Your Solution to Confusing Non-Profit Accounting

By July 8, 2019 Accounting
Solution to Confusing Non-Profit Accounting

Did you know that public charities report almost twice as many accounting errors as corporations? That’s what a study from the American Accounting Association found based on research collected between 2006 and 2010. Why is this? No doubt, some of these errors are due to specific non-profit accounting nuances that can cause accidental errors. However, other errors may be due to a lack of qualified accounting and financial professionals at smaller non-profit organizations. It’s not surprising that many non-profits operating on shoestring budgets rely completely on volunteer labor for accounting expertise. Others may unload bookkeeping and financial responsibilities onto administrative staff or other employees who may be hard-working, yet lack crucial training or experience. Other organizations may purchase accounting software in an effort to save on labor costs, sometimes sacrificing accuracy for cost-savings.

As an accounting firm specializing in services for both business and non-profit, we have gained a lot of firsthand experience as to how to operate a financially successful organization. Our experience with many non-profit clients shows that partnering with an experienced accounting professional is the best way to prevent costly, time-wasting errors in non-profit financial management.

Though budgets may be tight, making funds available to hire a qualified accountant is crucial. As American author John Maxwell said: “If you want to do a few small things right, do them yourself. If you want to do great things and make a big impact, learn to delegate.” When looking at the big picture, accuracy in accounting is about a lot more than avoiding errors. It’s about helping to grow and develop your charity so it can better accomplish its unique mission.

If you’re not yet convinced, continue reading below to discover just a few ways that an experienced accountant can help you create a financially healthy non-profit. 

They can translate IRS guidelines to ensure your organization meets them.

To maintain non-profit status and avoid penalties, complying with state and government regulations is imperative to the future success of your organization. While the IRS publishes Compliance Guides and other resources to aid in maintaining non-profit status, ensuring the guidelines are all met to the satisfaction of the IRS can be a significant hurdle. An accountant well versed in non-profit regulations can oversee and review the filing of annual tax returns, as well as monthly or quarterly statements to ensure financial management is on track throughout the fiscal year. 

They help new organizations file for nonprofit status and acquire a FEIN.

Any time a business or non-profit must file and communicate with the IRS, it’s a good idea to have an accounting professional involved. From the very beginning, they can help you file for non-profit status (through IRS form 1023) as well as acquire a FEIN, also known as an EIN or Federal Employer Identification Number. 

They can help educate the board of directors in nonprofit-specific financial budgeting and management.

If you are like many non-profits, your board of directors may call the shots for some of the biggest decisions that shape the future of your organization. While board members are usually accomplished professionals, they can often have a background outside of the non-profit world. An accountant can consult with them about the financial health of the organization and help them understand specific non-profit financial information that could be critical for making key decisions.

They can produce income and program expense statements.

These statements create a map of financial activity and net assets over a specific period of time. Not only are these records important for managers within the organization, but for the board of directors as well. Equipping the board with well-organized income and program expense statements helps to give them context, and answers potential questions they may have such as, “What is the annual budget?”, “What are our expenses to-date?”, “How do this year’s numbers compare to last year’s?” and “What is the current state of unrestricted funds versus restricted funds?”

Have questions? Reach out to us for non-profit accounting help.

Our accounting firm serves the Keller, Southlake, and Fort Worth area, helping area non-profits (including churches) improve the accuracy and strategy of their financial management. If you want to help ensure your finances are supporting the future success of your organization, reach out to us. We’d love to learn more about your specific non-profit organization and how we can help you reach your goals.

Call us today at 817-581-3223 or send us a message online.