Nonprofits are an important part of everyday business in the cities where we live, work, and play. Many provide crucial services to support our communities, which are supported by key fundraising efforts, grants, professional memberships, and other strategic channels. And while these funds are at the heart of keeping nonprofits healthy and productive, having poor accounting measures in place could shatter even the best of intentions.
Keeping the following nonprofit accounting tips in mind can help nonprofits achieve their mission in all areas of operations for ongoing success.
#1: Know Your Nonprofit Tax and Accounting Regulations
When it comes to nonprofit accounting, the rules of the game are totally different compared to standard for-profit accounting.
When filing and claiming your nonprofit’s tax-exempt status, you need to follow specific nonprofit IRS requirements as well as Generally Accepted Accounting Principles (GAAP). These can change from year to year, so be sure to always check for updates. Choosing the right professional team of accountants can help you move in the right direction.
#2: Encourage a Multi-year Plan that Supports Strategic Initiatives
Creating growth for your nonprofit is key to maintaining an edge in the market with committed employees and an active, enthusiastic board of directors. Having a multi-year plan of three to five years allows you to plan ahead with your organization’s goals, marketing strategies, and financial needs in mind. This may include hiring additional staff or implementing new accounting software to support your nonprofit’s growth.
#3: Create a Realistic Annual Budget
Every financial segment of your nonprofit is important, from operating costs and new programs to fundraising efforts and donor participation. Knowing how to balance your nonprofit’s annual budget helps ensure that realistic goals are put into place. Maintaining a structured budget keeps expectations in line and goals on track.
#4: Distribute Financial Tasks Throughout the Staff
You know the old adage—never put all of your eggs in one basket. The same applies when assigning financial tasks. This helps protect the integrity of your accounting stream for improved troubleshooting should a discrepancy occur.
#5: Improve Fraud Protection
Nonprofit fraud is nothing new. To steer clear of any unlawful accounting practices, share your internal policies and controls with organizational leaders, staff, and board members. You can also have your nonprofit create a Code of Ethics, sharing it with everyone to use as a personal moral compass. Discussing your practices with a nonprofit accounting specialist can also help ensure it stays in the clear for productive days ahead.
#6: Streamline Budgeting with the Right Software
Your nonprofit is special. So, your accounting software should be unique, too. Nonprofit accounting software is designed for the specific challenges it may face, building a stronger business across all departments in the process. Your nonprofit accounting software can even help you protect financial data for a more secure working platform.
#7: Build Relationships Within the Company
As part of a healthy nonprofit accounting practice, building relationships with other departments keeps everyone working toward the same goals and outcomes. This can be done through accounting training sessions, record reconciliation team sessions, and regular meetings for policy updates. Get creative and choose a nonprofit accounting specialist to guide you for best results.
#8: Support Independent Board Members
Having board members who are independent in their own field makes way for more diverse ideas and problem-solving for your nonprofit. Avoiding any conflicts of interest helps develop trust within the board and the organization, where decisions are only made in the best interest of the nonprofit.
Check in to Nonprofit Accounting
To learn more about nonprofit accounting best practices, contact us today.