The Ultimate Guide to Bookkeeping for Nonprofits

Restricted funds are donations or grants given for a specific purpose or project and must be used accordingly. Unrestricted funds can be used at the nonprofit’s discretion for any operational needs, providing greater flexibility in managing resources. If you’re looking for a one-stop-shop online fundraising tool that seamlessly integrates with your CRM, marketing tool, or accounting software, take a look at Donorbox. Over 100,000 nonprofits worldwide have used our tool to boost donations with features like peer-to-peer fundraising, text-to-give, event ticketing, recurring donations, and more. Each statement relies on quality information regarding the organization’s income from cash donations, grants, in-kind gifts, and expenses.

What are the basic nonprofit bookkeeping tasks?

Have an organizational mind, good critical thinking skills, excellent processing and analyzing abilities, and be detail-oriented. You must be able to keep track of finances and accounts receivable, manage budgets, and prepare financial reports. You must be able to systematize and manage your data, and be able to quickly and accurately research information. You must also be able to communicate effectively with donors, board members, and other stakeholders.

Inconsistent Record-Keeping

• Nonprofit-friendly accounting software shouldn’t just allow you to create professional-looking budgets.
• They must have the willingness to learn and the flexibility to adapt their bookkeeping practices.
• For example, large organizations like universities often have dozens, if not hundreds, of bank accounts for different purposes like scholarships, tuition, projects, etc.
• Nonprofit fund accounting differs from for-profit accounting because it ensures accountability to the donors’ wants and tracks how these funds are allocated.
• Both non-profit and for-profit organizations follow generally accepted accounting principles (GAAP).
• Our professional process will set your organization up for success in all of your financial management and accounting activities.
• You must be able to keep track of finances and accounts receivable, manage budgets, and prepare financial reports.

Their focus is to record the data so the accountant can analyze this and perform more complex functions. Bookkeeping services for nonprofit are critical to https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ the success of their organizations. They’re both required for making effective and well-informed financial decisions.

• As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.
• Instead, seek out an experienced nonprofit bookkeeping service you can trust.
• Some donations and grants will come into your organization restricted for specific purposes.
• National or large non-profits may prefer to hire bookkeepers and accountants.
• We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.

What are some popular bookkeeping software options for non profits?

That is why if you are unfamiliar with the whole process, we present you with a complete guide on bookkeeping for nonprofits. Getting started with nonprofit bookkeeping isn’t easy, but it is essential. Bookkeeping for some small nonprofits may be as simple as creating invoices for donations received and paying salaries and day-to-day expenses.

Good bookkeepers excel in time management and organization, which helps to optimize workflows and complete critical financial processes accurately and punctually. This is crucial for maintaining nonprofit compliance and meeting reporting requirements. Think of bookkeeping as studying for a test—it’s the necessary first step you must take to prepare yourself for the big exam. In the same way, bookkeeping can prepare your nonprofit’s financial records and budget for tax filings, annual reports, and every other deep dive into your assets. If you have any employees, you must ensure accurate calculations for wages. Consider factors like hourly rates, overtime pay, and deductions for taxes and benefits.

Allocate revenue and expenses to restricted fund accounts

Your financial professionals need to understand these key differences to produce effective deliverables for your organization. Bookkeepers are in charge of maintaining your books closely day in and day out. They are responsible for all data entry into accounting ledgers or software. Their focus is on recording the financial transactions of your organization through maintaining records, tracking accounting services for nonprofit organizations transactions, and creating financial reports.

Services

Additionally, it can lead to missed opportunities in the form of “untranslated” financial information or unidentified financial insights. After you’ve registered as a nonprofit with your state, the next step is to apply for tax-exempt status under Section 501. While tax-exempt status might be determined by the IRS and federal law, nonprofit status is determined by state law. Because of this, the IRS requires that you obtain nonprofit status from your state before applying for tax-exempt status. Restricted net assets are donations that have certain terms and restrictions attached, have special accounting procedures, and must be kept separate from other net assets. For more information about how to create a budget, check out the National Council of Nonprofits guide to Budgeting for Nonprofits.

Accurate and timely bookkeeping practices will make the job of those tasked with budgeting much easier to tackle. Essentially, you should view bookkeeping as the financial oversight process that’s necessary for operating your nonprofit daily. For example, bookkeeping ensures your nonprofit uses its revenue wisely and maintains its tax-exempt status. Accounting, on the other hand, is using that information to provide a detailed analysis of your finances. Partner with a qualified accountant or bookkeeper knowledgeable about nonprofit accounting and tax regulations.