Bookkeeping for Nonprofits: A Basic Guide & Best Practices

bookkeeping for a nonprofit

Shows assets, liabilities, and net assets—broken into restricted and unrestricted categories—on a specific date. A nonprofit accountant requires a minimum of a four-year college education with a degree in the field of accounting. Accountants often opt for certifications to improve their credibility, such as taking the CPA exams to become a certified public accountant. This statement details the cash inflows and outflows from operating, investing, and financing activities, providing insight into the organization’s liquidity.

Nonprofit Accounting Basics for Founders, Board Members & Executives

bookkeeping for a nonprofit

Bookkeepers handle many types of financial data that need absolute precision. Even minor errors in recording transactions can result in poor decision-making and potential legal issues. The average yearly salary of a nonprofit bookkeeper in the US is $62,587, depending on experience and the organization’s size​. Technological advances have revolutionized the way organizations operate, and accounting services for nonprofit organizations the continued prevalence of paper checks in payment processes stands out as a bottleneck for many nonprofits.

  • It allows donors, grantors, volunteers, and other stakeholders to see how donations are being utilized to create social impact.
  • Cash-based accounting records income when received and expenses when paid out.
  • FastFund Nonprofit Accounting offers comprehensive fund accounting, payroll, and donor management features, making it an all-in-one solution for non profit financial management.
  • As a small business owner, you must know how to go about opening your bank account and managing your finances through business banking.
  • Periodic reports are created to provide updates on how the grant funds are being used.

Nonprofit Accounting Basics: Financial Reports

bookkeeping for a nonprofit

Looking up a nonprofit’s Form 990—using services like Guidestar.org—can tell you a lot about its financial state. Once you’ve got your bookkeeping system setup and have started generating financial statements, the final piece of the nonprofit accounting puzzle is getting your tax obligations straight. While an accountant will interpret financial reports and make informed suggestions for the board, a bookkeeper is responsible for organizing the nonprofit’s data to create these reports. Since nonprofit organizations don’t center on profit but on a nonprofit mission, they have different bookkeeping practices.

bookkeeping for a nonprofit

Setting up a New System

Kristen Slavin is a CPA with 16 years of experience, specializing in accounting, bookkeeping, and tax services for small businesses. A member of the CPA Association of BC, she also holds a Master’s Degree in Business Administration from Simon Fraser University. In her spare time, Kristen enjoys camping, hiking, and road tripping with her husband and two children. The firm offers bookkeeping and accounting services for business and personal needs, as well as ERP consulting and audit assistance. A nonprofit’s Statement of Activities is a https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ report generated in place of an Income Statement, which a for-profit business would be required to file.

bookkeeping for a nonprofit

Nonprofit Accounting Best Practices

That’s why it’s so important to choose accounting software that’s designed to meet these specific needs. Finding the right fit can make managing your nonprofit’s finances much simpler. Your nonprofit also needs to produce specialized financial reports, such as statements of activities, to show how funds are used to support its mission. At its core, the main goal of accounting for nonprofits is to ensure transparency and accountability to stakeholders–think donors, grant-makers, and regulatory agencies. That’s where your role in nonprofit accounting becomes critical—not just for keeping things running smoothly, but for ensuring transparency and building trust with donors and supporters.

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