In starting a non-profit in Nashville, it’s important to work with an accounting firm who can help you in the management of the organization’s complex finances. Accounting in nonprofits covers a wide area, from record-keeping and budgeting to reporting to the IRS and state authorities. Accuracy is important at all times, otherwise you could lose your nonprofit status, or worse, find yourself accused of fraud.
Here are the areas where professional accounting can serve a nonprofit.
As with any other organization, a nonprofit has to work on a budget. An accountant can help distribute the working capital among the various functions and areas of the nonprofit, adjusting for any financial issues. In many cases, nonprofits have a decentralized structure where each area manager has their own budget. The individual budgets are submitted to the central office, which then appropriates the working capital accordingly, taking into account the budget of the organization as a whole.
A nonprofit’s accounting records have to be tightly monitored and maintained at all times. Otherwise, the organization risks violating state and federal regulations. Financial records have to comply with Generally Accepted Accounting Principles (GAAP). Revenues and expenses have to be accurately categorized, recorded, and reported in order to show that everything falls within the organization’s charter and status.
Categorizing and Recording Contributions
Nonprofits get revenues from a wide range of sources. Similar to a for-profit company, it can make money from the sale of goods and services.
Unlike for-profit organizations, though, nonprofits also generate funds from donations and member contributions. Accountants must report each source of funding separately to the IRS, with detailed information on who made the contributions and how they were made. This is important not only in assessing the amount of funding received and spent by the nonprofit, but also in determining if the donor can write off the contribution or transaction in their tax declaration.
In addition, an accurate accounting of donations gives the nonprofit a clear picture of donors’ participation and involvement, which should then be analyzed and used in effectively soliciting future contributions.
Maintaining and Keeping Corporate Records
While this is a basic requirement in all organizations, it takes on greater significance in a nonprofit. Articles of Incorporation, charters, annual reports, board meeting minutes, and similar records have to be updated and kept easily accessible at all times. If the IRS or the state decides to investigate the nonprofit for some reason, these documents are first to be scrutinized.
Accounting for Activities and Revenues
The IRS and the state require detailed reporting on a nonprofit’s activities and revenues. Fundraising events must be clearly documented. The nature of the event, the purpose, the cost of staging, and the amount of funds raised have to be shown.
The nonprofit’s programs must also be accurately reported, detailing the nature of the programs, what was accomplished, and who benefitted from them. These records should also be analyzed internally to find out where the organization is succeeding and where improvements can be made. The achievements can be highlighted and presented to donors to rally more support and encourage them to continue contributing to the organization.
Non-profits, regardless of their objectives, are governed by financial regulations. Partnering with an accounting firm only ensures that they can carry on their mission while keeping their finances sound and in proper order.
Recordkeeping Basics for Nonprofits, 501c3.org
Accounting Considerations for Non-Profits, Scranton.edu