Nonprofit Bookkeeping 101: Everything You Need to Know in 2025

Nonprofits have strict rules regarding funding sources and how they should be spent. For example, large organizations like universities often have dozens, if not hundreds, of bank accounts for different purposes like scholarships, tuition, projects, etc. These financial statements can provide helpful insight into your nonprofit’s financial health so that you can adjust accordingly and plan your next moves. By understanding the basics of nonprofit accounting, your team will https://holycitysinner.com/top-benefits-of-accounting-services-for-nonprofit-organizati/ be better equipped to fund its mission and make strategic decisions about your organization’s future. Use the tips above to get started, and don’t hesitate to contact an accountant (like our team at Jitasa!) with any questions or to take your systems to the next level. These categories are based on the Unified Chart of Accounts (UCOA), a standardized COA model that aligns with nonprofit reporting requirements.

• As with any financial statement, ensure that all figures are accurate and up to date before submission.
• The program offers numerous integrations and an easy-to-use interface, even for those who aren’t tech-savvy.
• For example, time-tracking tools tell you how long it takes an employee to complete a project’s task.
• Effective financial management is the backbone of a thriving nonprofit, ensuring stability, transparency, and informed decision-making.
• Learn about the key components of a nonprofit’s statement of cash flows and how to properly interpret this important statement.
• Every year the IRS goes through 70,000 nonprofit applications that are applying for federal tax-exempt status.
• Get 50% Off for 3 Months—track funds with clarity and build trust with every dollar.

Case Study: How One Nonprofit Got Back on Track

When you can confidently manage the bookkeeping for a nonprofit organization, you will be able to safeguard funding, attract more investors, and efficiently meet the needs of your nonprofit. Proper bookkeeping tells you exactly where each dollar goes and proves that funds advance your cause. In this section, you’ll learn why disciplined record‑keeping is as vital as a compelling vision. Making sure your bank records and internal records reflect the same data is vital to ensuring the financial stability of your organization.

Statement of functional expenses

The point of this statement is to help determine whether or not the organization meets its goals or has enough funds to support its programs. You’ll be able to provide a snapshot of the organization’s financial health so that stakeholders can assess its performance and decide its future direction. Overspending a grant budget may have significant financial implications for a nonprofit. Careful consideration needs to be made each time a nonprofit enters into a grant. Learn more about the various scenarios in which a nonprofit may be unable to use grant funds on costs that the organization thought were acceptable and what the organization should do.

• Every source requires a tailored accounting strategy to align with the organization’s comprehensive financial framework.
• Open communication through transparent financial records builds donor confidence.
• Unlike traditional business accounting, which focuses on profit, nonprofit accounting monitors how organizations use their funds to achieve their mission.
• This preparation helps your organization maintain strong financial management even when key personnel changes occur.
• With the right approach and the best tool for the job, your organization can keep better books to help with transparency, annual reporting, and tracking your fiscal health.
• These policies include conflict of interest, whistleblower, and document retention policies to maintain compliance and trust with donors and stakeholders.

Get Started with Your First Month Free

• Once you’ve got a bookkeeping system and a bank account in place, you need some way of making sure the information in both of those systems lines up.
• And on the review site TrustRadius, Sage Intacct gets 8.6 stars out of 101 with customers indicating they’re happy with Sage’s fast customer service response time.
• They are responsible for all data entry into accounting ledgers or software.
• Creating realistic budgets becomes challenging when funding isn’t guaranteed.
• This differs from regular accounting, which tracks your expenses and income.
• YPTC offers data visualization services that can help you make data-driven decisions and access the information you need to run your organization from anywhere.

Carrie has lived the majority of her adult life in South Korea as a Second Language teacher while supporting the work of a local missionary in children’s outreach. As she considered a return to the United States and a change in career fields, she accounting services for nonprofit organizations earned a certificate in accounting from Liberty University. Although Carrie remains a resident of South Korea and hopes to eventually return, she currently resides in North Carolina with her husband and son. As a stay at home mom, she is excited to put to use her knowledge of accounting and teacherly obsession with management, organization, and anything to do with numbers as a remote bookkeeper. Her hobbies and interests in life generally revolve around her local church from cleaning to family outings to building relationships with some elderly in our community. Learn how to build, read, and use financial statements for your business so you can make more informed decisions.

Nonprofit accounting software runner-ups

Until now, you may have cobbled together a team with part-time help, volunteer help, or managing it all yourself. Our list of the year’s best free accounting software can help you keep your books in order while you plan for growth. We’ve found that sometimes clients have hidden errors buried in their bookkeeping that may be causing inaccurate account balances or profit and loss statements. Sometimes these can be complicated and require more work than anyone realized! We think it’s important that you know the full cost before signing up with us and not receive any surprise charges, for that reason we need to know the true scope of the work.

Nonprofits have strict rules regarding funding sources and how they should be spent. For example, large organizations like universities often have dozens, if not hundreds, of bank accounts for different purposes like scholarships, tuition, projects, etc. These financial statements can provide helpful insight into your nonprofit’s financial health so that you can adjust accordingly and …