There are many aspects to running a nonprofit organization; many are the same as running a for-profit business, but others are very different. Bookkeeping and accounting for nonprofits are two such areas that are different.
What Makes Them Different?
One of the first differences is that instead of reporting to stockholders as for-profit organizations do, nonprofits report to a board of directors.
Also, in exchange for being granted a tax-exempt status, the Internal Revenue Service requires nonprofits to adhere to a high degree of transparency. Another big difference is that the IRS requires that a nonprofit’s financial records “must reveal its commitment to its stated charitable purpose through an appropriate use of its assets.”
Sounds confusing? It can be if you’re inexperienced with bookkeeping and accounting in the nonprofit world. Even more reason to locate a bookkeeping or accounting service that is very familiar with, or perhaps, even specializes in nonprofit bookkeeping.
Finding such a Service
- Your financial institution may be able to point you in the right direction. Otherwise, ask your peers or colleagues in the nonprofit world which bookkeeping service they use and if they’re happy with them.
- Search online or in your local phone book for bookkeeping services. Ask them if they have experience doing bookkeeping for nonprofits. If not, you may want to continue searching for one that does.
- Depending on where your nonprofit is located, you may not find a bookkeeping service locally. Rather than driving to one out of your area, you may decide to hire one that you’ve found online, in which case they could be located anywhere. Provided they have nonprofit experience and can adhere to any state tax laws that may be applicable to you, there shouldn’t be any worries. If you settle on someone online, ask the same kinds of questions you would of someone local: how much experience do they have working with nonprofits; can they share references; and what can they offer as opposed to your finding someone nearby?
Additional Services May Also Be Available
In your search for a bookkeeping service for your nonprofit, you may also find that a company may also provide other services, such as handling your accounts receivable/payable, handling payroll, and doing tax preparation. Again, as long as they adhere to the laws of your individual state, the fact that they are located elsewhere doesn’t have to be a challenge.
As with hiring any service, check with the Better Business Bureau and any state regulatory/licensing agencies to make sure the nonprofit bookkeeping service you’re considering has a high rating and is in good standing.