For example, your year end close becomes a lot simpler if you have accurate monthly reports to work from. To learn more about exactly which taxes your tax-exempt nonprofit might still be on the hook for, consult IRS Publication 557, or better yet, consult with a nonprofit tax specialist. They’ll have experience helping organizations like yours minimize their tax bill and make sure you aren’t breaking any tax code rules. This is essentially the nonprofit accounting version of the balance sheet equation. Once you’ve got a bookkeeping system in place, you need to start creating financial statements.
Just like the statement of financial position, the statement of activities keeps net assets that have conditions and stipulations attached to them separate from unrestricted funds. As you come to the end of your accounting year, you need to wrap up your books for the previous year and start the books for the next year. Your accounting period indicated the beginning and end of your reporting period, which can be 6, 12, or 18 months, depending on the needs of your nonprofit. If you choose the most common reporting period of 12 months, this period can be a calendar year (January to December) or a fiscal year (using another 12-month period).
FASB Clarifies and Improves Guidance for Not-for-Profit Grant and Contribution Accounting
Most organizations don’t bother with accruing payroll until fiscal year end, but other than that, it’s a good idea to adjust most other balance sheet accounts each month. It goes without saying that you should never use your personal bank account for your nonprofit organization. You can always ask your bank about your account options and use those tailored for nonprofits. If you’re looking for a one-stop-shop online fundraising tool that seamlessly integrates with your CRM, marketing tool, or accounting software, take a look at Donorbox. Over 80,000 nonprofits worldwide have used our tool to boost donations with features like peer-to-peer fundraising, text-to-give, event ticketing, recurring donations, and more. A bookkeeper with experience in fund accounting will create detailed fund accounting reports to help your accountant file quarterly statements and perform audits.
For the most part, nonprofits can apply to the IRS to become exempt from federal taxes under Section 501. For the most part, however, cash flow statements for non and for-profits are very similar. If you’ve dealt with for-profit cash flow statements before, this should look very familiar. You probably didn’t start a nonprofit organization to stare at spreadsheets and Google things like “how to record an in-kind donation.” It may be hard to believe but getting too much money can sometimes destabilize a nonprofit organization.
How to set up bookkeeping for your nonprofit
While you can certainly buy a ledger book at an office supply store, keep in mind that it’s much easier to set up your chart of accounts if you’re using an accounting software, such as Wave. Run annual reports to check for accuracy and make sure all accounts balance. Make sure to adjust entries as needed, and then re-run the reports and print them for your records. To ensure that happens, your accounting department and finance team need to work together to create a month end close process. Looking up a nonprofit’s Form 990—using services like Guidestar.org—can tell you a lot about its financial state.
As mentioned above, you’ll want to review and make any needed changes to your employees’ W-4 Forms. In addition to this, be sure to send contribution statements and a Form 1099 for vendors by January 31. After posting subledger transactions, check for any transactions that may not be complete. Break year-end close tasks into assignments with due dates and monitor real-time status including tracking the percentage completion for each assignment. In this way, Sage Intacct makes it easy to customize reporting while maintaining a streamlined chart of accounts. According to the Close the Books survey, finance teams that adopt a cloud financial accounting solution are on average 25% more automated than those using an on-premises solution.
Record Incoming Cash
You’ll see how Aplos can help simplify your bookkeeping so you can spend less time doing administrative work and more time focusing on your mission. No matter where the cash comes from, you need to have a record of it. That means verifying that you’ve sent invoices and cross-checking which invoices clients have paid. Furthermore, review your general ledger to ensure you’ve posted credit and debit entries correctly.
Sage Intacct has a table-driven chart of accounts, which lets you create primary natural account codes (assets, liabilities, net assets, revenues, and expenses). You can also tag transactions with attributes bookkeeping for nonprofits called “dimensions” (location, grant, fund, program, and more) that provide additional context. During any given month, you track expenses, income, donors, fund balances, bank transfers, and more.