Keeping track of your nonprofit’s finances can be challenging. But it’s essential to do so to maintain your organization’s integrity.
Nonprofits need a bookkeeping system to help them stay on top of their finances. The treasurer or financial officer needs tools to keep the books straight.
Keep Track of Your Donations
In-kind donations can be a valuable source of support for nonprofits. But keeping track of these donations can be challenging, especially from an accounting perspective.
It’s important to properly account for these noncash gifts because they can significantly impact your bottom line. Managing them properly can lead to unique tax deductions, better management of your corporate philanthropy program, and increased brand awareness for your organization.
A crucial part of tracking your in-kind contributions is keeping contemporaneous tallies of the donated services you receive and assigning fair market value to them. It may be done by asking donors to provide the open market value of the goods or materials they are donating or by determining an estimated fair market value rate for the work they are providing for you.
Keep Track of Your Expenses
For nonprofit accounting purposes, you need to keep track of your expenses. It will help you avoid tax penalties and keep your organization compliant with IRS rules.
The first step is creating a system for tracking expenses and income. It will make it easier to file your taxes at the end of the year and manage your money more efficiently throughout the year.
Another essential thing to remember is that your expenses should be classified based on how they are used at your nonprofit. It will allow you to properly allocate your funds and make it easier to find information when filing your nonprofit’s annual Form 990.
Nonprofits can use accounting software to do this. These programs offer intuitive dashboards and accounting tools to create budgets, track costs, reconcile bank accounts, and record receivables.
Many nonprofits can also benefit from using accounting software. It’s a good option for growing nonprofits.
Reconcile Your Bank Account
Reconciling your bank account is an essential step for any nonprofit organization. Not only does it help keep your financial records accurate, but it can also save you money in the long run.
Reconciliation involves comparing your internal accounting to the transactions on your statement from your bank or other financial institution. It allows you to detect any issues, such as missing payments, fraudulent activity, or errors in your data entry.
Depending on your type of accounting software, you can reconcile your bank account within the software itself. However, some systems require human assistance.
For example, if you’re using AccuFund, its Bank Reconciliation module can reconcile all your checking accounts in one place. You can mark checks, deposits, and cash adjustments to enter service charges and interest earned.
Reconciling your bank account regularly is the best way to catch any potential fraud in your bank. Moreover, it can help you avoid overdrawing your account and paying unnecessary fees or penalties. These expenses can add up to many extra costs for your business.
Keep Your Purchases Ordered
Nonprofits often have strict rules about what they can and cannot spend money on, so ensuring your purchases are ordered and budgeted for from the start is vital to your organization’s success. It also gives you a paper trail to follow if disputes arise, which can help you maintain financial integrity.
It’s a good idea to establish strict purchase order criteria and have people within your nonprofit follow them so you can avoid going over your budget while still buying quality products or services. You can set up a simple online form that provides information such as item description, price, and delivery date for easy tracking.
Keeping your purchases ordered helps keep your records up-to-date and shows stakeholders that you are responsible and organized, which can attract potential donors. They also help you stay compliant with state and federal funding requirements.
A manual purchase order process can be time-consuming and error-prone, so automating it as much as possible is a good idea. Cogsy is an automated system that generates restock recommendations based on your history, allowing you to bulk-add orders in minutes and radically reduce your risk of errors.
Keep Your Fixed Assets Records
Keeping your fixed assets records is a vital part of nonprofit accounting. They help you stay organized, provide a comprehensive picture of your financial health and stability, and ensure that your net assets are accurate.
Fixed assets are tangible items like land, buildings, furniture, vehicles, or computer software your organization will use for over a year. They can be expensive, but they’re worth the investment.
To avoid overspending on duplicate assets, you must regularly perform an inventory. It helps you identify which fixed assets may be obsolete or need replacement in the next fiscal year.
It also allows you to determine what your needs will be in the future. For example, if you’re a health nonprofit that needs more computers for your small community health initiatives or health education, it can help you plan to raise funds for those assets.
