{"id":26279,"date":"2023-06-13T06:00:54","date_gmt":"2023-06-13T13:00:54","guid":{"rendered":"https:\/\/pro-migration.local\/?p=26279"},"modified":"2025-06-10T11:36:09","modified_gmt":"2025-06-10T18:36:09","slug":"nonprofit-accounting","status":"publish","type":"post","link":"https:\/\/gofundme.to\/__proxy\/pro.gofundme.com\/c\/blog\/nonprofit-accounting\/","title":{"rendered":"Navigating Nonprofit Accounting: Best Practices and Tips"},"content":{"rendered":"

Accounting may not be the most glamorous part of any business, including nonprofits, but it\u2019s instrumental in keeping your organization running smoothly.<\/p>\n

From compliance to financial management, accounting provides the systems and information needed to keep a nonprofit\u2019s finances in check.<\/p>\n

However, understanding and evaluating financial data can feel daunting when getting started\u2014but it doesn\u2019t have to be. Our guide details how you can take care of all your accounting needs and sustain your nonprofit\u2019s financial health for the long term.<\/p>\n

5 Ways Nonprofit Accounting Compares to For-Profit Accounting<\/h2>\n

For-profit businesses have well-established accounting practices that you might already know. There are plenty of commonalities between these processes and the guidelines nonprofits must follow in accounting. However, there are also a few key differences to keep in mind.<\/p>\n

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  1. Taxes:<\/strong>\u00a0Approved nonprofits hold tax-exempt status with the Internal Revenue Service (IRS), unlike for-profit businesses that must pay income taxes for employees.<\/li>\n
  2. Financial statements:<\/strong>\u00a0Instead of a balance sheet that for-profit companies keep, nonprofits must maintain a statement of financial position. Additionally, nonprofits keep a statement of activities rather than an income statement like for-profit businesses.<\/li>\n
  3. Equity versus\u00a0<\/strong>net assets<\/strong>:<\/strong>\u00a0When a for-profit business has a surplus, that money goes to the shareholders as equity. With a nonprofit, that money goes toward the organization\u2019s net assets.<\/li>\n
  4. Governance:<\/strong>\u00a0A private owner (or public stockholders) typically runs a for-profit business. With nonprofit organizations, a volunteer\u00a0nonprofit board of directors<\/a>\u00a0oversees them. This impacts the reporting and accountability structure within the accounting.<\/li>\n
  5. Revenue:<\/strong>\u00a0The income for a for-profit business comes from the sales of goods and services. Within a nonprofit, this revenue comes primarily from fundraising and grant management.<\/li>\n<\/ol>\n

    Nonprofit Accounting Best Practices<\/h2>\n

    Every nonprofit is different and requires a custom approach to accounting. However, there are a few basic steps that all charities in the nonprofit sector should follow. Whether a seasoned professional or just starting, here are a few suggestions for making the most of nonprofit accounting.<\/p>\n

    1. Establish a Budget<\/h3>\n

    A budget is your financial blueprint. It\u2019s where you include your anticipated revenue and expenses for the upcoming year based on the previous year\u2019s performance. This helps inform your team\u2019s forecasting exercises and spending plans. Be sure to plan for contingencies, too.<\/p>\n

    Stick to your budget as closely as possible. Take the time to review it on a monthly basis to evaluate your progress and pivot if needed. Your organization\u2019s operating budget should serve as your guide, but it\u2019s also critical that each department have an operating budget that ladders back up to your nonprofit\u2019s larger goals.<\/p>\n

    2. Select an Accounting Software<\/h3>\n

    The right digital tool can help you track your finances more reliably. With plenty of options available, take time to select the one that best suits your unique needs, experience, and budget. For example, QuickBooks and FreshBooks are two commonly used accounting solutions.<\/p>\n

    The best nonprofit accounting system will help you:<\/p>\n