19 Jun What Are the Basics of Non-Profit Accounting?
Your Guide to Non-Profit Accounting
Handling your accounting is an essential piece of the puzzle no matter what sort of organization you run. There are some different principles and philosophies in play depending on the type of accounting that you’re doing.
The field of accounting is valued at $133 billion today. This means that there are several professionals available who can assist you in handling your accounting the correct way — including if you run a non-profit organization.
Here are some non-profit accounting guidelines that you should keep in mind.
Non-Profit Accounting Guidelines
Make Certain You Have Non-Profit Status
First things first, make certain that you hold a non-profit designation. This will help you achieve and maintain your nonprofit status so that you’re handling each detail correctly and enjoy the tax benefits.
Working with a non-profit account pro will then help you organize your finances and address your obligations as a non-profit.
Consider the Forms You Have to File
Nonprofit organizations also have certain obligations that you want to remain mindful of. Understanding accounting for nonprofits requires you to know which forms you’re responsible for. These include documents like your statement of financial position, cash flow, activities, and functional expenses.
It’s important that you understand what forms you need to file, whether you run a small business or a non-profit. Working with a thorough accountant can help you keep track of these documents and details throughout the year so that you don’t let these details pile up and can handle them quickly and correctly.
Separate Your Money Accordingly
Learning to classify your money and separate it is one of the most crucial parts of the process. Non-profit organizations will generally separate their money into a variety of categories and accounts.
Some of these groups that you need to separate your funds into include temporarily restricted, restricted, and unrestricted.
Temporarily restricted funds are set aside for specific projects. Your restricted funds category will generally get used for ongoing projects within your nonprofit organization. Many nonprofits also keep an unrestricted fund, which is a pool of money that can later be earmarked for different parts of your budget.
Keeping clean records in this regard will help your nonprofit stay organized and thrive. You can also use non-profit accounting software to do it in the most accurate and consistent manner.
Figure out which platform is ideal for your organization and get some hands-on experience with it. This will help you choose the software platform with the highest-quality graphical user interface (GUI), the most straightforward explanations, and the most impactful features.
Compare How It’s Different From Bookkeeping
Get to know the difference between bookkeeping and accounting as it relates to your non-profit organization. Both have their place, but you’ll be better able to get the help and service that you need when you can understand the differences.
For example, accounting non-profits might include services like:
- Forecasting and making sound financial decisions
- Thoroughly examining and reviewing your various accounts
- Filing tax forms and other financial forms
- Helping with audits
- Creating financial reports
Meanwhile, non-profit bookkeeping is typically reserved for tasks like:
- Generating and writing checks
- Making bank deposits
- Addressing your payroll needs and services
- Allocating your expenses
- Handling one side of transactions
Explore these details to the best of your ability so that you’re better able to find the services that’ll help you.
Learn How to Budget
Non-profit accountants need to also be familiar with the process of budgeting. These organizations particularly need to have a handle on accounting so that they can maintain transparency with the donations that they receive and how they are used.
You’ll need to have a budget that is as thorough as possible, including percentages and itemized designations.
Choose Your Accounting Method
One of the most important things to consider when handling your non-profit accounting is the accounting method that you use. Some of the main accounting methods that you might use include cash accounting and accrual accounting.
With cash accounting, you’re tracking the intake and expenditure of your cash. With the accrual method, you’re tracking revenue and expenses. Each type of accounting has its pros and cons, and will typically come down to the preference of your organization. Get to know the various accounting methods available and how they’ll play a role in how your company handles its money.
Find the Help of an Accounting Professional
Finally, it’s critically important that you get the help of an accounting professional that can assist you with all of your non-profit accounting needs. By touching base with a certified public accountant (CPA), you can make the decisions that matter the most and will know that your accounting is cared for.
Make sure that your CPA is licensed and insured, that they are trained and versed at helping non-profits, and that they also have a quality software platform that you’ll get the most from. One of the best ways to handle this accounting service is by working with a firm that you can outsource the work to.
These words of advice will assist you when you’re trying to look into non-profit accounting and want to do it correctly. Do your due diligence so that you never have to worry about your organization getting the accounting help that it needs.
Dempsey, Vantrease & Follis assist you with your accounting needs. If you’re ready to learn more, contact us via our site or by phone at (615)893-6666 in Murfreesboro and (615)444-4125 in Lebanon.