Whether or not you’re analyzing donor engagement, fundraising success, or service supply, efficient information assortment permits your group to make extra knowledgeable choices so you possibly can capitalize in your strengths and keep away from repeating previous errors. It additionally helps your nonprofit be extra clear with varied stakeholders—supporters, funders, and even the federal government.
Monitoring monetary information is equally important. Whereas many nonprofit accounting actions revolve round compliance, additionally they assist your group consider its spending and income era to profit from its sources and exhibit monetary duty to its supporters.
For those who’re simply getting began with nonprofit accounting, some of the easy entry factors is to study a number of the key paperwork concerned on this course of. Let’s stroll by way of 4 sorts that you just’ll see steadily collectively.
1. Chart of Accounts
Your chart of accounts (COA) is actually a listing of your nonprofit’s monetary data. It lists your entire ledgers and accounts in a desk format and assigns numbers to every one in order that they’re simpler to search out, overview, and report on.
Here’s a fast breakdown of the overall classes you’ll doubtless see in your nonprofit’s COA:
- Property (account numbers starting with 1000): Every part your nonprofit owns, equivalent to money, property, gear, and accounts receivable.
- Liabilities (account numbers starting with 2000): Every part your nonprofit owes, together with debt, deferred income, and accounts payable.
- Web Property (account numbers starting with 3000): What your nonprofit is price, calculated by subtracting your complete liabilities out of your complete property.
- Income (account numbers starting with 4000-6000): All the funding your nonprofit brings in by way of particular person donations, company philanthropy, earned earnings, funding returns, and grants.
- Bills (account numbers starting with 7000-9000): All the sources your nonprofit spends on its mission-related packages and initiatives, administrative wants like employees compensation and facility prices, and upfront expenditures related to fundraising campaigns.
These sections and account numbers are based mostly on the Unified Chart of Accounts (UCOA), a mannequin COA that aligns with nonprofit reporting requirements. Nevertheless, most small to mid-sized organizations discover that the UCOA is simply too advanced for his or her wants, in order that they find yourself utilizing its basic construction as a basis and simply together with the accounts they recurrently use on their COA.
2. Budgets
For those who’ve organized a funds on your family earlier than, you already know that the purpose of making this doc is to offer course on your spending and earnings era. Nonprofit budgeting serves the same overarching goal, nevertheless it units a course on your complete group, so it’s an concerned course of that many individuals at your nonprofit (finance workforce, fundraising employees, board members, government management, and many others.) ought to have enter on.
Your nonprofit may need to create a number of completely different forms of budgets relying on its actions. In accordance with Jitasa, the commonest ones embody:
- Working funds: That is most likely what involves thoughts if you hear the time period “nonprofit funds”—the grasp monetary plan that initiatives your entire group’s income and bills for a given fiscal 12 months.
- Fundraising marketing campaign funds: These paperwork observe the upfront prices of revenue-generating initiatives, particularly extremely concerned ones like occasions or 24-hour giving days, that can assist you decide your return on funding (ROI) for the marketing campaign.
- Capital funds: These budgets define the bills related to multi-year initiatives like capital campaigns and clarify the way you’ll cowl these prices over their full period.
- Program funds: Since launching a brand new mission-related program sometimes requires many one-time investments, making a separate funds for it to start out may also help you differentiate these from recurring bills and guarantee you possibly can fund it long-term.
- Grant proposal funds: Most grantmakers will ask for a funds as a bit of a grant utility to exhibit that your group will use the funding correctly in the event you win it.
To be as helpful as attainable to your nonprofit, all of those budgets ought to embody outlined actions, real looking metrics, and particular timelines for spending and income era. Moreover, be sure any area of interest kind of funds you create aligns along with your working funds.
3. Monetary Statements
Monetary statements are among the many most useful experiences for all nonprofit professionals. Every of those statements organizes and summarizes your group’s accounting information in a special, actionable method to inform your operations.
The 4 core nonprofit monetary statements are the:
nonprofit accounting documents_supplementary [alt text: A mind map of the four core nonprofit financial statements and the data each one reports, which are explained below.]
- Assertion of actions. Because the nonprofit equal of a for-profit earnings assertion, this doc particulars your group’s income, bills, and alter in web property for a given 12 months to put the inspiration for future budgeting choices.
- Assertion of monetary place. Also called a steadiness sheet, this assertion outlines your nonprofit’s property, liabilities, and web property to offer a snapshot of your monetary well being and potential for progress.
- Assertion of money flows. This report tracks how money strikes out and in of your nonprofit by way of working, investing, and financing actions. It’s sometimes compiled month-to-month moderately than yearly like the opposite statements to assist maintain your spending and fundraising on observe along with your funds all year long.
- Assertion of practical bills. That is the one monetary assertion distinctive to nonprofits as a result of it exhibits how your group’s spending furthers its mission by breaking down program, administrative, and fundraising prices intimately.
Along with utilizing these paperwork for inner decision-making, additionally they assist with exterior transparency by offering monetary info on your annual report. Loop recommends together with high-level information within the report itself—utilizing charts and graphs to make it extra digestible—and attaching full variations of your monetary statements as appendices in case some readers wish to dig deeper.
4. Tax Varieties
In case your nonprofit has legitimate 501(c)(3) standing, it’s exempt from paying federal earnings tax, in addition to many state taxes. However simply because your group is tax-exempt doesn’t imply you possibly can fully write off tax season! You continue to must file a couple of kinds annually to adjust to IRS and native nonprofit necessities, together with:
- Type 990. That is the federal tax return for exempt organizations, which your monetary statements will allow you to full. There are 4 variations of the shape—990-N for small nonprofits, 990-EZ for mid-sized organizations, the complete 990 for big nonprofits, and 990-PF for personal foundations—so be sure to file the best one on your group.
- State-specific kinds. Sure states have further tax kinds that nonprofits need to fill out to stay exempt from state taxes—Type 199 in California and Type CHAR500 in New York are the best-known ones. Different states ask for a replica of Type 990 or different annual kinds not associated to taxes to keep up nonprofit standing, so it’s necessary to remain up-to-date on the necessities on your state.
- Employer kinds. Your group can be required to offer its workforce members with particular person tax kinds to assist them file their returns. Each worker in your payroll ought to obtain a W-2, and any contractors you’re employed with will get a 1099.
Be aware of the deadlines for every of those kinds, since submitting late can incur fines and even threat your 501(c)(3) standing if it occurs repeatedly. Type 990 is due on the fifteenth day of the fifth month after your nonprofit’s fiscal 12 months ends (Might 15 in case your fiscal 12 months follows the calendar 12 months), W-2s and 1099s have to be distributed by January 31, and every state units its personal deadlines for extra kinds.
For those who need assistance creating or decoding any of those paperwork, don’t hesitate to contact an accountant who focuses on nonprofit work. They’ll be capable of use their expertise and experience to make sure your group’s monetary planning, recordkeeping, and reporting not solely adjust to laws but additionally contribute to its long-term well being and sustainability.
In regards to the Writer
Jon Osterburg
Since becoming a member of Jitasa in 2010, Jon Osterburg has helped a whole bunch of nonprofits world wide successfully handle their funds by way of tailor-made, outsourced bookkeeping and accounting providers. He presently serves as Jitasa’s Chief Working Officer, is a member of two nonprofit boards, and has earned a certificates for Govt Schooling from the Yale College of Administration.
