Whether or not you’re analyzing donor engagement, fundraising success, or service supply, efficient information assortment permits your group to make extra knowledgeable selections so you’ll be able to capitalize in your strengths and keep away from repeating previous errors. It additionally helps your nonprofit be extra clear with numerous stakeholders—supporters, funders, and even the federal government.
Monitoring monetary information is equally important. Whereas many nonprofit accounting actions revolve round compliance, in addition they assist your group consider its spending and income era to benefit from its sources and display monetary duty to its supporters.
When you’re simply getting began with nonprofit accounting, some of the easy entry factors is to find out about among the key paperwork concerned on this course of. Let’s stroll by means of 4 sorts that you simply’ll see continuously collectively.
1. Chart of Accounts
Your chart of accounts (COA) is actually a listing of your nonprofit’s monetary data. It lists your whole 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 probably see in your nonprofit’s COA:
- Property (account numbers starting with 1000): The whole lot your nonprofit owns, similar to money, property, gear, and accounts receivable.
- Liabilities (account numbers starting with 2000): The whole lot 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): The entire funding your nonprofit brings in by means of particular person donations, company philanthropy, earned earnings, funding returns, and grants.
- Bills (account numbers starting with 7000-9000): The entire 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 commonly use on their COA.
2. Budgets
When you’ve organized a price range to your family earlier than, you already know that the aim of making this doc is to supply path to your spending and earnings era. Nonprofit budgeting serves an identical overarching function, but it surely units a path to your entire group, so it’s an concerned course of that many individuals at your nonprofit (finance workforce, fundraising employees, board members, govt management, and so on.) ought to have enter on.
Your nonprofit might need to create a number of totally different kinds of budgets relying on its actions. In accordance with Jitasa, the most typical ones embrace:
- Working price range: That is most likely what involves thoughts if you hear the time period “nonprofit price range”—the grasp monetary plan that initiatives your whole group’s income and bills for a given fiscal yr.
- Fundraising marketing campaign price range: These paperwork monitor the upfront prices of revenue-generating initiatives, particularly extremely concerned ones like occasions or 24-hour giving days, that will help you decide your return on funding (ROI) for the marketing campaign.
- Capital price range: 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 price range: Since launching a brand new mission-related program usually requires many one-time investments, making a separate price range for it to start out may help you differentiate these from recurring bills and guarantee you’ll be able to fund it long-term.
- Grant proposal price range: Most grantmakers will ask for a price range as a bit of a grant utility to display that your group will use the funding correctly when you win it.
To be as helpful as attainable to your nonprofit, all of those budgets ought to embrace outlined actions, sensible metrics, and particular timelines for spending and income era. Moreover, be certain any area of interest kind of price range you create aligns along with your working price range.
3. Monetary Statements
Monetary statements are among the many most useful stories for all nonprofit professionals. Every of those statements organizes and summarizes your group’s accounting information in a unique, 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 earnings assertion, this doc particulars your group’s income, bills, and alter in internet property for a given yr to put the inspiration for future budgeting selections.
- Assertion of economic place. Also called a stability sheet, this assertion outlines your nonprofit’s property, liabilities, and internet property 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 by means of working, investing, and financing actions. It’s usually compiled month-to-month somewhat than yearly like the opposite statements to assist maintain your spending and fundraising on monitor along with your price range all year long.
- Assertion of useful 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 inside decision-making, in addition they assist with exterior transparency by offering monetary info to 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 need to dig deeper.
4. Tax Types
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’ll be able to 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:
- Kind 990. That is the federal tax return for exempt organizations, which your monetary statements will assist you 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 be certain to file the fitting one to your group.
- State-specific kinds. Sure states have further tax kinds that nonprofits should fill out to stay exempt from state taxes—Kind 199 in California and Kind CHAR500 in New York are the best-known ones. Different states ask for a replica of Kind 990 or different annual kinds not associated to taxes to keep up nonprofit standing, so it’s essential to remain up-to-date on the necessities to your state.
- Employer kinds. Your group can also be required to supply 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. Kind 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 should be distributed by January 31, and every state units its personal deadlines for added kinds.
When you need assistance creating or decoding any of those paperwork, don’t hesitate to contact an accountant who makes a speciality of 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 Creator
Jon Osterburg
Since becoming a member of Jitasa in 2010, Jon Osterburg has helped a whole lot of nonprofits all over the world successfully handle their funds by means of tailor-made, outsourced bookkeeping and accounting companies. He presently serves as Jitasa’s Chief Working Officer, is a member of two nonprofit boards, and has earned a certificates for Government Training from the Yale Faculty of Administration.