Nonprofit
Nonprofit bookkeeping services
Nonprofit accounting is not commercial accounting with different words. Restricted funds change what the books have to prove.
Nonprofit accounting is not commercial accounting with different words. Restricted funds change what the books have to prove.
At a glance
The defining feature of nonprofit accounting is that money arrives with strings attached, and the books have to prove the strings were honoured. That is a different job from tracking profit, and it is why generic bookkeeping does not transfer.
When a donor gives for a stated purpose, that restriction binds. Spending restricted money on general operations is not a reporting error, it is a breach of the terms the gift was made under.
A single cash figure cannot answer the only question that matters to a grantor: how much of what I gave you for this programme is still available for it. Fund accounting exists to answer that, and retrofitting it onto a year of undifferentiated transactions is close to impossible.
The annual return is not merely a filing. It is published, and it is read by prospective funders, watchdogs and journalists. Programme-versus-administrative expense ratios are compared across organisations by people making funding decisions.
Which version applies depends on gross receipts and assets — 990-N, 990-EZ or the full 990. Failing to file for three consecutive years revokes exempt status automatically, and reinstatement is a slow, expensive process.
Grants come with their own reporting deadlines and cost categories that rarely match your fiscal year or your chart of accounts. Books structured only for the 990 make every grant report a manual reconstruction.
Fund accounting from the start, restricted balances that are always current, a monthly close with a named accountant, and 990 preparation as a by-product of the year rather than a spring project.