Nonprofit accounting: Beginner guide + key financial statements

Forbes Advisor selected these solutions based on features, pricing, reputation and more. The best accounting software for accounting services for nonprofit organizations nonprofits should offer nonprofit-specific features like fund-based accounting, donation tracking, and Form 990 generation. One of the best ways to ensure your organization’s accounting is held to a high standard is by using software that’s specifically designed for nonprofits. It’s a good idea to make use of nonprofit accounting software, which comes built-in with the features you need to keep your nonprofit’s accounting on track. These features include nonprofit reporting, GAAP compliance, and simplified tax filing for organizations.

Fund Accounting Deep Dive

They’re too big for small-scale solutions but not large enough for enterprise-level software. Fortunately, customizable NPO accounting software can hit that sweet spot. In addition to the functionality described above, you’ll need extra features. For example, if you receive any money from grants and need to allocate expenditures to them appropriately, you’ll want to ensure your software has fund accounting functionality. We included Fund EZ because it provides specialized functionalities tailored to the complexities of grant and program reporting. This capability is crucial for nonprofits that rely heavily on grants and must ensure compliance with funders’ reporting requirements.

How do I set up an accounting system for a nonprofit?

Most nonprofits elect some kind of treasurer or financial officer to manage all of the organization’s finances. Using a personal bank account and keeping a shoebox full of receipts isn’t going to cut it. Typical categories include program services, management and general, fundraising, and other sources of income. You can use the statement to assess the usage of funds, track performance, and make decisions about future operations.

Simplify bookkeeping and maximize tax savings

Different states have different filing and informational registration requirements, so stay up-to-date on changes to your state’s regulations for nonprofit reporting. At the bottom of the document, a statement of activities would show a “Net Assets” total, while an income statement would list a “Net Income” total instead. Keeping overhead costs low from the beginning is a great way to demonstrate trustworthiness when you seek financial support. People want to give to causes that will put their donations to good use, so keeping expenses to a minimum will help them decide to support you. What exactly is the difference between for-profit and nonprofit accounting?

Explore how our platform can support your bookkeeping efforts and enhance your overall financial management. The Nonprofit Bookkeeper oversees day-to-day financial transactions, adhering to nonprofit accounting standards. These programs come with features specifically designed for nonprofits, such as tracking donations and grants, budgeting, and creating reports for stakeholders. Bookkeeping involves recording financial transactions and keeping track of all incoming and outgoing funds.

Best nonprofit accounting software

This being said, the five nonprofit accounting software options on our list are pretty upfront about their features, plan structures, and everything they have to offer. Now that you have a solid grasp of nonprofit accounting, the next step is choosing the right tools https://holycitysinner.com/top-benefits-of-accounting-services-for-nonprofit-organizati/ to help you manage your books effectively. Choosing the right software is essential for maintaining accuracy, transparency, and compliance.

The 4 Essential Financial Statements for Nonprofits

It offers accounting and bookkeeping features comparable to QuickBooks Online and Xero but for exactly no dollars. Xero also excels at accounting basics that can keep your nonprofit’s budget on track, including thorough financial reporting and expense tracking. Its mobile app lets you collaborate on the go, and it integrates with hundreds of third-party apps. Didn’t find the best accounting software for nonprofits (specifically, your nonprofit) on our list above? See if one of these additional accounting software solutions for nonprofit treasurers and bookkeepers meets your needs. Unlike most software for nonprofits, NonProfitPlus includes inventory management, which is crucial if you stock merchandise (like T-shirts and mugs) to raise money or reward donors.

Our specialized services cater to nonprofits’ unique needs and ensure your organization complies with all the necessary regulations. Tools like You Need a Budget (YNAB) or Mint can help create budgets based on income streams and provide insights into potential cost-cutting measures. In such cases, a fundraising platform like DonorPerfect or GoFundMe can help streamline the donation process by automatically recording contributions into the organization’s books. Mixing personal and business finances is a mistake that many small nonprofits make due to limited resources or a lack of understanding about the importance of separating personal and business finances. These errors can lead to financial mismanagement and have serious consequences, such as losing tax-exempt status or damaging the organization’s reputation. Ensure all relevant documents are organized and readily available, financial statements are accurate, and all necessary schedules and disclosures are completed.

• Our partners cannot pay us to guarantee favorable reviews of their products or services.
• Strong feature set includes thorough record-keeping, invoicing and advanced inventory management and pricing rules.
• To complete Form 990, you’ll need to provide information about your organization, its mission, and how it’s achieving its goals.
• This compensation may impact how and where products appear on this site (including, for example, the order in which they appear).
• Fortunately, various tools and resources are available that can help streamline nonprofit bookkeeping processes, save time and money, and ultimately contribute to the success of the organization’s mission.
• Looking at these documents can tell you how much money you have, where your money is, and how it got there.

• Additionally, full-time bookkeepers become intimately familiar with the non-profit’s activities.
• These funds cannot be used for general operating expenses or other programs unless the donor explicitly allows it.
• Some are unrestricted net assets and some are considered restricted net assets.
• Most nonprofit-friendly accounting software like QuickBooks Aplos or Nonprofit Treasurer will allow you to generate financial statements automatically.
• They’ll have experience helping organizations like yours minimize their tax bill and make sure you aren’t breaking any tax code rules.
• If you have remote or global staff that would need real-time cloud-based accounting, choosing a cloud-based software is essential.
• MoneyMinder’s focus on budgeting tools and fund accounting makes it particularly valuable for organizations that need to closely monitor how specific funds are being used.

A crucial responsibility of nonprofit bookkeeping is tracking exactly how money was spent so that your nonprofit can create a functional expense report at the end of each year. And ensuring that every receipt, bill, check, credit card charge, and bank transfer gets into your system is a core function of nonprofit bookkeeping. Bookkeepers lay the foundation for the accounting processes that will follow.