As a non-profit organization, it may feel like accounting and finances are confusing. Unlike for profit organizations, a non-profit organization can have cash coming in from many different sources like donors, dues, fundraising, and other avenues. Fortunately, at Aldridge & Borden Co, we’re experienced with keeping the finances of non-profit organizations in order.
The Rules of Accounting for Non-Profit Organizations
With nonprofit bookkeeping, there are different rules for where the money coming in can go that differ from for-profit accounting. For example, donors may set restrictions on where the donated funds go and how they can be used. Due to these restrictions, it is important to ensure that funds are being spent in the correct way.
Fund Accounting
Because of their restrictions, nonprofit organizations use fund accounting to manage their finances. With fund accounting, nonprofits are able to allocate donations and money into different funds in order to keep them organized. This allows nonprofits to spend the funds on their intended purpose.
Traditional Expenses
Additionally, non-profit organizations may have expenses like employee salaries, building expenses, and other internal expenses. All of the money that is coming in and going out must be recorded. This can be a stressful situation for many organizations.
Put yourself in the best financial position!
Because of the many regulations in play, it is important to work with an accounting firm that understands the intricacies associated with nonprofits and nonprofit accounting. From understanding fund accounting and tax laws, to properly tracking and reporting on the financials, a professional accountant from Aldridge Borden will be able to provide valuable insight and recommendations. You will want a nonprofit accounting firm to help you with these regulations to make sure you keep your nonprofit status.
Montgomery Accountants For Non-Profits
Aldridge Borden is an accounting firm in Montgomery that understands the nuances of non-profits and fund accounting. Having been around for decades, the CPAs at Aldridge Borden leverage their vast experience to handle any mix of complex issues that may arrive.
Why It Is Important To Use Accounting For A Nonprofit Organization
Nonprofit accountants have a vital role to play in maintaining the financial health of their organization. They are responsible for keeping accurate financial records and ensuring that the organization’s books are in compliance with state and federal laws. This is no small task, as nonprofit organizations are subject to a complex web of regulations. Failure to keep the books up to legal standards can put the organization at risk of losing its tax-exempt status and opening it up to possible legal action. Financial data accounting software can make it easier to track expenses, income, and cash flow. By staying informed and taking advantage of available resources, nonprofit accounting professionals will provide effective nonprofit accounting.
Other functional expenses nonprofit accounting can provide:
- Income statement
- Financial statements
- Net assets
- Balance sheet
- Statement of financial position
- Cash flow statements
- Bank reconciliation
- petty cash transactions
- Fundraising events statements and fundraising expenses
- Annual tax form
- Accounts receivable
- And other financial documents
Cash Vs. Accrual Method
As a non-profit organization, it is essential to keep track of all income and expenses in an organized manner. One way to do this is through a cash accounting method, where you record payments and receipts as they occur. This can be helpful in keeping track of immediate financial needs. However, it is important to note that this system does not always provide an accurate picture of how much cash you have. For example, if you receive a grant in December but do not actually receive the funds until January, you would not record the income until January under a cash-basis system.
An accrual system, on the other hand, records transactions when they occur, regardless of when the money is actually exchanged. This gives you a more accurate picture of your financial situation, but it can be more complicated to understand and maintain. Ultimately, the best accounting system for your nonprofit organization will depend on your specific needs and goals. As a result, it is important to carefully consider which type of accounting system will best suit your organization’s needs.
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