Bookkeeping for a nonprofit is just as important as for any for profit business. Not only does it keep you in compliance with the IRS, it is essential for many of your current and prospective donors. We will provide this Guide to Business Bookkeeping for Nonprofits below to help you out.

1. Profit Versus Nonprofit Bookkeeping in Income

Although you may have a certain tax exemption status, you are still required to file taxes. This includes keeping detailed track of all your income and expenses. A traditional business generally makes income through the sales of goods and/or services. However, you as a nonprofit still generate income through any of the below means:

  • Cash donations during events.
  • Donations via grants from corporations, foundations, or individuals.
  • Grants via federal, state, or local government agencies.
  • Sales from items such as bake sales, clothing sales, and other merchandise.

Did you know? The United States has over 1.51 million nonprofits designated as a 501(c)(3), which includes charitable, religious, educational, and others? Source: Statista

2. Keep Track of Your Expenses

A traditional business can generally spend its income on whatever it likes. However, you as a nonprofit – especially a 501(c)(3) – are expected to keep your expenses to a certain percentage. For example, you may pay your employees a fair salary when comparable to the for profit market. However, excessive salaries or benefits will not look good to donors, and it may compromise your status as a 501(c)(3). Consult your bookkeeper for a breakdown of fair pay for your workers and other expenses.

3. You Must File Taxes

You as a nonprofit are most likely exempt from paying taxes. However, you are not exempt from filing taxes. The most common form for nonprofits is the 990. There are different types of this form for different size nonprofits. For example, the 990-N is for nonprofit organizations who took in less than $50,000 in gross receipts per year. Most nonprofits are also required to file electronically. Consult your bookkeeper for the best and easiest way to file your taxes.

4. Transparency

It isn’t just the IRS you have to satisfy. Many donors, volunteers, and even workers will want to see your numbers in order to do participate in your nonprofit. It is highly recommended to have these numbers up to date on a regular basis, as well as presented in a professional manner. In fact, many successful nonprofits have their numbers available for viewing on their websites on a regular basis.

More on the Guide to Business Bookkeeping for Nonprofits

Are you a new or existing non-profit who needs help balancing the books in a professional and accurate manner? Contact us to learn more about how we can help keep your nonprofit compliant and attractive.