounting expert. It can be a challenge for some nonprofits to hire full-time staff. While the people who work for your organization have the best of intentions, they might not have all the qualifications needed to organize and run an accounting department. At the very least, you need someone who understands the Generally Accepted Accounting Principles (GAAP) for nonprofit organizations. Nonprofits are also turning to outside firms to help them with their accounting function. In doing that, they find that they get the nonprofit experience and expertise required to handle the complexities of their particular nonprofit organization which in turn, enables them to put their best foot forward to their Board of Directors and funding partners.