Knowing how money flows in and out of your organization and sharing that data effectively with your board and donors will help your organization run more smoothly. In addition, nonprofit bookkeeping will provide the data you and your team need to identify the most pressing needs that your nonprofit faces and finding ways to address them. Give yourself the opportunity to focus on fundraising, infrastructure, staffing, marketing and more — while your financials run smoothly. While for-profit organizations have shareholders to appease, nonprofits have donors to thank and cultivate. The receipt for these donations is usually based on their fair market value. Decimal is staffed with the best accountants who understand the specifics of non-profit bookkeeping.

While there are cheaper versions of QuickBooks available for nonprofit organizations, we selected QuickBooks Enterprise Nonprofit because of its robustness. For large or growing organizations who need comprehensive accounting services, this program can be a good fit. NetSuite’s accounting software offers accounts receivable and payable, cash management, fixed asset What is the significance of FOB Shipping Point and FOB Destination? management, a general ledger and tax management solutions. When we contacted a sales representative for a starting price, we were told there is no set starting price as each solution is uniquely catered to the NetSuite client. Aplos is best for nonprofit organizations that need to attract and retain donors through targeted donor management, such as churches.

Ready to spend less time managing your donors and more time engaging them?

However, there is another distinction we need to cover when discussing accounting at nonprofit organizations and that is the difference between accounting and bookkeeping. Nonprofit accounting is the way a nonprofit’s financial transactions are planned for, recorded, and reported Accounting Equation Assets, Liabilities, Owners Equity over time. Accounting for nonprofits also differs from that in the for-profit sector in a number of other ways. For instance, nonprofits have no legal ownership interests and they earn their funding from supporters who do not expect a financial return on their investment.

• You may not operate a university, but you still want to see where you can spend your money, and if restrictions apply to you based on how your funds were acquired.
• Some businesses or foundations will match contributions made by employees or their subsidiaries with grants.
• Equipping yourself with the best software and people can make a world of difference for your organization.
• She volunteers as a court-appointed child advocate, has a background in social services and writes about issues important to families.
• Xero’s highly customizable and in-depth reporting tools make Xero stand out.
• The best nonprofit accounting software should include all the core accounting features and functionality all businesses need, such as the ability to send invoices and track spending.

Due to this love of the craft and experience in the field, we decided to put together this guide to help nonprofits like yours better understand their accounting needs. Depending on the size of your nonprofit organization and the number of transactions, it may be wise to do bank reconciliations once a month. That way, you’ll identify potential bank errors, help track cash flow, and prevent fraud. Setting and revisiting your nonprofit budget shouldn’t be a one-time task on your to-do list. Instead, it’s a document that you should revisit on a regular basis, making adjustments when your actual revenue and expenses stray from your original plan. For-profit companies leverage an income statement to show how much they have earned or lost over a specific period of time.

Best for Large Organizations

Its directors want to know, for example, how much equity the nonprofit has accumulated or how much its revenue exceeds its expenses. Net assets determine whether the nonprofit’s work is sustainable or if there is room for growth. The calculation used to determine net assets, which are called profits in for-profit businesses, answers that question. Assets include any item of value the nonprofit organization owns, such as cash, investments, property, vehicles and accounts receivable. For example, if a donor restricts their donation to ensure it’s only used to fund that organization’s scholarship fund, that money would be added to a restricted fund set aside for the scholarship. If a donor does not restrict the donations they provide, that money can be added to your organization’s annual fund and used for overhead, programs, or any other expenses.

• You probably didn’t start a nonprofit organization to stare at spreadsheets and Google things like “how to record an in-kind donation.”
• The majority of nonprofits fall into the category of organizations who would benefit from outsourcing their accounting needs.
• Many small to midsize organizations struggle to find someone to fill this role.
• Board members will come and go over time, and some of them will have more financial proficiency than others.

Public viewpoints on overhead expenses hurt the nonprofit industry a great deal. Overhead includes those expenses that nonprofits use to cover administrative costs, market their mission for fundraising, and pay for other internal expenses that help the organization grow. Essentially, overhead expenses are those that nonprofits use to pay for anything that isn’t a program directly related to the organization’s mission. Filing the annual Form 990 is a key aspect of nonprofit accounting, and one that can’t be overlooked. Form 990 is the annual tax form that tax-exempt (e.g. 5013) organizations are required to file each year to remain compliant with the regulations and requirements set by the IRS.

What are the basic nonprofit bookkeeping tasks?

This version of QuickBooks allows you to accept donations and securely store donor information in your database. If you upgrade to the Gold, Platinum, or Diamond plans, you can even get payroll services for your organization and pay your staff directly through QuickBooks. In addition, they can track expenses and capture receipts to simplify tax filings and report to donors the nonprofits’ overhead-versus-project costs. These in-kind donations are unique to nonprofit organizations and will contribute to special financial statements like your statement of activities.

• Unrestricted net assets are any funds your nonprofit has received from donors that have no rules or conditions attached to them, like a pure cash donation.
• These tools are just the starting point to carefully managing the bookkeeping for your nonprofit organization.
• He has published extensively in the field of nonprofit accounting and is coauthor of The Budget-Building Book for Nonprofits and The Cash Flow Management Book for Nonprofits, both from Jossey-Bass.
• Next, we’ll look into some of the actions that are specific to nonprofit organizations.
• Meanwhile, organizations with impactful and effective accounting will be more likely to allocate their resources appropriately and drive their mission forward.

The financial position statement gives you a look at that and lets you see what you own, owe, and how much money is left in the pot after. Non-profit organizations need to create a budgeting system to ensure they are allocating their resources efficiently and effectively. Your budget should include projected income and expenses, which should be updated periodically. If you’re managing the books on your own or using a bookkeeper who doesn’t have experience working with nonprofit organizations, it could lead to significant problems in the short and long-term. Don’t use your personal bank account to receive, hold or disburse money for your nonprofit.

How To Do Bookkeeping For Nonprofits

The company was founded by the treasurer of a religious finance committee because he had difficulties finding software that met his needs. He created ACCOUNTS as an alternative to the more expensive and complex accounting programs available at the time. As we evaluated providers for this best-of guide, we looked for a variety of providers for different nonprofit needs. We also looked for some common elements, such as value for the cost, ease of use, breadth of features and functionality and customer support. Here is a closer look at how we evaluated the inclusions for this best-of 2023 list. Nonprofits that need to reduce labor costs per project should consider Zoho Books.