Best Accounting Software For Nonprofits

Many new nonprofits must rely on volunteers to record financial reports, so when electing a treasurer, you can look for someone with a similar background. No one knows your nonprofit better than you do, which is why you should hire a professional bookkeeper to get your records in order and leave the decision-making up to your organization’s leaders. And, if you need further advice, an experienced bookkeeper can give you their perspective on your budget. The more transactions your nonprofit makes, the more often you should reconcile your bank statements.

Annual Compliance and Reporting

• That way, you’ll identify potential bank errors, help track cash flow, and prevent fraud.
• For-profit accounting also focuses on revenue sources and production costs, such as materials and labor.
• Cash flow management is critical for the success and sustainability of any nonprofit.
• Boards must then show due diligence by monitoring, with the executive director, the financial health and compliance of the organization.
• Relevant documents, such as invoices, receipts, contracts, etc., should support all financial transactions.
• Invoices are legal documents and should have your organization’s logo, name, address, email, phone number, invoice number, and date.

Nonprofits use a chart of accounts, a categorized list of all the accounts used to classify financial transactions. It includes cash, accounts receivable, accounts payable, https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ donations, program expenses, administrative expenses, etc. Effective nonprofit accounting requires promptly recording the amount and date of each donation, noting any donor restrictions, and ensuring that necessary acknowledgments and tax documentation are provided. This initial step sets the foundation for all future tracking and reporting. It’s more than just relationship building; it’s a crucial part of nonprofit accounting that ensures every contribution is properly recorded, tracked, and used according to donor wishes.

Keep a Close Eye on the Budget

Accrual accounting records income when earned and expenses when incurred, even if cash moves later. Accrual offers a fuller picture and is required once your nonprofit tops $5 million in annual revenue or accepts federal grants. Popular options include QuickBooks Nonprofit, Aplos, Sage Intacct, Wave, Xero, and Araize FastFund Accounting. These tools offer features tailored to non profit needs, such as fund accounting, donor management, and grant tracking. Fund accounting is a system used by non profits to manage and report their financial accounting services for nonprofit organizations resources. It ensures that funds are allocated and used according to donor restrictions and organizational purposes, enhancing transparency and compliance.

• Getting your financial statements correct involves more than just checking boxes—these documents use financial information to tell your organization’s mission story.
• Each option has its unique advantages for your nonprofit’s financial management.
• This means that all financial transactions should be recorded promptly and with precision.
• Generally Accepted Accounting Principles (GAAP) are the standard framework of guidelines for financial accounting used in the United States.
• Your specific needs might vary—organizations with government contracts might require bigger reserves to handle payment delays.

See Bench’s features in action

Plan differences revolve around the number of users, customization options, inventory management, automations and expense tracking. You have to pay an extra fee for payroll services, starting at $45 per month. FreshBooks’ software stands out for its ability to track expenses and restricted funding.

The 4 Essential Financial Statements for Nonprofits

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. Additionally, it outlines expenses by function – distinguishing between program, management, and fundraising expenses. This statement allows stakeholders to evaluate the organization’s ability to generate funds and use the revenue effectively to support its mission.

Essential Guide for Not-For-Profit Bookkeeping: Best Practices for Nonprofits

Furthermore, nonprofit bookkeeping differs in some critical ways from for-profit bookkeeping too. Because nonprofit bookkeepers must manage restrictions, grants, and expenses in significantly more detailed ways than a for-profit bookkeeper. Use separate accounts for restricted grants when donor agreements require it. Maintaining accurate and compliant nonprofit bookkeeping presents several challenges.