Whether or not you’re analyzing donor engagement, fundraising success, or service supply, efficient knowledge assortment permits your group to make extra knowledgeable selections so you may capitalize in your strengths and avoid repeating past mistakes. It additionally helps your nonprofit be extra clear with numerous stakeholders—supporters, funders, and even the federal government.
Monitoring monetary knowledge is equally important. Whereas many nonprofit accounting activities revolve round compliance, in addition they assist your group consider its spending and income technology to take advantage of its sources and exhibit monetary duty to its supporters.
For those who’re simply getting began with nonprofit accounting, one of the simple entry factors is to study among the key paperwork concerned on this course of. Let’s stroll via 4 varieties that you simply’ll see ceaselessly collectively.
1. Chart of Accounts
Your chart of accounts (COA) is basically 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 so that they’re simpler to search out, overview, and report on.
Here’s a fast breakdown of the overall classes you’ll possible see in your nonprofit’s COA:
- Property (account numbers starting with 1000): Every thing your nonprofit owns, corresponding to money, property, tools, and accounts receivable.
- Liabilities (account numbers starting with 2000): Every thing your nonprofit owes, together with debt, deferred income, and accounts payable.
- Internet Property (account numbers starting with 3000): What your nonprofit is price, calculated by subtracting your whole liabilities out of your whole belongings.
- Income (account numbers starting with 4000-6000): All the funding your nonprofit brings in via particular person donations, corporate philanthropy, earned revenue, 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. Nonetheless, most small to mid-sized organizations discover that the UCOA is just too advanced for his or her wants, so that they find yourself utilizing its common construction as a basis and simply together with the accounts they repeatedly use on their COA.
2. Budgets
For those who’ve organized a funds to your family earlier than, you already know that the objective of making this doc is to supply path to your spending and revenue technology. Nonprofit budgeting serves an analogous overarching goal, nevertheless it units a path to your entire group, so it’s an concerned course of that many individuals at your nonprofit (finance group, fundraising employees, board members, government management, and so on.) ought to have enter on.
Your nonprofit may need to create a number of totally different kinds of budgets relying on its actions. Based on Jitasa, the commonest ones embrace:
- 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 yr.
- Fundraising marketing campaign funds: These paperwork monitor the upfront prices of revenue-generating initiatives, particularly extremely concerned ones like events 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 length.
- Program funds: Since launching a brand new mission-related program sometimes requires many one-time investments, making a separate funds for it to begin will help you differentiate these from recurring bills and guarantee you may fund it long-term.
- Grant proposal funds: Most grantmakers will ask for a funds as a bit of a grant application to exhibit that your group will use the funding properly for those who win it.
To be as helpful as potential to your nonprofit, all of those budgets ought to embrace outlined actions, sensible metrics, and particular timelines for spending and income technology. Moreover, ensure that any area of interest kind of funds you create aligns together 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 knowledge in a distinct, actionable strategy 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 revenue assertion, this doc particulars your group’s income, bills, and alter in web belongings for a given yr to put the muse for future budgeting selections.
- Assertion of economic place. Also called a steadiness sheet, this assertion outlines your nonprofit’s belongings, liabilities, and web belongings to supply 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 via working, investing, and financing actions. It’s sometimes compiled month-to-month quite than yearly like the opposite statements to assist hold your spending and fundraising on monitor together with your funds all year long.
- Assertion of practical bills. That is the one monetary assertion distinctive to nonprofits as a result of it reveals how your group’s spending furthers its mission by breaking down program, administrative, and fundraising prices intimately.
Along with utilizing these paperwork for inside decision-making, in addition they assist with exterior transparency by offering monetary info to your annual report. Loop recommends together with high-level knowledge 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 need to dig deeper.
4. Tax Types
In case your nonprofit has legitimate 501(c)(3) standing, it’s exempt from paying federal revenue tax, in addition to many state taxes. However simply because your group is tax-exempt doesn’t imply you may utterly write off tax season! You continue to must file just a few varieties every year to adjust to IRS and native nonprofit necessities, together with:
- Form 990. That is the federal tax return for exempt organizations, which your monetary statements will assist you to full. There are 4 variations of the shape—990-N for small nonprofits, 990-EZ for mid-sized organizations, the total 990 for big nonprofits, and 990-PF for personal foundations—so ensure that to file the proper one to your group.
- State-specific varieties. Sure states have additional tax varieties that nonprofits must 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 duplicate of Type 990 or different annual varieties not associated to taxes to keep up nonprofit standing, so it’s vital to remain up-to-date on the requirements for your state.
- Employer varieties. Your group can also be required to supply its group members with particular person tax varieties 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 conscious of the deadlines for every of those varieties, 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 yr ends (Could 15 in case your fiscal yr follows the calendar yr), W-2s and 1099s have to be distributed by January 31, and every state units its personal deadlines for extra varieties.
For those who need assistance creating or deciphering any of those paperwork, don’t hesitate to contact an accountant who focuses on nonprofit work. They’ll be capable to use their expertise and experience to make sure your group’s monetary planning, recordkeeping, and reporting not solely adjust to rules 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 lots of of nonprofits world wide successfully handle their funds via tailor-made, outsourced bookkeeping and accounting providers. He at the moment serves as Jitasa’s Chief Working Officer, is a member of two nonprofit boards, and has earned a certificates for Government Schooling from the Yale Faculty of Administration.