Again with regard to the IRS, program accomplishment data and fundraiser details are required disclosures on Form 990 for nonprofits filing anything greater than a Form 990-N. Your state fundraising registration renewal may seek some of these details as well, particularly details on fundraising events. Also, the IRS requires nonprofits to carefully track donor data so that the public support test can be accurately calculated. Your statement of functional expenses enables you to allocate your expenses according to their use at your organization.

Step 10: Ensure Compliance with Nonprofit Accounting Standards

At The Charity CFO, we work exclusively with nonprofit organizations and offer a start-to-finish solution for outsourcing your bookkeeping, financial statements, and expert advice. Because this method of accounting tracks directly with money going into or out of your bank account, it’s by far the simplest method of accounting. And it’s preferred by many small nonprofits without experience in bookkeeping or the budget to hire a full-time accountant or outsourced accounting service. To complete Form 990, you’ll need to provide information about your organization, its mission, and how it’s achieving its goals. It ensures that your nonprofit is actually acting as it claims to, using your financial statements as evidence. By regularly monitoring financial records, nonprofit leaders can better understand their organization’s financial health and strategically allocate funds to achieve their goals.

key financial statements for nonprofit accounting

Mistakes are often unintentional, arising from a lack of oversight or experience. Volunteers often comprise a significant part of a nonprofit’s staff and may leave an organization with short notice, which can cause recordkeeping gaps. If you have a nonprofit organization, working toward making the world a better place is likely your top priority. However, nonprofits receive generous tax breaks and must be accountable to their donors.

Recording business transactions

First, find out which considered software offers a free trial or a version you can use to try the software before buying. Sage Intacct is best for global nonprofits that must work across currencies and tax codes to manage their financials. Rules for paying and collecting sales taxes are complex and vary from state to state. Nonprofit organizations must pay federal and local payroll taxes for their employees (and withhold payroll taxes on behalf of their employees, just like any other company.

In this guide, we talk about the essential components of bookkeeping for nonprofits and provide handy tips for keeping your paperwork impeccable and your compliance squeaky clean. From project and event management, interacting with board members and fundraising, to accurate bookkeeping, there’s so much on a manager’s plate. This is unusual for a bookkeeping company because bookkeeping does not require a degree or certification. This means every level of your bookkeeping has a professional set of eyes on https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ it from top to bottom.

• These systems integrate multiple processes to record and update all transactions automatically, allowing users to access financial data in real-time from anywhere with an internet connection.
• Bookkeepers typically handle the data entry work, while the accountant handles the analysis of the data.
• The Internal Revenue Service (IRS) is responsible for overseeing these organizations and ensuring they comply with applicable tax laws.
• A budget is a detailed financial plan for nonprofits that outlines projected income and expenses to help your organization allocate resources effectively.
• For example, if your nonprofit is focused on environmental conservation, you might anticipate the need to expand its programs to additional regions in the next five years.