Whether you’re running a small non-profit or a large non-profit, ensuring your accounting is in order is essential. Working with an accounting firm aware of your requirements is necessary if you require more time or resources to get your bookkeeping in order.
The right accounting firm can help you with various tasks, from tax compliance to financial reporting. Here are some of the key reasons your non-profit organization should work with an accounting firm:
Tax Compliance
Tax compliance is submitting correct tax returns and paying assessed taxes on time. It is essential to the government for several reasons, including balancing the budget and providing goods and services to its citizens. With a steady stream of tax revenue, these goals will be met.
Non-profit organizations have many tax requirements that can lead to fines and penalties if they are not met. Certified accountants from non profit CPA firms with experience dealing with not-for-profit organizations is highly advised due to this requirement. These include filing a 990-N e-filing form with the IRS and keeping adequate records.
These records may prove crucial for board members and donors who want to learn more about your organization. Additionally, they are essential for submitting renewals and applications to various government agencies.
In addition to these fundamental compliance issues, non-profits must Generally follow Accepted Accounting Principles (GAAP). These standards are intended to create consistency in financial statements across industries and make it easier for investors and the government to interpret them.
Financial Reporting
For several reasons, working with an accounting firm for your financial reporting needs would be best. Firstly, it will ensure your finances are current and you can comply with the latest accounting standards.
Second, it will allow you to produce quick reports that contain information on budget, expenses, donor reporting and grant reporting. It will enable you to make informed decisions daily to be more efficient and inspire confidence in your donors.
Third, it will allow you to maintain the integrity of your financial records and adhere to the highest ethical standards. Non-profits must report their financial status at the highest level of transparency to donors.
Like a balance sheet for for-profit companies, a non-profit’s statement of financial position identifies the organization’s assets and liabilities. It also lists any restrictions which determine the limitations on how the funds can be spent.
Funding
Funding is an organization’s money from taxpayers, foundations, and granting organizations. These funds can be used for programs or other purposes, but they must be properly tracked and managed to ensure that the money is being spent as intended.
For a non-profit, this means keeping track of each program and how the money is being spent. It can be challenging to manage when using manual accounting methods and spreadsheets, so hiring an accounting firm to help you handle this aspect of your financial management is best.
The most common funding for non-profits is granted from foundations and government agencies. These funds don’t have to be repaid and are typically designated for specific programs.
Many donors prefer that non-profits keep their overhead expenses as low as possible so that they can direct most of the money towards programs. However, this can be a tricky area of financial management, and donors may want to give less if they believe that the non-profit is spending less on overhead.
Budgeting
Budgeting is a financial management tool that outlines how an organization plans to use its money. It breaks down anticipated revenue along with forecasted direct and indirect expenses.
Non-profits must regularly update their budgets to ensure they’re accurate and reflect fundraising efforts and expenses. They may also need to change the budget during the year to accommodate organizational shifts and new initiatives.
An accounting firm can provide a non-profit with a budget that shows its anticipated revenues and expenditures for a specific period. It helps non-profits monitor their cash flow and determine whether it’s healthy enough to meet their goals.
Donors and foundations expect non-profits to use donated funds responsibly. They also hope to have rigorous internal controls and reporting standards.
For non-profits often must work with an accounting firm with experience in the sector to ensure their finances are handled correctly. They must also have an accountant that can adapt to changing office conditions and regulations.
Financial Planning
Whether you’re running a large, multi-faceted non-profit or a small volunteer-run community service organization, financial planning is essential to keeping your organization functioning at peak performance. It’s a process that focuses on defining and setting goals, quantifying them, factoring in inflation, having an investment plan to meet these goals, and preparing for unexpected risks such as untimely death, serious illnesses, and sudden loss of employment.
Having a professional accounting firm help you with your financial planning will ensure that you’re getting all of the elements of your plan down correctly and have the time to make sure you are on track for your goals. It also means that your board members and donors can trust the information you provide regularly.
Another important aspect of financial planning is making sure you are keeping your tax situation in check. Non-profits need to understand the intricacies of tax reporting rules and how they can affect their bottom line. They also need to be aware of the value of employee benefits and how that might affect their taxable income.
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