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What Is Bookkeeping For Nonprofits?
Bookkeeping for nonprofits primarily involves recording and entering an organisation’s financial records. Nonprofit financial records are very important, as they ensure that the organisation operates efficiently.
As nonprofit organisations, they are required by the government to maintain their tax-exempt status. Doing so requires proper bookkeeping. Nonprofits can choose to have an official bookkeeper or implement the best bookkeeping software for nonprofits to keep an eye on their expenses, donations, and loyal donors, as well as their ongoing campaign strategies.
Why Is Bookkeeping Services For Nonprofits Essential?
- Clarity – Having a clear understanding of where your money is going, as well as where the donations are coming from, will allow you to make more informed decisions and improve the efficiency of your business.
- Organised Space – A decluttered space always encourages a productive mind. So having proper data about the transactions can improve the general efficiency of your nonprofit and create room for more creativity.
- Better Fundraising Strategies – Running reports and evaluating expenses can help you identify areas you lack and plan for future donation management systems.
- Better Saving Potential – Tax deductions are an integral part of any organisation. So Having a good record of all your expenses will allow you to claim these deductions on your tax returns and create a better picture of your savings for the future.
- A Clean Organisation – When you start clearing the mess, it is easy to spot fraudulent activities inside the organisation (if any). Preventing such kinds of unauthorised activities can keep the organisation’s environment clean and attract a better workforce in the future.
7 Nonprofit-Friendly Bookkeeping Solution For Your Organisation
Whether a small nonprofit or a massive organisation, keeping the financial records in order is a must. Finance, being the most crucial part of any organisation, has its own set of rules as well as complicated procedures. It is always advisable to have a professional deputed to handle such kinds of sensitive activities. However, there are some basic points nonprofits should evaluate when it comes to bookkeeping.
1. Get Your Organisation A Dedicated Bank Account
Instead of receiving donations through personal accounts, nonprofits should always have a proper bank account solely for their official transactions. Nonprofits should also be able to fund managed through specific accounts, as they have certain norms about how they should spend their money.
Having a specific account can clear a lot of confusion and align the transaction records in the future, eliminating a tiresome workload. Also, reconciling your bank accounts involves comparing the transactions from your statements with those in your books. Doing so at least once a month can help keep your books up-to-date and prevent fraud.
2. Find The Bookkeeping Software For Nonprofits
Many accounting software programs can help you manage your books, but not all are suitable for all kinds of nonprofits or charitable organisations. There are some fund accounting software solutions that are specifically designed for nonprofit organisations.
Search for nonprofit accounting software that can help you manage various aspects of your fundraising campaigns, such as keeping records of your recurring donations (online payments), financial statements, financial reports, and tax receipts. Nonprofits can consider the best free bookkeeping software for nonprofits, like WhyDonate, to keep track of their incoming donations. This fundraising platform is a bit like free accounting software but with a few additional accounting features for nonprofits.
Organisations can maintain Excel sheets adding details about their previous/ongoing/future campaigns with the details of their one-time/recurring donations, cash flow, payouts, and other expenses. These kinds of bookkeeping tasks will improve the nonprofits’ donor management and expense management systems in the future.
3. Recruit A Bookkeeper
As a new bookkeeper, you may choose to hire someone from within your organisation or look for someone from job portals like LinkedIn. Before you hire a new bookkeeper for your accounting tasks, make sure that they understand the role and responsibilities of the position.
A professional can handle many crucial activities like financial reporting, inventory management, customer relationship management, income and expense tracking etc. Having a well-rounded fund experience can help your nonprofit create reports that will help keep its finances running smoothly.
4. Keep Track Of Cash Transactions, In-Kind Donations, And Grants
Often nonprofits ignore to keep track of their received in-kind donations, which is not a good financial management practice. It can be very time-consuming and difficult to keep track of business expenses. Many small nonprofits prefer to avoid having to spend their time doing this.
But in fact, having a sound bookkeeping system for tracking expenses can help small nonprofits grow. It can also help them manage their financial transactions and ensure that they are on track to meet their goals.
There should always be track of all the contributions made in non-cash or in-kind forms, as these may have been purchased by your nonprofit. Employees may contribute to a charitable organisation through grants, and businesses or foundations may match their contributions. Nonprofits must also keep track of such donations, which can help them receive matching funds.
5. Implement Internal Organisational Policies
Nonprofits and businesses are required to protect themselves against fraud. While you may think that you can trust everyone who works for your organisation, it’s still important to take the necessary steps to prevent these types of problems. One of the most important steps to doing this is establishing policies and procedures that will help prevent fraud. As your organisation grows, it’s also important that you hire more staff members and keep track of all of your expenses.
You should also establish a code of fundraising ethics which aims to highlight the organisation’s values and morals. This can serve as a reminder to members of the board of directors, donors, and employees that the code must be followed.
6. Make A Budget
A budget is a vital part of any organization’s operations, as it sets the stage for the organization’s future and ensures financial stability. Nonprofits typically operate with an annual budget, which helps determine their targets and whether they’re on track to meet their goals. But it’s important to keep in mind that budgets are never the same. It should be reviewed regularly to ensure that it’s still on track.
Having a well-planned budget will ensure all members are on the same page regarding the organization’s goals and activities.
7. Be Consistent With Your Bookkeeping Process
No matter how big or small the nonprofit is, doing manual bookkeeping activities are mandatory. So, ensure that the dedicated bookkeeper is well aware of his/her responsibilities and how minor changes can affect the entire organization.
Maintaining statements and reconciliation of accounts can meet the financial goals and keep the organisation ready for taxation.
Start Your Bookkeeping Practice Now
Nonprofits often depend upon crowdfunding platforms to run campaigns and raise funds online. So it is always important to go with verified and trusted platforms like WhyDonate, where running campaigns and getting payouts are hassle-free.
We at WhyDonate are constantly upgrading ourselves so that we can provide you with a seamless platform where you can not only create fundraisers for your own needs but also help others who are struggling financially. So consider using affordable bookkeeping software for nonprofits so that you can be the guide to someone else someday.
