A non-profit aims to achieve an objective or a set of goals and its finances are important tools for attaining these goals.
Consequently, appropriate bookkeeping systems ensure that nonprofits use their financial resources according to their mission.
Bookkeeping for such organizations entails the customary principles and accounting tasks that all businesses implement to track, analyze, and record financial transactions.
Bear in mind that maintaining a financially healthy organization begins with healthy bookkeeping, so check out these tips.
All organizations need a dependable system of financial controls. These verifications and procedures protect assets, prevent the misuse of finances or mistakes and offer liability protection for the board and management.
Controls usually entail procedures for approval and authorization as well as appropriate documentation. Every nonprofit, regardless of the size, must seek accounting expertise to aid in implementing, monitoring, and developing a suitable system of financial controls.
Develop Internal Controls
Internal controls describe a set of policies, guidelines, and rules that apply to everybody in the organization. These policies are crucial for any nonprofit because they set a tone of accountability and develop an environment of integrity and ethics.
These safety measures also include proper handling of finances, periodic audits, and timely, precise reporting.
A budget is a nonprofit’s monetary plan for fulfilling its mission. Analyzing expenses and income allows the board and management to make decisions that will help maintain the organization’s financial health.
It’s important to note that the budget also functions as a significant internal control. Comparing the budget with outcomes regularly will reveal any irregularities. Therefore, the board and management should compare the former year’s budget at least quarterly.
It’s important to revisit the budget regularly and make adjustments to avoid shortfalls if unexpected costs arise or donations don’t match expectations.
In the event that the board and management have limited experience when it concerns budgeting and monitoring results, an accounting company with nonprofit experience can offer assistance with evaluating and designing a budget as well as educating the staff on how to conduct the process. Bear in mind that the budget should mirror your organization’s objectives.
Procedure for Cash Donations
Cash is susceptible to theft during counting, collection, and storage. Therefore, it’s important to have at least two people present during the collection or handling of cash.
Make sure you give every donor a numbered receipt and ensure you record the amount in the receipt book. Furthermore, you should keep receipt books and cash in a safe with limited access until you deposit the cash.
Separate Monetary Duties
It’s imperative you separate financial responsibilities among various people to avoid fraud. Don’t permit one person to create invoices, perform bookkeeping, and approve invoices.
Furthermore, you shouldn’t make assumptions simply because you know the person. This is because embezzlement and fraud can still occur irrespective of the organization’s size.
If you must depend on one person to perform accounting duties, somebody else should reconcile the bank statements.
Board members and management require comprehensive financial information to make informed decisions. Therefore, they depend on timely, precise financial statements such as the income statement, balance sheet, and cash flow statement.
Comparing these documents against the budget or similar documents from the former year identifies significant trends and variations that facilitate prudent decisions.
Dependable financial reports are also necessary for strategic planning. You’ll discover that nonprofit leaders need precise financial projections to evaluate the feasibility of scheduled projects or activities as well as timely fiscal information to examine those strategies.
The IRS has very stringent guidelines for the tax filings needed to sustain an exempt status. Whether you’re just starting a nonprofit or have operated one for years, it’s crucial you collaborate with your accounting firm to ensure you maintain compliance.
While bookkeeping sounds comparatively straightforward, it can entail numerous responsibilities and activities, depending on the organization’s size and volume of transactions. When it comes to bookkeeping, shortcuts can be costly, so invest in the best expertise available to decrease costs and risks.
Dailey Bookkeeping Services is a Xero Certified SILVER Partner and a QuickBooks Online Certified Advisor, so if we can help you with your bookkeeping needs, just give us a call, we would love to help you! The owner, Jacqueline Dailey is a Certified Public Bookkeeper, an Advanced Certified QuickBooks and QuickBooks Online ProAdvisor, a Sleeter Group Certified QuickBooks Consultant and a Xero Certified Silver Partner. We work remotely so we can work with any company located in the U.S. If we can help you with this process or provide you with custom reporting, please give us a call. If we cannot help you, we will refer you to someone who can! Feel free to visit our website at http://www.