Nonprofit Bookkeeper vs Accountant: Whats the Difference?

Others may be involved in the day-to-day activities of budgeting and paying the nonprofit’s bills. Every organization we work with gets a hands-on team that understands how nonprofits operate—from compliance and board reporting to fundraising strategy and restricted funds. We bring clarity to your finances so you can focus on leading your organization, not chasing numbers. Maintaining accurate and compliant nonprofit bookkeeping presents several challenges.

• Unlike for-profit organizations, where there is a unified tracking system, nonprofit organizations are restricted to separate tracking of financial transactions.
• Many small non-profits have a modest budget or minimal operating activities.
• Your bookkeeping activities support your compliance with fund accounting rules.
• The entry should contain information such as the donor’s name, the amount of money, and the date.
• While the basic bookkeeping principles may apply in both cases, certain seemingly small details make significant differences in how a nonprofit’s finances are done.
• By the end of this guide, you’ll have the skills to confidently manage your nonprofit’s accounting needs.
• A person in this position will oversee budgeting, reporting, and will also take care of the regulations and policies of the nonprofit.

Compliance and Reporting Burden

• FreshBooks is available on both computers and mobile devices, so you can stay on top of your nonprofit organization at any time.
• Nonprofits typically use accrual accounting vs cash accounting to recognize revenue and expenses.
• Non-profit accounting includes financial analysis for presentation to owners and the board of directors.
• Even your choice of accounting software must align with the unique tracking requirements because regular business tools often fail to do so.
• (Here’s a COA template you can build from.) You can also benefit from investing in accounting software designed for nonprofits.
• It also involves documenting the donor’s restrictions, designations, or special handling requirements.
• Whether in-house or outsourced, a skilled bookkeeper is crucial for operational efficiency and financial integrity.

When hiring a fractional CFO, look for a firm that specializes in nonprofit finance, like Jitasa. Regardless of whether your bookkeeper and accountant are in-house staff members or outsourced professionals, you should know the difference between the two before you start recruiting. Let’s dive in with an overview of the different financial positions your nonprofit needs to fulfill and who you should task with each one. Every organization has different financial needs, so the exact activities that are considered “bookkeeping duties” will accounting services for nonprofit organizations vary from nonprofit to nonprofit. The statement of activities (also sometimes called the operating statement) is like the nonprofit version of the income statement.

Ensuring Regulatory Compliance

The purpose of grant tracking is to ensure that grant funds are properly managed, used according to the grantor’s specific conditions and requirements, and reported accurately. We’re honored that over 120 nonprofits trust us with their bookkeeping and accounting. And we’d be excited to show you how we can help your organization meet your goals. Of course, the central role of nonprofit bookkeeping is to keep the books of your organization current and accurate. And it’s one of the essential roles of bookkeeping in a nonprofit organization. The nonprofit bookkeeper is the front line in the battle for the accurate financial data you need to run your business, so let’s review the core responsibilities of a nonprofit bookkeeper.

© AccountsBalance, 2024. All rights reserved. An EcomBalance Company.

One of the most powerful tools available to streamline your non profit’s bookkeeping processes is Araize FastFund Accounting software. Specifically designed for non profit organizations, FastFund Accounting offers comprehensive fund accounting, payroll, and donor management features that can transform your financial management. Implementing these best practices will help non profits manage their finances more effectively and focus on their mission. After reading this, you might think that the role of a bookkeeper for a nonprofit setting is highly prized due to the complexity and enormity of details and responsibilities involved.

Understanding Nonprofit vs. For-Profit Accounting

As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development. When managing payroll for https://holycitysinner.com/top-benefits-of-accounting-services-for-nonprofit-organizati/ a nonprofit, bookkeepers must administer federal and state taxes, deduct money for employee benefits, and determine how funds are affected. Once a year, you’ll send the required documents to an accountant to submit Form 990 to the IRS and provide tax documentation to staff.

Budgeting and Financial Planning

• Nonprofits operate on a foundation of trust from donors, volunteers, and the community at large.
• Ideally, they will have some experience with nonprofit accounting software or spreadsheets.
• Unlike for-profit businesses, nonprofits face unique challenges in managing their finances, from tracking donor contributions to complying with strict regulatory requirements.
• Non-profit organizations, driven by their mission to make a difference in communities and causes around the world, often operate under the watchful eye of donors, grantors, and regulatory bodies.
• Think of bookkeeping as studying for a test—it’s the necessary first step you must take to prepare yourself for the big exam.
• Nonprofit organizations have a tax-exempt status with the Internal Revenue Service (IRS).

Sure, you’ll find overlap between the two roles In many small organizations. But the experience, responsibilities, and deliverables required of bookkeepers are very different from those required of accountants. Because while nonprofit bookkeeping and accounting are related, they’re not the same thing. Internal controls are essential for safeguarding assets, ensuring accurate financial reporting, and preventing fraud. A lack of internal controls can expose an organization to financial risks and legal issues.

As you can imagine, this makes running or working in a nonprofit very unique – especially in terms of financial stability. Whether you’re a bookkeeper for a nonprofit or trying to understand the best accounting practices for nonprofits – this article is for you. QuickBooks is the most well-known accounting software for nonprofits and for-profit organizations. It has a nonprofit software that allows organizations to invoice, track donations, develop reports, and more. A nonprofit’s statement of cash flow tracks a nonprofit organization’s cash and financial health.