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 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, in addition they assist your group consider its spending and income era to profit from its assets and reveal monetary duty to its supporters.
In the event you’re simply getting began with nonprofit accounting, one of the vital easy entry factors is to find out about a few of the key paperwork concerned on this course of. Let’s stroll via 4 varieties that you simply’ll see continuously collectively.
1. Chart of Accounts
Your chart of accounts (COA) is basically 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 so that they’re simpler to seek out, overview, and report on.
Here’s a fast breakdown of the final classes you’ll probably see in your nonprofit’s COA:
- Property (account numbers starting with 1000): All the pieces your nonprofit owns, equivalent to money, property, gear, and accounts receivable.
- Liabilities (account numbers starting with 2000): All the pieces 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 whole liabilities out of your whole belongings.
- Income (account numbers starting with 4000-6000): The entire funding your nonprofit brings in via particular person donations, company philanthropy, earned revenue, funding returns, and grants.
- Bills (account numbers starting with 7000-9000): The entire assets 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 complicated for his or her wants, so that they find yourself utilizing its normal construction as a basis and simply together with the accounts they usually use on their COA.
2. Budgets
In the event you’ve organized a price range in your family earlier than, you realize that the aim of making this doc is to offer path in your spending and revenue era. Nonprofit budgeting serves an identical overarching goal, but it surely units a path in your entire group, so it’s an concerned course of that many individuals at your nonprofit (finance staff, fundraising employees, board members, government management, and so forth.) ought to have enter on.
Your nonprofit may need to create a number of totally different varieties of budgets relying on its actions. In keeping with Jitasa, the commonest ones embrace:
- Working price range: That is in all probability 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 can assist 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 length.
- 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 begin will help you differentiate these from recurring bills and guarantee you possibly can fund it long-term.
- Grant proposal price range: Most grantmakers will ask for a price range as a bit of a grant software to reveal that your group will use the funding correctly for those who win it.
To be as helpful as attainable to your nonprofit, all of those budgets ought to embrace outlined actions, real looking metrics, and particular timelines for spending and income era. Moreover, make sure that 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 special, actionable approach 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 internet belongings for a given yr to put the inspiration for future budgeting selections.
- Assertion of economic place. Often known as a steadiness sheet, this assertion outlines your nonprofit’s belongings, liabilities, and internet belongings 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 via 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 purposeful 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 in 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 Varieties
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 possibly can utterly write off tax season! You continue to must file a number of kinds every year 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 show you how to full. There are 4 variations of the shape—990-N for small nonprofits, 990-EZ for mid-sized organizations, the total 990 for giant nonprofits, and 990-PF for personal foundations—so make sure that to file the proper one in your group.
- State-specific kinds. Sure states have further tax kinds 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 replica of Type 990 or different annual kinds not associated to taxes to take care of nonprofit standing, so it’s vital to remain up-to-date on the necessities in your state.
- Employer kinds. Your group can also be required to offer its staff 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 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 kinds.
In the event you 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 of use their expertise and experience to make sure your group’s monetary planning, recordkeeping, and reporting not solely adjust to rules but in addition contribute to its long-term well being and sustainability.
Concerning the Creator
Jon Osterburg
Since becoming a member of Jitasa in 2010, Jon Osterburg has helped lots of of nonprofits all over the world successfully handle their funds via tailor-made, outsourced bookkeeping and accounting companies. He at present 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.
